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Airline earnings start to ease

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Airline earnings start to ease

Third-quarter profit decline indicates profitability may have already peaked; Asia-Pacific remains bright spot
/ 12:30 AM November 12, 2016

Global airline earnings slipped in the third quarter of 2016, signaling continued operating challenges and supporting the industry view that profitability may have already peaked.

According to data from the International Air Transport Association, the commercial airline industry saw profit decline 2.5 percent to $8.95 billion in the July-to-September period this year.

“The initial financial results from Q3 2016 continue to indicate robust performance by historical standards,” Iata said in its latest airlines financial monitor.

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“However, industry operating conditions are becoming more challenging and the latest results are a further indication that the profitability cycle, while remaining robust, may have peaked,” it added.

Nevertheless, a mixed narrative emerged when exploring airline profitably per region.

Asia-Pacific air carriers, for example, saw earnings during the period surge 274.3 percent to $1.52 billion while in North America, carriers saw profitability fall 37.8 percent to $3.85 billion. Airline profits in Europe rose 36.4 percent to $3.54 billion.

“Margins fell in North America, reflecting volatile fuel and labor costs. By contrast, margins improved in Asia Pacific and were broadly unchanged in Europe from a year ago,” IATA said.

Iata also pointed to positive signs moving forward. It noted that “intense downward pressure” on underlying yields eased during the middle months of 2016. Fares in the premium airline segment have also been resilient, having noted an increase on the Europe-Asia and North Atlantic markets.

“All told, the high-yielding premium segment continues to offer an important buffer for airline financial performance,” Iata said.

Iata said passenger traffic was also resilient in September and the seasonally adjusted industry-wide load factor increased to a nine-month high.

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