IATA raises profit forecast for airlines
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The International Air Transport Association (IATA) has revised its 2016 financial outlook for the world’s airlines.
Under the new forecast, airlines are expected to generate combined profits of US$39.4 billion this year, US$4.1bn higher than in 2015. This also marks an increase from the previous 2016 profit forecast of US$36.3bn, which IATA issued in December 2015.
The revised outlook is based on the expectation that airlines will generate revenues of US$709bn in 2016, for a net profit margin of 5.6%. If this result is achieved, it will mark the fifth consecutive year airlines have made a profit.
But the global income will not be evenly distributed; more than half the industry’s profits will be generated in North America (US$22.9bn), while Asia Pacific and European carriers are expected to generate US$7.8bn and US$7.5bn respectively.
Middle Eastern carriers are expected to post a US$1.6bn profit, and a US$100 million profit is forecast for Latin American airlines. The only region expected to make a loss is Africa, which is expected to see a deficit of US$500m.
“Lower oil prices are certainly helping, though tempered by hedging and exchange rates. In fact, we are probably nearing the peak of the positive stimulus from lower prices,” said Tony Tyler, IATA’s director general & CEO.
“Performance however, is being bolstered by the hard work of airlines. Load factors are at record levels, new value streams are increasing ancillary revenues, and joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition. The result: consumers are getting a great deal and investors are finally beginning to see the rewards they deserve.”
Making a profit in the airline business remains tough, however; IATA’s forecast means that, on average, carriers will make US$10.42 for each passenger carried, or US$5.60 for every US$100 in sales.
“Looked at from a different angle Starbucks will earn about US$11 for every US$100 in sales,” said Tyler. “We don’t begrudge Starbucks their profitability, but there is clearly still upside for airline profits.”
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