IATA: outlook for volumes positive

Vietnam Airlines

Airline profit expectations for the year ahead have fallen, but remain upbeat and the oulook for cargo volumes is, “positive”, according to a survey by the International Air Transport Association (IATA).

The association’s quarterly Airlines Business Confidence Index July survey, which it published on Wednesday 22 July, canvassed the opinions of chief financial officers and cargo heads from carriers across the globe.

IATA says the survey found the rate of expected improvement in profitability over the next 12 months has also fallen in July compared to the April survey, which suggests improvements in key drivers might have “peaked earlier in the year”.

Respondents in the survey indicated to IATA that airfreight volumes during the last three months were expanding, but at a slower rate than earlier in the year in the first quarter (Q1).

The association explains that this is consistent with the data, which shows freight tonne kilometres are still up on a year ago, but it adds that growth has flattened during recent months.

IATA says the outlook for cargo volumes “remains positive”, but 53 per cent of respondents expects gains in the year ahead, compared with 63 per cent in April.

“Expectations have weakened slightly on the back of slower growth in world trade over recent months with large declines in key markets like emerging Asia as well as little improvement in business confident due to sluggishness in some emerging markets,” IATA explains.

IATA says that respondents in the July survey also indicated that cargo yields will decline in the second quarter (Q2) of this year and will fall during the year ahead, which was the same in the April survey.

But on a positive note, the associations notes the declines in yields have now “bottomed out” as they are now stable compared to the Q1 survey. “There could be further declines in yields once hedging positions unwind, although some of those would already have done so, but the survey does not predict further falls than those anticipated in April,” IATA says.

The survey found that 44.8 per cent of respondents expect to see a fall in cargo yields over the next 12 months, while 17.2 per cent feel there will be an increase and 37.9 per cent expect no change in yields.

Respondents also report seeing a decline in input costs in the second quarter (Q2) compared to a year ago, but at a slower rate than in the first three months of the year. The Q2 fall is a result of the drop in crude oil prices, which averaged $65 a barrel in Q2, 40 per cent down on the price highs in mid-2014.

IATA says that such input costs are expected to decline during the year ahead, but not by as much as was anticipated earlier this year.

The survey also found airline employment activity has increased slightly in Q2, which IATA points out reflects the positive financial performance of carriers.