IATA revises 2017 industry profitability outlook upwards

The International Air Transport Association (IATA) revised its 2017 industry profitability outlook upwards. Airlines are expected to report a US$31.4bn profit (up from the previously forecast US$29.8bn) on revenues of US$743bn (up from the previously forecast US$736bn). “This will be another solid year of performance for the airline industry. Demand for both the cargo and passenger business is stronger than expected. While revenues are increasing, earnings are being squeezed by rising fuel, labor and maintenance expenses. Airlines are still well in the black and delivering earnings above their cost of capital. But, compared to last year, there is a dip in profitability,” said Alexandre de Juniac, IATA’s Director General and CEO. In 2017 airlines are expected to retain a net profit of US$7.69 per passenger. That is down from US$9.13 in 2016 and US$10.08 in 2015. The average net profit margin stands at 4.2% (down from 4.9% in 2016). “Airlines are defining a new epoch in industry profitability. For a third year in a row we expect returns that are above the cost of capital. But, with earnings of US$7.69 per passenger, there is not much buffer. That’s why airlines must remain vigilant against any cost increases, including from taxes, labor and infrastructure,” said de Juniac.
While overall industry performance is strong, major regional variations remain. About half the industry profits are being generated in North America (US$15.4bn). Carriers in Europe and Asia-Pacific will each add a US$7.4bn profit to the industry total. Latin America and Middle East carriers are expected to earn US$800m and US$400m respectively. Airlines in Africa are expected to post a US$100m loss.