Moody's: Stable 2018 outlooks for global airlines, aircraft leasing, global shipping and North American railroads

Moody's maintains stable outlooks for global airlines, aircraft leasing, global shipping and North American railroads, the rating agency says in its 2018 Outlook for the global transportation sector.

The global airline industry's stable outlook is driven by projections for 8.5%-10% operating margins for Moody's-rated airlines through 2019, with US carriers remaining the most profitable. Industry revenue will grow by about 4%, offsetting higher labor and fuel costs.

"Steady global economic growth will support rising demand for air travel over the next 12 to 18 months," said Jonathan Root, VP -- Senior Credit Officer at Moody's. "Developing countries will continue to lead capacity growth, followed by Europe and the US."

The aircraft leasing industry, meanwhile, will see stable net interest margins of 8%-9% over the next year or so, though competition from new entrants will limit the upside. Global air travel growth is currently tracking about 200 basis points above its long-term trend of around 4.5%, with capacity expansion remaining in line with growth in demand.

Moody's forecasts low-single-digit EBITDA growth in the global shipping industry, driving the sector's stable outlook. The container shipping segment will remain oversupplied, but the situation won't appreciably worsen. A continuing excess supply of tankers will however keep profits low in that segment, while dry bulk freight rates will continue to slowly improve.

The North American railroad industry's stable outlook is based on 3%-4.5% growth in freight revenues, though growth in freight volumes will slow to 1%-2%. Core pricing will rise 2%-2.5%, benefiting from a tighter transportation market, while the recent positive impact of export coal prices will wane.

"Healthy US GDP growth has favorably impacted most freight groups," said Rene Lipsch, VP -- Senior Credit Officer at Moody's. "But growth in total freight volumes over the next year or so will be tempered by declining shipments of grain, petroleum products and coal."

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