KUCHING: The International Air Transport Association (IATA) announced an upward revision of its 2015 industry outlook to a US$29.3 billion net profit. On expected revenues of US$727 billion, the industry would achieve a four per cent net profit margin.
According to a statement, the significant strengthening from the US$16.4 billion net profit in 2014 reflects the net impact of several global factors, including stronger global economic prospects, record load factors, lower fuel prices, and a major appreciation of the US dollar.
All regions are expected to see an improvement in profitability in 2015 compared with 2014. There are, however, stark differences in regional economies, which are also reflected in airline performance.
“The industry’s fortunes are far from uniform. Many airlines still face huge challenges,” said Tony Tyler, IATA’s director general and chief executive officer.
“For the airline business, 2015 is turning out to be a positive year. Since the tragic events of September 2001, the global airline industry has transformed itself with major gains in efficiency.
“This is clearly evident in the expected record high passenger load factor of 80.2 per cent for this year. The result is a hard-earned four per cent average net profit margin. On average, airlines will retain US$8.27 for every passenger carried.”
All regions will see improved profitability in 2015 compared with 2014. They will also see capacity expansions but these are expected to broadly match the expansion in demand.
This aligns with the global expectation for capacity to expand 6.2 per cent, slightly behind the projected 6.7 per cent increase in demand. Aside from these few similarities, the regions are expected to deliver widely divergent levels of profitability.
Within Asia-Pacific, carriers are expected to generate a US$5.1 billion profit for a 2.5 per cent net margin. Asia-Pacific airlines have about a 40 per cent share of the global air cargo market. Consequently, they have been disproportionately impacted by the doldrums in the air cargo industry.
The slowdown in the Chinese economy has also had a dampening impact on profitability. Demand is expected to grow a healthy 8.1 per cent, slightly ahead of the 7.7 per cent forecast growth in capacity. Lower fuel costs will help but the stronger dollar reduces the benefit in this region.
The airline industry continues to add value to its customers, to the wider economy, and to governments.
Aviation’s global connectivity now spans 16,485 city-pairs (2014), which is nearly double the number in 1994. This connectivity is a catalyst for economic benefits for users and the wider economy.
Over that same period, average airfares have fallen around 64 per cent, which has been a major stimulus for trade, tourism, and foreign direct investment associated with global supply chains.
The number of aviation jobs is rising although the pace of hiring is expected to taper slightly in 2015. Total direct employment in the sector is expected to reach 2.5 million. The total airline payroll in 2015 is expected to reach US$150 billion.
The industry tax bill is expected to grow to $116 billion in 2015. That is a 3.9 per cent increase on 2014.
Investments in new aircraft are a major driver of fuel efficiency improvements.
In 2015, airlines are expected to take delivery of more than 1,700 new aircraft worth $180 billion. About half are expected to replace less fuel-efficient older aircraft.