IATA: Confidence falling but costs declining

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Confidence among airline chief financial officers and heads of cargo has fallen in January, with only 45.7 per cent expect profits to improve over the next twelve months, according to the International Air Transport Association (IATA)

In the association’s Airline Business Confidence Index January 2016, it says profit expectations for the next 12 months have fallen over the past two quarters, which IATA says suggests improvements peaked earlier in 2015. In the January 2015 survey, 78 per cent expected profits to improve over the next 12 months.

IATA says: “The growth outlook is positive for both passenger and cargo businesses, but the share of respondents expecting improvements has decreased compared to a year ago. This likely reflects concerns over weakness in the global business environment and emerging market economies.”

Volume growth is expected to be slow, with 45.2 per cent predicting an improvement over the next 12 months and 41.9 per cent expecting no change. Though the outlook remains positive, in the January 2015 survey, 71.4 per cent had predicted a 12 month volume increase.

IATA says: “Expectations have weakened on the back of slower growth in world trade as well as little improvement in global business confidence due to sluggishness in some emerging markets.”

The respondents are not so optimistic about yields, with 48.8 per cent expecting no change, 38.7 per cent think they will decrease and only 12.9 per cent anticipate improvements.

Continuing falling oil prices provide some hope, with 45.5 per cent expecting costs to fall by 45.5 per cent over the next 12 months, 42.4 per cent think there will be no change and 12.1 per cent say they will increase. Crude oil prices fell to $38 a barrel in December, and 77.1 per cent of respondents say they input costs fell over the past three months.

The association says: “Previous (2014) survey responses included reference to cost cutting measures as reasons for declines in current/future cost fluctuations, but the fall in fuel prices has been the key factor in both recent past and future expectations of lower cost pressures during the past year.”