IATA says airline profit cycle may be peaking
The International Air Transport Association (IATA) said in its most recent airlines financial monitor that data on global airlines show industry profitability and cash flow remained “solid” in the second quarter of 2016, but added that the “industry profitability cycle is showing signs of peaking”.
The global trade group said global airline share prices rose 0.9 percent in September, but were “well below” where they started the year and said oil prices were still favourable to airlines but that prices were likely to trend upwards in the years ahead.
IATA said “intense downward pressure” on passenger years appeared to ease during the middle months of 2016 and the premium segment “continues to offer a buffer” for overall airline performance with premium airfares holding up better than economy fares.
The cargo sector continued to be weak although it had improved somewhat from earlier in the year, IATA said but the association said low loads “continue to keep cargo yields and revenues under pressure”.
“Net cash flow in our sample of 64 airlines rose to 21 percent of revenues in Q2 2016, up from 19.6 percent in the same period last year. Net cash flow increased in most regions except Latin America and Asia-Pacific,” IATA said in its report.
On the demand side, IATA said annual growth in industry-wide traffic slowed to 4.6 percent in August, from an upwardly-revised 6.4 percent in July. “Developments in traffic continue to reflect the net impact of a range of competing drivers. Negative headwinds, including from the subdued global economic backdrop, have tended to dominate so far in 2016, although passenger traffic has still grown broadly in line with its 10-year average rate,” IATA said.
IATA also reported that 140 new aircraft were delivered in August – higher than were delivered in August 2015 (120) and said net storage activity made a “modest negative contribution (-37) in August” that was driven by more aircraft going into storage than in each of the previous three months.