The global airline industry is expected to make a net profit of $29.8bn in 2017, the International Air Transport Association (IATA) said in Geneva on Thursday. The figure represents a 4.1% net profit margin on forecast total revenues of $736bn.
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%).
Middle Eastern airlines, driven by the three top Gulf carriers – Qatar Airways, Emirates and Etihad – are forecast to generate a net profit of $300mn next year for a net margin of 0.5% and an average profit per passenger of $1.56, IATA director general and CEO Alexandre de Juniac said at a media event.
This, according to IATA chief economist Brian Pearce, is below the $900mn 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 Cooperation Council and growing air traffic management delays.
IATA revised slightly downward its outlook for 2016 airline industry profitability to $35.6bn (from the June projection of $39.4bn) 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%).
De Juniac said, "Airlines continue to deliver strong results. This year we expect a record net profit of $35.6bn. Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8bn. 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."
"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 recognise that profits are not evenly spread with the strongest performance concentrated in North America."
De Juniac, who took over as IATA chief in September this year, said 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, the former CEO of Air France-KLM.
Middle Eastern airlines, driven by the three top Gulf carriers – Qatar Airways, Emirates and Etihad – are forecast to generate a net profit of $300mn next year for a net margin of 0.5% and an average profit per passenger of $1.56, IATA director general and CEO Alexandre de Juniac said at a media event.
This, according to IATA chief economist Brian Pearce, is below the $900mn 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 Cooperation Council and growing air traffic management delays.
IATA revised slightly downward its outlook for 2016 airline industry profitability to $35.6bn (from the June projection of $39.4bn) 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%).
De Juniac said, "Airlines continue to deliver strong results. This year we expect a record net profit of $35.6bn. Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8bn. 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."
"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 recognise that profits are not evenly spread with the strongest performance concentrated in North America."
De Juniac, who took over as IATA chief in September this year, said 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, the former CEO of Air France-KLM.