AIRLINES LIKELY TO BE PROFITABLE IN 2017: IATA
As per assessment made by the International Air Transport Association (IATA), commercial airlines are projected to collectively generate a record net profit of $35.6 billion in 2017. Forecast made earlier in June 2016 of a profit of $39.4 billion has been revised downward attributing the reduction to slower growth in global gross domestic product and rising operational costs.
However, even if the $35.6 billion profit is achieved, it would be the highest absolute profit ever generated by the global airline industry. According to IATA, higher oil prices will have the biggest impact in 2017. In 2016 oil prices averaged $44.60 per barrel and this is forecast to increase to $55 per barrel in 2017. This will push average jet fuel prices from $52.10 in 2016 to $64.90 per barrel next year. Fuel is expected to account for 18.7 per cent of the industry’s cost structure in 2017, which is significantly below the recent peak of 33.2 per cent in 2012-13.
The strongest financial performance is being delivered by airlines in North America. Net post-tax profits will be the highest at $18.1 billion in 2017 although down slightly from the $20.3 billion expected in 2016. European airlines are projected to generate a net profit of $5.6 billion in 2017, a drop from the $7.5 billion in 2016 and Asia-Pacific carriers are expected to generate $6.3 billion next year, a drop from the $7.3 billion figure in 2016. In 2017, IATA is also projecting airlines to take delivery of 1,700 new aircraft.