IATA cites low oil prices, increases forecast profit to US$39.4b

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Low oil prices and hard work by airlines to fill their aircraft are reasons given by the International Air Transport Association (IATA) for airlines to make a collective net profit of USD$39.4 billion this year, forecasting an increase from a previous estimate of USD$36.3 billion.

The world airline body representing over 260 airlines accounting for 83 percent of global air traffic,   made this known at IATA’s annual meeting in Dublin.

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Outgoing IATA DG, Tony Tyler in his remarks at the AGM Opening Press Conference said, “The industry’s net profit of $39.4 billion is a big number. But it is shared amongst hundreds of airlines around the world. And on $709 billion of revenue, it translates to a 5.6% net profit margin.”

“For those who follow the airline industry regularly, you will know that airlines have long-struggled with profitability. This is a seventh consecutive year of profits and a fifth consecutive year of improving profitability. 2016 will also be the second time in history—and second year in a row—for airlines to make a profit that exceeds their cost of capital.”

He continued,” This is all good news. It means that airlines should be taken seriously as businesses. But there are challenges. With a 5.6% net margin, the average profit per passenger is still $10.42 on an average one-way fare.”

“The job of repairing balance sheets is under way. We have had a few years of good profits and some airlines have started to pay down debt. It will, however, take a longer run of profits before balance sheets are returned to health.”

He said that the mood at the AGM is optimistic; mixed with some caution as trade and economic growth are weak.

“We are probably nearing the peak of the positive stimulus from lower oil prices. But, on the positive side, the industry is operating at high levels of efficiency. Load factors are high. Ancillary revenue streams are growing. And various forms of partnership are producing strong results. Airlines are producing solid results in a challenging environment. It’s an impressive performance.”