Higher altitude I Airlines are likely to post collectively $19.9 billion profit this year and $25 billion in the next as falling oil prices and economic recovery provide tailwind, says IATA
International Air Transport Association (IATA) has raised its profit outlook for global airlines on lower oil prices and recovery prospects of world economy.
The industry body sees airlines globally posting collective net profit of $19.9 billion this year, up from $18 billion projected in June. This looks set to rise to $25 billion in 2015, IATA said.
"Stronger industry performance is good news for all. It's a highly competitive industry and consumers—travellers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in. A healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last," said Tony Tyler, IATA's director general and CEO.
IATA forecast states that after adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1% on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8%.
"On per-passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on $6.02 earned in 2014 and more than double the $3.38 earnings per passenger achieved in 2013" said the report. Similarly, return on invested capital (ROIC) is expected to grow to 7%. This is a substantial improvement on the 6.1% ROIC expected to be achieved in 2014.
"While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2% net profit margin. The industry story is largely positive, but there are a number of risks in today's global environment—political unrest, conflicts, and some weak regional economies- among them. And a 3.2% net profit margin does not leave much room for a deterioration in the external environment before profits are hit," added Tyler.
Similarly, passenger traffic is expected to grow 7% in 2015 which is well above the 5.5% growth trend of the past two decades. Capacity growth is expected to outstrip this slightly at 7.3%, pushing the passenger load factor to 79.6% (slightly down on the 79.9% expected for 2014). Total passenger numbers are expected to grow to 3.5 billion and passenger revenues are expected to grow to $623 billion.
For airlines in the Asia-Pacific region are expected to achieve a net profit of $5 billion in 2015 (up from $3.5 billion in 2014) for a 2.2% net profit margin. That translates into $4.3 per passenger. Some strengthening of cargo markets, particularly important in this manufacturing region, plus lower fuel costs, are expected to drive the moderate improvement on 2014.
Vertical lift
7%-- passenger traffic is expected to grow next year
5.5% growth trend of the past two decades
$7.08 airlines will make in 2015
$5 billion profit expected in the Asia-Pacific region in 2015
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