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Geneva — Profits for global airlines will fall for the first time in six years in 2017 as rising oil and labour costs bite and demand slows, the International Air Transport Association (Iata) said on Thursday.
Iata, representing 265 airlines accounting for 83% of global air traffic, also cut its 2016 forecast for collective net profit to $35.6bn — still a record high but down from a previous prediction for $39.4bn.
After a strong couple of years, airlines have found the going tough in the latter half of 2016. Attacks on airports and popular tourist destinations in North Africa and Europe have dampened travel demand for some routes.
A rush to take advantage of low oil prices to offer more seats and gain customers has also put ticket prices under pressure, hindering profits.
Iata said it expects airline profits to fall 16% to $29.8bn next year, of which almost two thirds, or $18.1bn, will come from North American carriers.
However, at a predicted 7.9%, the industry’s return on capital is expected to exceed the cost of capital in 2017 for the third year in a row, a boost for investors in the sector.
The average return fare is due to fall almost 11% to $363 in 2016 from $407 the previous year. Fares will decline 3% in 2017 to $351, Iata predicted.
Meanwhile oil prices have been rising and labour costs are also creeping up, and are expected to rise 1.3% in 2017, Iata chief economist Brian Pearce said.
"Unit revenues are starting to get better, but there is still more pressure on those than there is on cost," Pearce said.
Reuters
Geneva — Profits for global airlines will fall for the first time in six years in 2017 as rising oil and labour costs bite and demand slows, the International Air Transport Association (Iata) said on Thursday.
Iata, representing 265 airlines accounting for 83% of global air traffic, also cut its 2016 forecast for collective net profit to $35.6bn — still a record high but down from a previous prediction for $39.4bn.
After a strong couple of years, airlines have found the going tough in the latter half of 2016. Attacks on airports and popular tourist destinations in North Africa and Europe have dampened travel demand for some routes.
A rush to take advantage of low oil prices to offer more seats and gain customers has also put ticket prices under pressure, hindering profits.
Iata said it expects airline profits to fall 16% to $29.8bn next year, of which almost two thirds, or $18.1bn, will come from North American carriers.
However, at a predicted 7.9%, the industry’s return on capital is expected to exceed the cost of capital in 2017 for the third year in a row, a boost for investors in the sector.
The average return fare is due to fall almost 11% to $363 in 2016 from $407 the previous year. Fares will decline 3% in 2017 to $351, Iata predicted.
Meanwhile oil prices have been rising and labour costs are also creeping up, and are expected to rise 1.3% in 2017, Iata chief economist Brian Pearce said.
"Unit revenues are starting to get better, but there is still more pressure on those than there is on cost," Pearce said.
Reuters
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