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Airlines to hit historic high with third successive profitable year

The International Air Transport Association (IATA) projects the global airline industry will make a net profit of $29.8 billion in 2017.



Projected total revenues of $736 billion represent a 4.1 per cent net profit margin. This will be the third consecutive year in which airlines will make a return on invested capital (7.9 per cent) which is above the weighted average cost of capital (6.9 per cent).

IATA revised its outlook for airline industry profitability this year slightly downward to $35.6 billion, from the June projection of $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 per cent).

“Airlines continue to deliver strong results. This year we expect a record net profit of $35.6 billion.  Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That’s a very soft landing and safely in profitable territory,” said Alexandre de Juniac, IATA’s director-general and CEO.

He confirmed that these three years are the best performance in the industry’s history despite abundant political, economic and security risks. And controlling costs is still a constant battle in a hyper-competitive industry.

“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 recognise that profits are not evenly spread, with the strongest performance concentrated in North America,” said de Juniac.

Published : December 09, 2016

By : The Nation