The global airline industry expects to report a collective net profit of $39.4 billion this year, Tony Tyler, Director-General and Chief Executive Officer, International Air Transport Association (IATA), said on Thursday.
This is an upward revision of the $36.3-billion estimate that IATA had predicted in December last year.
“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 oil prices. Load factors are at record levels. New value streams are increasing ancillary revenues,” Tyler said at the opening ceremony of IATA’s 72nd Annual General Meeting here.
The DG said that all regions are making a contribution to the $4.1-billion boost over 2015 with improved results, but there were “stark regional differences” in the performance of airlines.
Airlines in the Asia-Pacific region are expected to post a $7.8-billion profit this year up from $7.2 billion in 2015 with capacity expected to expand 9.1 per cent this year, while demand is likely to grow at 8.5 per cent.
IATA adds that challenges in the region include intense competition as the budget airline sector expands, restructuring in the Chinese economy and infrastructure and cost difficulties in the Indian market.
In comparison, African airlines are expected to post a loss of $500 million, a slight improvement over the $700-million loss that the airlines in the region posted last year.
“On average, airlines will make $10.42 for each passenger carried. Looked at from a different angle, Starbucks will earn about $11 for every $100 in sales, while airlines will make $5.60,” Tony said, highlighting the problems faced by the industry.
Incidentally, this is only the second year in a row and only the second time in the airline industry’s history that the return on invested capital (9.8 per cent) will exceed the cost of capital estimated at 6.8 per cent, IATA estimates.
(The writer is in Dublin at the invitation of the International Air Transport Association)