IATA: Airline profits to rise in 2016 despite cargo weakness

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IATA CEO and director general, Tony Tyler, at the IATA Global Media Day, 9 December 2015

Airlines are expected to make profits of $36.3 billion in 2016, with passenger demand expected to make up for weak cargo growth, the International Air Transport Association (IATA) announced at its Global Media Day in Geneva (Switzerland).

The association says of the global total, North America will be responsible for $19.2 billion of net profit, followed by Europe at $8.5 billion. Asia Pacific airlines are expected to make a profit of $6.6 billion followed by the Middle East at $1.7 billion.

IATA predicts Latin American carriers will make a profit of $400 million compared to a loss of $300 million this year. African airlines are predicted to reduce losses from $300 million this year to $100 million in 2016. Airlines are expected to achieve a profit margin of 5.1 per cent if they hit the predicted profit.

IATA director general and chief executive officer, Tony Tyler says: “With net profit margins still in the five per cent range there is little buffer. Achieving returns that barely exceed the cost of capital means that airlines are finally meeting the minimum expectations of their shareholders. For most other industries this is the norm and not the expectation.”

The association is expecting oil prices to average $51 a barrel in 2015, compared to $55 this year but the strength of the US dollar is likely to offset gains. Global economic growth is expected to be hit by the slowdown in China offsetting Eurozone recovery.

IATA say cargo revenues are set to decline $1.4 billion to $50.8 billion, from the $52.2 billion in 2015.

In total, the industry is expected to uplift 52.7 million tonnes of cargo in 2016, up from 51.3 million in 2015.

IATA also forecasts cargo yields will fall by a further 5.5 per cent next year and demand for air cargo is “disappointing” but will still accelerate in 2016 to three per cent ahead of the 1.9 per cent growth in 2015.