Global airline industry's profit to touch $39.4 bn this year

Global airline industry's profits are projected to rise nearly 12 per cent to USD 39.4 billion this year, primarily fuelled by lower oil prices, IATA said today.
It also said there are continuing infrastructure and cost difficulties in the Indian market.
The latest forecast by International Air Transport Association (IATA), revised from last December's estimate of USD 36.3 billion, would be higher than the global aggregate profit of USD 35.3 billion recorded in 2015.
Releasing its latest financial outlook today, IATA said the global air transport industry profits are expected to increase to USD 39.4 billion in 2016.
"That is expected to be generated on revenues of USD 709 billion for an aggregate net profit margin of 5.6 per cent. 2016 is expected to be the fifth consecutive year of improving aggregate industry profits," an IATA release said.

Talking about the airline industry in the Asia Pacific region, which is expected to post USD 7.8 billion profits this year, IATA said there are challenges such as "continuing infrastructure and cost difficulties in the Indian market".

"Airlines in Asia-Pacific are expected to post a USD 7.8 billion profit in 2016, up from USD 7.2 billion in 2015. Capacity is forecast to expand by 9.1 per cent in 2016, ahead of demand which is likely to grow by 8.5 per cent," the release said.
With regard to this region, IATA said the challenges include intense competition as the budget sector expands, restructuring in Chinese economy and continuing infrastructure and cost difficulties in the Indian market.

IATA Director General and CEO Tony Tyler said lower oil prices are certainly helping-though tempered by hedging and exchange rates, adding that in fact, "we are probably nearing the peak of the positive stimulus from lower prices".
"Performance, however, is being bolstered by the hard work of airlines. Load factors are at record levels. New value streams are increasing ancillary revenues...," he added.
According to IATA, the outlook is based on oil averaging USD 45/barrel (Brent) over the course of the year which is significantly lower than the USD 53.9 average price in 2015.
"The full impact of lower fuel prices is still being realised as hedges mature. Overall, fuel is expected to represent 19.7 per cent of the industry's expenses, down from a recent high of 33.1 per cent in 2012-2013," it added.

Further, IATA noted that passenger demand is robust with 6.2 per cent growth expected in 2016 but it would be lower than 7.4 per cent growth recorded last year.
"Capacity is expected to grow slightly ahead of demand at 6.8 per cent. Load factors are expected to remain high (80 per cent), but with a slight slip from 2015 (80.4 per cent).
"Yields are expected to fall by 7 per cent. Unit costs, driven by lower fuel prices, are expected to fall by 7.7 per cent. Overall the passenger business is projected to generate USD 511 billion in revenues, down from USD 518 billion in 2015," it noted.