IATA predicts airlines’ profitability to improve in 2015

11 December 2014 (Last Updated December 11th, 2014 18:30)

The International Air Transport Association (IATA) has predicted improved industry profitability, with the airlines expected to post a collective global net profit of $19.9bn in 2014, up from $18bn projected in June.

The International Air Transport Association (IATA) has predicted improved industry profitability, with the airlines expected to post a collective global net profit of $19.9bn in 2014, up from $18bn projected in June.

In its 'Economic Performance of the Air Transport Industry' report, IATA says that the airlines' collective profit is further projected to rise to $25bn in 2015.

Average return fares for air passengers will be 5.1% lower next year compared with 2014, owing to higher profits posted by airlines as a result of cheaper fuel and faster global growth. Cargo rates are also expected to fall by 5.8%.

"The global economy continues to recover and the fall in oil prices should strengthen the upturn next year."

IATA says that on a passenger basis, airlines will make a net profit of $7.08 in 2015, up on the $6.02 earned in 2014 and more than double the $3.38 earnings a passenger achieved in 2013.

The return on invested capital (ROIC) is expected to grow to 7.0%, which is a marked increase on the 6.1% ROIC expected in 2014.

IATA director general Tony Tyler said: "The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year."

Tyler advises caution, however, saying that political unrest, conflicts and some weak regional economies can all throw a spanner in the works.

Forecast also differed depending on the region, with North American airlines expected to see the strongest profit margins of 6% next year.

In contrast, European airlines are expected to see profit margins of 1.8%, which IATA says could be due to 'high regulatory costs, infrastructure inefficiency and onerous taxation'.

Airlines in the Asia-Pacific region are expected to achieve a net profit of $5bn in 2015, up from $3.5bn in 2014 for a 2.2% net profit margin.

Passenger capacity for the Middle East airlines is expected to expand by 15.6% in 2015, up from 11.4% in 2014, representing a profit of $7.98 a passenger and a net profit margin of 2.5%.

Latin American airlines are expected to post net profits of $1bn in 2015, up from $700m in 2014, while Africa will see a marginal improvement with $200m in 2015 which is an improvement on the break-even performance in 2014.

The association also says that it expected airlines to spend $192bn on fuel next year, down from an expected $204bn this year.

The industry body represents 250 airlines, accounting for 84% of global air traffic.