Airline profitability has peaked and volumes flat

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Cargo volumes have remained stagnant and profitability peaked earlier this year, according to the International Air Transport Association (IATA) business confidence index survey October 2015.

In the survey of chief financial officers and heads of cargo, 50 per cent saw an improvement in profitability in the past three months, while 25 per cent say there was no change and the other 25 per cent say it decreased.

Of the respondents, 38.9 per cent say volumes did not change in the past three months, 36.1 per cent saw an improvement while 25 per cent say cargo dropped. In the third quarter, 56.8 per cent of respondents said cargo yields fell, 37.8 per cent saw no change and only 5.4 per cent reported an increase.

IATA says: “Passenger volumes were reported to have expanded at a robust rate during Q3, but growth in cargo volumes is now broadly flat on the year ago period, which is consistent with FTK [freight tonne kilometre] data and the lacklustre demand backdrop.”

The one positive area in the third quarter was 71.8 per cent of respondents reported input costs falling, helped by crude oil prices averaging $52 a barrel, down 55 per cent on the mid 2014 highs.

IATA says: “The growth outlook is positive for both passenger and cargo businesses, but not at the strong pace that was expected earlier in the year. This is likely to reflect concerns over weakness in the global business environment and emerging economies.”

For the next 12 months, half of respondents say cargo volumes will improve in the period, 42.1 per cent expect no change and 7.9 per cent predict a drop.

Cargo yields are not expected to improve over the next 12 months, with 47.2 per cent predicting no change and 38.9 per cent saying they will decrease.