Subscribe Free
in Air Transport

Another Strong Year for Airline Profits in 2017

Posted 9 December 2016 · Add Comment

The International Air Transport Association (IATA) announced that it expects the global airline industry to make a net profit in 2017 of $29.8 billion. On forecast total revenues of $736 billion, that represents a 4.1% net profit margin.

This will be the third consecutive year (and the third year in the industry’s history) in which airlines will make a return on invested capital (7.9%) which is above the weighted average cost of capital (6.9%).

IATA revised slightly downward its outlook for 2016 airline industry profitability to $35.6 billion (from the June projection of $39.4 billion) owing to slower global GDP growth and rising costs. This will still be the highest absolute profit generated by the airline industry and the highest net profit margin (5.1%). 
 
"Airlines continue to deliver strong results. This year we expect a record net profit of $35.6 billion.  Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That’s a very soft landing and safely in profitable territory. These three years are the best performance in the industry’s history—irrespective of the many uncertainties we face. Indeed, risks are abundant— political, economic and security among them. And controlling costs is still a constant battle in our hyper-competitive industry," said Alexandre de Juniac, IATA’s Director General and CEO. 
 
"We need to put this into perspective. Record profits for airlines means earning more than our cost of capital. For most other businesses that would be considered a normal level of return to investors. But three years of sustainable profits is a first for the airline industry. And after many years of hard work in restructuring and re-engineering the business the industry is also more resilient. We should also recognize that profits are not evenly spread with the strongest performance concentrated in North America," said de Juniac.
 
2017 
While airline industry profits are expected to have reached a cyclical peak in 2016 of $35.6 billion, a soft landing in profitable territory is expected in 2017 with a net profit of $29.8 billion. 2017 is expected to be the eighth year in a row of aggregate airline profitability, illustrating the resilience to shocks that have been built into the industry structure. On average, airlines will retain $7.54 for every passenger carried.
Expected higher oil prices will have the biggest impact on the outlook for 2017. In 2016 oil prices averaged $44.6/barrel (Brent) and this is forecast to increase to $55.0 in 2017. This will push jet fuel prices from $52.1/barrel (2016) to $64.9/barrel (2017). Fuel is expected to account for 18.7% of the industry’s cost structure in 2017, which is significantly below the recent peak of 33.2% in 2012-2013. 
 
2017 Regional Analysis
Middle Eastern carriers : Middle Eastern airlines are forecast to generate a net profit of $0.3 billion for a net margin of 0.5% and an average profit per passenger of $1.56. This is below the $900 million profit expected in 2016. Average yields for the region’s carriers are low but unit costs are even lower, partly driven by the strong capacity expansion, forecast at 10.1% this year, ahead of expected demand growth of 9.0%. Threats are emerging to the success story of the Gulf carriers, including increases in airport charges across the Gulf States and growing air traffic management delays.
 
2016
2016 will be a record year for industry profitability. The expected net profit of $35.6 billion is slightly ahead of the $35.3 billion recorded in 2015, as is the 5.1% net profit margin (slightly ahead of the 4.9% recorded for 2015).
The modest revision from previous expectations largely is owing to two factors:
Slower global GDP growth: 2.2%, which was below mid-year expectations of 2.3% growth.
Non-fuel unit costs increased by 2.0% in 2016.  
 
The Business of Freedom 
"Air transport is the business of freedom. The safe and efficient global movement of goods and people is a positive force in our world. Aviation’s success betters peoples’ lives by creating economic opportunity and supporting global understanding. We must stand firm in the face of any rhetoric that would put limits on aviation’s future success," said de Juniac. 
 
 
 
* required field

Post a comment

Other Stories
Advertisement
Latest News

Emirates becomes official partner of The 2018 Ryder Cup

Emirates and the European Tour have renewed their existing European Tour Agreement for four years until 2021.

Passenger traffic at DXB rises to near-record eight million in July

Dubai International (DXB) recorded its second busiest month on record for passenger traffic in July with over eight million passengers, according to the monthly traffic report issued by operator Dubai Airports.

Qatar Airways' inaugural flight lands at Václav Havel Airport Prague

Qatar Airways' first non-stop flight from Doha landed yesterday at Václav Havel Airport Prague. Qatar Airways flight QR 291, operated by an Airbus A320, departed Hamad International Airport on Monday at 08:00 am and arrived at Václav

Gulfstream unveils its Connectivity Service programme

Gulfstream Aerospace has announced the creation of its Connectivity Service programme, a comprehensive, bundled suite of in-flight internet, voice and entertainment offerings customised to meet the needs of each Gulfstream

Ethiopian Airlines starts thrice weekly service to Bahrain

Ethiopian Airlines Group has marked commencement of a thrice weekly service to Bahrain at a reception ceremony held at Addis Ababa Bole International Airport.

Kish Air orders B737 MAX, A320s

Iran's Kish Air chief executive officer, Mohammad Taqi Jadidi, has said the carrier has signed an MoU with Boeing for the purchase of ten B737 MAX, reports ch-aviation.

TAA SK 12MTHS16
See us at
DIAC BT1105121117RMIT BT1631817Commercial Aircraft Financing BT2017Aviation Africa BT18418Global Aerospace BT28218DASAS BT3006161117DAS BT1105161117AIME BT1204240118Aviation Show 267291117