IATA Survey: profitability to improve say CFOs

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Most airline chief financial officers and cargo heads are expecting profitability to improve in the next 12 months, according to the International Air Transport Association (IATA) business confidence index.

 

In its survey 78 per cent of respondents said profitability would improve before 2016. 

This compares to 70.5 per cent saying there would be an improvement in the business confidence index from January 2014. Confidence in the likelihood of profitability increasing in the next 12 months fell in the April survey last year to 60.4 per cent, before slowly rising to 62.2 per cent and 65 per cent in the July and October surveys, respectively. 

Of those surveyed for the January 2015 index, 68.3 per cent saw improvements in the last three months, up from 55.8 per cent in January 2014.

IATA says of the industry’s profitability: “Financial performance started to improve in the second half, after no gains in the second quarter, and the outlook remains positive, which suggests there will be further growth in profitability.”

Respondents to the January index report input costs falling because of reduced oil prices, a situation which is expected to continue into 2015. Of those respondents, 68.3 per cent say costs have fallen in the last three months and 67.5 per cent expect costs to fall in the next 12 months. While 12.5 per cent anticipate an increase and 20 per cent say there will be no change. In the January 2014 survey, 36.6 per cent expected input costs to fall over the next 12 months, while the percentage expecting no change or an increase was 31.7 per cent each.

According to IATA, the reason for the oil price fall is because, “crude oil prices, and therefore jet fuel prices, have declined due to several factors, including increasing oil supply in the US as well as a strengthening US dollar.”

Respondents are also reporting increased growth rates, with 56.8 per cent saying cargo volumes have risen over the past three months, compared to 10.8 per cent seeing decreases. Asia Pacific and North America are the regions reporting the biggest improvements in volumes.

Over the next twelve months, 71.4 per cent say they are expecting cargo volumes to increase and 2.9 per cent think growth will decrease, while 25.7 per cent anticipate no change. In January 2014, 66.7 per cent expected to see an increase, 2.6 per cent expected a decrease and 30.8 per cent anticipated no change.

 

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