IATA predicts 2017 will be another strong year for airline profits

The International Air Transport Association (IATA) has announced from Geneva that it expects the global airline industry in 2017 to make a net profit of US$29.8 billion – a 4.1% net profit margin based on total forecast revenues of US$736 billion. This means the industry will, for the third consecutive year, make a return on invested capital (7.9%) above the weighted cost of capital (6.9%). Despite lowering its outlook for 2016 airline profitability to US$35.6 billion, this will still be the highest absolute profit generated by the airline industry, and also the highest net margin, at 5.1%.
According to IATA’s Director General and CEO, Alexandre de Juniac, “Airlines continue to deliver strong results. This year we expect a record net profit of US$35.6 billion. Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning US$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,” adding, “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.”
North American Carriers: Strongest financial performance by North American airlines should result in net post-tax profits of US$18.1 billion, with a net margin of 8.5% and average per-passenger profit of US$19.58
European carriers: Anticipated aggregate net profit of US$5.6 billion with a net margin of 2.9% and an average per-passenger profit of US$5.65
Asia-Pacific carriers: Expected net profit of US$6.3 billion with a net margin of 2.9% and an average per-passenger profit of US$4.44
Latin American carriers: Anticipated net profit of US$200 million with a net margin of 0.7% and a per-passenger profit of US$0.76
African Carriers: This is expected to be the weakest financial performance with an expected net loss of US$800 million. Capacity is expected to grow by 4.7% and revenue to equate to a per-passenger loss of US$9.97