Europe and North America drive airline profit increase

American Airlines Boeing 787

Airlines have seen profits increase in the third quarter of 2015 to $12.2 billion with North America and Europe making up for weakness elsewhere, according to the International Air Transport Association (IATA) airlines financial monitor November 2015.

The IATA report says North American airlines have seen net post tax profits almost double from $3.4 billion in the third quarter of 2014 to $6.5 billion in 2015. Europe has seen an increase to $5.4 billion from $4.2 billion in 2014. In comparison, Asia-Pacific profits have fallen to $940 million in the third quarter from $1.4 billion during the same period last year while Latin American losses increased to $530 million from $88 million in 2014.

IATA says: “The improvement was driven by carriers in the US and Europe. In Asia, by contrast, Q3 profits are down on a year ago, mostly reflecting weakness in cargo volumes and yields. Similarly, airlines in Latin America continue to struggle with falling yields and recession in major economy Brazil.”

The association says demand in freight tonne kilometres (FTK) weakened in October compared to September, because of European performance, though IATA says trade should improve in upcoming months. While demand has been slow, capacity measured in available FTK increased by 0.3 per cent in October compared to September, continuing a trend seen throughout 2015.

The load factor has remained weak, at 44 per cent worldwide between January and October, a low not seen since mid-2009. Africa has continued to see the worst load factors, at 29.8 per cent year-to-date (YTD), while it was highest in Asia-Pacific, at 54.2 per cent. In October, the load factor was 44.8 per cent, again, with Africa posting the lowest figure, at 30.3 per cent, and Asia-Pacific highest at 55.3 per cent.

IATA also notes that crude oil prices have fallen to $40 a barrel in November, down $25 from the mid-year peak. Crude oil prices have averaged $55 a barrel so far in 2015, with Iran increasing production and OPEC nations refusing to cut back. There has also been a slowdown in demand due to slower than expected global economic growth, particularly from economies like China.