Geneva -The International Air Transport Association (IATA) announced
that it expects the global airline industry to make a net profit in 2017
of USD 29.8 billion. On forecast total revenues of USD 736 billion, that
represents a 4.1% net profit margin. This will be the third consecutive
year (and the third year in the industry's history) in which airlines
will make a return on invested capital (7.9%) which is above the
weighted average cost of capital (6.9%).IATA revised slightly
downward its outlook for 2016 airline industry profitability to USD 35.6
billion (from the June projection of USD 39.4 billion) owing to slower
global GDP growth and rising costs. This will still be the highest
absolute profit generated by the airline industry and the highest net
profit margin (5.1%). "Airlines continue to deliver strong results. This year we expect a
record net profit of USD 35.6 billion. Even though conditions in 2017 will
be more difficult with rising oil prices, we see the industry earning
USD 29.8 billion. That's a very soft landing and safely in profitable
territory. These three years are the best performance in the industry's
history—irrespective of the many uncertainties we face. Indeed, risks
are abundant— political, economic and security among them. And
controlling costs is still a constant battle in our hyper-competitive
industry," said Alexandre de Juniac, IATA's Director General and CEO. "We need to put this into perspective. Record profits for airlines
means earning more than our cost of capital. For most other businesses
that would be considered a normal level of return to investors. But
three years of sustainable profits is a first for the airline industry.
And after many years of hard work in restructuring and re-engineering
the business the industry is also more resilient. We should also
recognize that profits are not evenly spread with the strongest
performance concentrated in North America," said de Juniac. 2017 While airline industry profits are expected to have reached a
cyclical peak in 2016 of USD 35.6 billion, a soft landing in profitable
territory is expected in 2017 with a net profit of USD 29.8 billion. 2017
is expected to be the eighth year in a row of aggregate airline
profitability, illustrating the resilience to shocks that have been
built into the industry structure. On average, airlines will retain
USD 7.54 for every passenger carried. Expected higher oil prices will have the biggest impact on the
outlook for 2017. In 2016 oil prices averaged USD 44.6/barrel (Brent) and
this is forecast to increase to USD 55.0 in 2017. This will push jet fuel
prices from USD 52.1/barrel (2016) to USD 64.9/barrel (2017). Fuel is expected
to account for 18.7% of the industry's cost structure in 2017, which is
significantly below the recent peak of 33.2% in 2012-2013. The demand stimulus from lower oil prices will taper off in 2017, slowing traffic growth to 5.1% (from 5.9% in
2016). Industry capacity expansion is also expected to slow to 5.6%
(down from 6.2% in 2016). Capacity growth will still outstrip the
increase in demand, thus lowering the global passenger load factor to 79.8% (from 80.2% in 2016). The negative impact of a lower load factor is expected to be offset somewhat by a strengthening of global economic growth.
World GDP is projected to expand by 2.5% in 2017 (up from 2.2% in
2016). Along with structural changes in the industry, this is expected
to help stabilize yields for both the cargo and
passenger businesses. This is a welcome development as yields
(calculated in dollar terms) have fallen each year since 2012. There is some optimism over the prospects for the cargo business in 2017. The break in falling yields and a moderate
uptick in demand (3.5%) will see cargo industry volumes reach a record
high of 55.7 million tonnes (up from 53.9 million tonnes in 2016).
Industry revenues are expected to rise slightly to USD 49.4 billion (still
well below the USD 60 billion level of annual revenues experienced in
2010-2014). Trading conditions remain challenging. "Connectivity
continues to set new records. We expect nearly 4 billion travelers and
55.7 million tonnes of cargo in the coming year. And almost 1% of global
GDP is spent on air transport—some USD 769 billion. Air transport has made
the world more accessible than ever and it is a critical enabler of the
global economy," said de Juniac. "Governments, however, do not make aviation's work easy. The global
tax bill has ballooned to USD 123 billion. Over 60% of countries put visa
barriers in the way of travel. And the total number of ticket taxes
exceeds 230. Billions of dollars are wasted in direct costs and lost
productivity as a result of inefficient infrastructure. These are only
some of the hurdles which confront airlines. Our aim is to work in
partnership to help governments better understand and fully maximize the
social and economic benefits of efficient global air links," said de
Juniac. 2017 Regional Analysis North American carriers: The strongest financial performance is being delivered by
airlines in North America. Net post-tax profits will be the highest at
USD 18.1 billion next year, although down slightly from the USD 20.3 billion
expected in 2016. The net margin for the region's carriers is also
expected to be the strongest at 8.5% with an average profit of
USD 19.58/passenger. In 2017 capacity offered by the region's carriers is
expected to grow by 2.6%, slightly outpacing expected demand growth of
2.5%. Recent consolidation continues to underpin the region's strong
profitability, even as the region faces upwards cost pressures which
include the price of fuel. European carriers: Airlines based in Europe are expected to post an aggregate
net profit of USD 5.6 billion in 2017 which is below the USD 7.5 billion for
2016. Nonetheless, carriers there are forecast to generate a 2.9% net
profit margin and a per passenger profit of USD 5.65. There remains a
significant gap between the performance of the region's carriers and the
performance of North American ones. Capacity in 2017 is expected to
grow by 4.3%, ahead of demand growth which is forecast at 4.0%. The
region is subject to intense competition and hampered by high costs,
onerous regulation and high taxes. And terrorist threats remain a real
risk, even if confidence is starting to return after the tragic
incidents in recent times. Asia-Pacific carriers: Airlines in the Asia-Pacific region are expected to generate a
net profit of USD 6.3 billion in 2017 (down from USD 7.3 billion in 2016) for
a net margin of 2.9%. On a per passenger basis average profits are
anticipated to be USD 4.44. Capacity offered by the region's carriers is
forecast to grow by 7.6%, ahead of a forecast growth in demand of 7.0%.
