Air travel profits put at $25 billion

(Barbados Nation) – Low oil prices and an improving world economy could have the airline industry smiling all the way to the bank.

That’s the expectation of the International Air Transport Association (IATA). In its recently-released ‘Economic Per-formance Of The Air Transport Industry’ report, IATA said industry profitability was on course to improve. “Airlines expected to post a collective global net profit in 2014 of some US$19.9 billion (up from the US$18 billion projected in June). This looks set to rise to US$25 billion in 2015,” it said.

The organisation concluded that “lower oil prices and stronger worldwide GDP growth are the main drivers behind the improved profitability”. “Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through.

The airline industry is highly competitive. After adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1 per cent on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8 per cent,” it said.



“The expected US$25 billion net post-tax profit represents a 3.2 per cent margin. On a per passenger basis, airlines will make a net profit of US$7.08 billion in 2015. That is up on the US$6.02 billion earned in 2014 and more than double the US$3.38 billion earnings per passenger achieved in 2013.

“The return on invested capital (ROIC) is expected to grow to seven per cent. This is a substantial improvement on the 6.1 per cent ROIC expected to be achieved in 2014. This is still 0.8 percentage points below the 7.8 per cent weighted average cost of capital, so there is still some ground to cover before achieving sustainable margins.” IATA director general and chief executive officer Tony Tyler said: “The industry outlook is improving.