Logistics

IATA expects $35.6 bn profit during 2016

Ashwini Phadnis Geneva | Updated on January 16, 2018 Published on December 08, 2016

A general view at the 2016 International Air Transport Association (IATA) Annual General Meeting (AGM) and World Air Transport Summit in Dublin, Ireland June 2, 2016. REUTERS/Clodagh Kilcoyne

The global airline industry expects to report a net profit of $ 29.8 billion during 2017

The global airline industry expects to earn $ 35.6 billion during 2016, a record profit thought it is slightly less than the original expectation, Alexandre de Juniac, Director General and Chief Executive Officer, International Air Transport Association (IATA), said on Thursday.

In June this year IATA had estimated that the global industry will report a profitability of $ 39.4 billion. But despite the dip in profitability, the good news for the global industry will continue in the next year also. De Juniac indicated that the global airline industry expects to report a net profit of $ 29.8 billion during 2017, eight year of being on the black for the industry.

“This (2017) will be the third year in a row where the return on invested capital (7.9 per cent) will exceed the cost of capital (6.9 per cent)… This is the best performance in the industry history irrespective of the many uncertainties we face,” de Juniac said in his address at the start of the Global Media Day event here on Thursday.

Brian Pearce, Chief Economist, IATA pointed out that next year conditions are expected to be tougher with higher fuel costs and a still relatively weak global economy. “But we still forecast that the industry will generate an above cost of capital of 7.9 per cent. In net profit terms that’s just a fraction under $ 30 billion,” Brian said.

Brent crude oil prices

The forecast for 2017 is based at Brent crude oil prices being at around $ 55 a barrel, a rise of $ 10 a barrel since this year. “ This ( Brent oil price being at around $ 55 a barrel despite the oil producers freezing production) is because the market is still over supplied,” Brian said.

Another reason for the positive outlook for 2017 is also based on “slightly stronger” economic activity and confidence in many parts of the globe which will help offset the slight increase in the price of Brent crude next year. “We are expecting to see the global industry carry a little less than 4 billion during 2017 and creating value for investors next year,” Brian said.

The DG added that the airlines are in better shape to remain profitable while facing the many challenges pointing out that is the reason “ we see a soft landing safely in profitable territory for 2017.”

During 2017, the strongest financial performance is likely to be delivered by airlines in North America with net post-tax profits at $ 18.1 billion slightly down from $ 20.3 billion expected in 2016 while the carriers in the Asia Pacific region are expected to generate a net profit of $ 6.3 billion down from $ 7.3 billion in the previous year. The net margin for the North America carriers is expected to be strongest at 8.5 per cent with an average profit of $ 19.58 per passenger while for carriers in the Asia-Pacific region net margins of 2.9 per cent on a per passenger basis average profits are anticipated to be $ 4.44. Indian carriers are included in the Asia Pacific region.

(The Correspondent is in Geneva at the invitation of International Air Transport Association)

Published on December 08, 2016
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