GENEVA: The combined profits of Middle East airlines in 2016 is expected to touch $1.7bn (about QR6.19bn), up by over 21 percent compared to the estimated combined profits of $1.4bn (about QR5.1bn) in 2015, according to latest figures released by the International Air Transport Association (IATA) at the ‘Global Media Day’ here recently.
The region is expected to recover most of the lost ground, but the collective profits of $1.4bn in 2015 is expected to be 22 percent lower than the previously forecast $1.8bn.
The Middle East is, however, split between strong Gulf airlines, with successful long-haul super-connector operations, and regionally-focused airlines which are suffering from the impact of lower oil revenues.
Profit per passenger of $7.97 forecast for 2016 is slightly less than that expected for European airlines and almost a third of what North American airlines are achieving. The region is still generating double-digit growth. Capacity is expected to expand by 12.1 percent and 12.2 percent in 2015 and 2016, respectively, largely as a result of growth in traffic over the region’s modern hubs.
According to the latest global airline industry outlook for 2016, the average net profit margin of 5.1 percent being generated with total net profits of $36.3bn. IATA also announced a revision to its airline industry outlook for 2015 upwards to a net profit of $33bn (4.6 percent net profit margin) from $29.3bn forecast in June.
“This is a good news story. The airline industry is delivering solid financial and operational performance. Passengers are benefiting from greater value than ever with competitive airfares and product investments. Environmental performance is improving. More people and businesses are being connected to more places than ever. Employment levels are rising. And finally our shareholders are beginning to enjoy normal returns on their investments,” said Tony Tyler, IATA’s Director General and CEO.
The strengthening industry performance is being driven by a combination of factors, including lower oil prices, strong demand for passenger travel, stronger economic performance in some key economies, and efficiency gains.
Lower oil prices (forecast to be $55/barrel Brent in 2015 and averaging a lower $51/barrel in 2016) are giving airline profits a boost; however, this is strongly moderated in many markets by the appreciation of the US dollar.
Strong demand for passenger travel (6.7 percent growth in 2015 and 6.9 percent in 2016) is making up for disappointing cargo demand growth (1.9 percent in 2015; strengthening to 3 percent in 2016). Weak cargo performance reflects sluggish growth in trade.
Efficiency gains by airlines are illustrated by record high load factors (80.6 percent in 2015, tapering slightly to 80.4 percent in 2016). Capacity is increasing and is expected to move ahead of demand growth in 2016. Yields, however, continue to deteriorate amid stiff competition.
In 2016, total passenger numbers are expected to rise to 3.8 billion traveling over some 54,000 routes. North American carriers are leading the industry’s performance and are expected to generate considerably more than half the industry’s total profits in both 2015 ($19.4bn) and 2016 ($19.2bn). On a per passenger basis, profits of $21.44 in 2016 also places their performance at the top of the industry.
