The International Air Transport Association (IATA) has lowered its estimate for airline industry profits in 2016 and forecasted a 16% decline in 2017, due to rising crude oil prices.
Airlines worldwide are expected to record cumulative record profits of $35.6 billion this year, compared to the $39.4 billion estimated in June, amid slowing global economic growth and rising costs.
Nevertheless, this would be the fifth consecutive year of earnings improvement, and the net profit margin is expected to reach 5.1% in 2016, also a record level, IATA predicted.
In 2017, profits are expected to reach $29.8 billion, and the average price per barrel of crude oil will be $55, up from $44.60 this year.
Fuel is expected to account for nearly 19% of airline expenses in 2017, compared to 33% in the 2012-2013 period.
IATA estimates that global passenger air traffic will grow by 5.1% in 2017, compared to an estimated 5.9% increase for 2016.
Next year, nearly 61% of net profit will be concentrated in North America, where earnings of $18.1 billion will be recorded, down 11% from this year, while European airlines could face a 25% decline in profit to $5.6 billion, due to competition and the threat of terrorist attacks.
IATA is an organization representing approximately 265 airlines worldwide, equivalent to 83% of global air traffic.
Source: Economica
Frequently Asked Questions
Why is IATA forecasting a decline in airline profits for 2017?
The primary reason for the forecasted 16% decline is the increase in crude oil prices, which raises operational costs for airlines.
Which region is expected to be the most profitable for airlines in 2017?
North America is expected to remain the most profitable region, accounting for nearly 61% of the industry’s total net profit.
How has the share of fuel costs in airline expenses changed?
Fuel is projected to represent about 19% of expenses in 2017, a significant decrease from the 33% seen during the 2012-2013 period.