The International Air Transport Association (IATA) has said global airlines will report their strongest profit margin in more than five years by 2015, with overall profits rising to approximately $25 billion next year.
The Geneva-based association which represents around 250 airlines (84 percent of global air traffic) gave an increase profit margin of 3.2 percent – the highest margin since 2010, when it reached 3.1 percent.
Jet fuel prices are expected to average $99.9 per barrel, and brent crude oil slipped below $66 a barrel – the lowest in five years and a fall of more than 40 percent since June.
Airline’s spend on fuel will drop to $192 billion in 2015, a decrease from $204 billion in 2014.
However, during his speech at IATA’s Global Media Day in Geneva, Tony Tyler warned: “A 3.2 percent net profit margin does not leave much room for a deterioration in the external environment before profits are hit.”
IATA also increased its profit forecast for 2014 to $19.9 billion in 2014, up from a previous estimate of $18 billion.
“The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year.”
Tony Tyler
IATA Director General and CEO
"While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2% net profit margin. The industry story is largely positive, but there are a number of risks in today's global environment--political unrest, conflicts, and some weak regional economies- among them,” said Tony Tyler, IATA’s Director General and CEO.
IATA’s global outlook was broken down to reflect differing fortunes for airlines in different parts of the world such as North America, Europe and the Middle East.
North America should see the strongest financial performance in 2015, after the consolidation and restructuring of airlines. They are expected to make the highest profit margins in 2015, exceeding the peaks of the late 1990s with a predicted 6 percent increase.
After Africa, Europe will stand as the weakest region for profitability, at just 1.8 percent for 2015. IATA says profitability is stunted by vigorous competition in the area due to its open skies, high regulatory costs, and taxes.
Latin American airlines have faced a mixed environment, with weak home markets affecting performance. However, consolidation of some airlines and long-haul successes are expected to boost its net profit margin to 2.6 percent.
Middle Eastern airlines have a low average yield, but with even lower unit costs, passenger capacity is expected to expand by 15.6 percent in 2015. Its overall net profit margin is expected to reach 2.5 percent.
“Today the industry is a vital driver of the global economy. We estimate that about 1% of global GDP is spent on air travel. Including direct taxation that will be a total spend of $823 billion next year. For that, we anticipate that 3.5 billion people will travel and 53.5 million tonnes of cargo—worth some $7.3 trillion—will be transported. Air travel is behind some $644 billion in tourism receipts,” said Tony Tyler.
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