Improved cargo performance is expected to offset rising fuel prices for
many of the region's airlines. The expansion of new model airlines and
progressive liberalization in the region is intensifying already strong
competition. In addition profitability varies widely across the region. Middle Eastern carriers: Middle Eastern airlines are forecast to generate a net profit
of USD 0.3 billion for a net margin of 0.5% and an average profit per
passenger of USD 1.56. This is below the USD 900 million profit expected in
2016. Average yields for the region's carriers are low but unit costs
are even lower, partly driven by the strong capacity expansion, forecast
at 10.1% this year, ahead of expected demand growth of 9.0%. Threats
are emerging to the success story of the Gulf carriers, including
increases in airport charges across the Gulf States and growing air
traffic management delays. Latin American carriers: Latin American airlines are expected to post a net profit of
USD 200 million, which is slightly lower than the USD 300 million forecast for
2016. Profit per passenger is expected to be USD 0.76 with a net profit
margin of 0.7%. Capacity offered by the region's carriers is forecast to
grow by 4.8% which is ahead of expected demand growth of 4.0%. Despite
some signs of improvement in the region's currencies and economic
prospects, operating conditions remain challenging, with infrastructure
deficiencies, high taxes, and a growing regulatory burden across the
continent. Venezuela continues to block the repatriation of some USD 3.8
billion of industry funds in contravention of international obligations. African carriers: Carriers in Africa are expected to deliver the weakest
financial performance with a net loss of USD 800 million (broadly unchanged
from 2016). For each passenger flown this amounts to an average loss of
USD 9.97. Capacity in 2017 is expected to grow by 4.7%, ahead of 4.5%
demand growth. The region's weak performance is being driven by regional
conflict and the impact of low commodity prices. 2016 2016
will be a record year for industry profitability. The expected net
profit of USD 35.6 billion is slightly ahead of the USD 35.3 billion recorded
in 2015, as is the 5.1% net profit margin (slightly ahead of the 4.9%
recorded for 2015). The modest revision from previous expectations largely is owing to two factors:
Slower global GDP growth: 2.2%, which was below mid-year expectations of 2.3% growth.
Non-fuel unit costs increased by 2.0% in 2016. The Business of Freedom "Air
transport is the business of freedom. The safe and efficient global
movement of goods and people is a positive force in our world.
Aviation's success betters peoples' lives by creating economic
opportunity and supporting global understanding. We must stand firm in
the face of any rhetoric that would put limits on aviation's future
success," said de Juniac. Some key indicators of the strength of global connectivity include:
The average return airfare in 2017 is expected to be USD 351 (2015 dollars), which is 63% below 1995 levels.
Average air freight rates in 2017 are expected to be USD 1.48/kg (2015 dollars) which is a 68% fall on 1995 levels.
The number of unique city pairs served by aviation grew to 18,429 in 2016, a 92% increase on 1995.
The
value of trade carried by air transport in 2017 is expected to be USD 5.7
trillion, a 4.9% increase on 2015. Air cargo accounts for around 35% of
the total value of goods traded globally.
The global spend on tourism enabled by air transport is expected to grow by 5.1% in 2017 to USD 681 billion.
Supply chain jobs supported by aviation are expected to grow by 3.4% in 2017 to some 69.7 million worldwide.
Airlines are expected to take delivery of some 1,700 new aircraft in
2017, around half of which will replace older and less fuel-efficient
aircraft. This will expand the global commercial fleet by 3.6% to
28,700.
Airlines are expected to operate 38.4 million flights in 2017, up 4.9%. Read Alexandre de Juniac's Speech IATA Economic Performance of the Airline Industry Interview with Brian Pearce on the 2017 IATA Industry Outlook (video) Overview of the 2017 IATAAirline Industry Economic Performance (video) For more information, please contact:
Corporate Communications
Tel: +41 22 770 2967
Email: corpcomms@iata.org | 
