Dublin: Airlines around the world will make more money this year than previous estimates, the International Air Transport Association (IATA) said on Thursday as it revised upward its industry outlook by 8.53 per cent to $39.4 billion (Dh144 billion).
The revision, up from its $36.3 billion profit forecast in December, comes as many airlines caution of weaker revenues in 2016 as capacity and currency fluctuations push down air fare margins.
Lower fuel prices and increasing industry partnership will drive higher profits this year that equate to an average profit of $10.42 per passenger or a profit margin of 5.6 per cent.
“It’s a good time for the airline industry,” outgoing IATA director general Tony Tyler said in Dublin at the opening day of the group’s annual industry meet.
A lower consensus forecast for oil benchmark Brent crude this year of $45 a barrel compared to $51 a barrel in December will also boost profits. However, Tyler cautioned the benefits of lower oil prices are being “tempered” by fuel hedging and currency exchange rates.
The industry is seeing an increasing number of collaborations that is benefiting the industry, IATA said. In recent years attention has focused on Etihad Airway’s strategy of buying minority stakes in seven airlines from Australia to Europe. Etihad says its strategy helps its share resources and reduce costs.
Qatar Airways holds a 15.1 per cent stake in British Airways parent company International Airlines Group (IAG). On Tuesday Aer Lingus, also a subsidiary of IAG, said it was exploring Dublin-Doha route possibilities with Qatar Airways.
This year, people will make an estimated 3.8 billion journeys, IATA said, adding that 2016 will be only the second time in history the industry makes more money than the cost of capital. The last time was 2015.
Lower airfares
Passengers are to reap the benefits of competition and other pressures on air fares with IATA forecasting a 7 per cent drop in yields this year.
“Consumers are getting great deals on a lot of choice,” Tyler said.
Turkish Airlines chief executive Temel Kotil told Gulf News on Wednesday his airline will price fares “around” two to three per cent lower this year due to a weak Turkish travel market.
James Hogan, president and chief executive of Etihad Airways umbrella company Etihad Aviation Group (EAG), said on Tuesday there are “heavy discounts” worldwide.
A spate of terror attacks and safety incidents around the world are expected to effect travel sentiment this year. Travellers from East Asia to Europe dropped off following the March Brussels bombings and the attacks in Paris in November.
Tyler called for better sharing of intelligence between governments and the airlines to help improve industry safety and security.
