Airline Profits Set To Peak In 2016 then Slip in 2017, Says IATA

 - December 8, 2016, 9:40 AM

The International Air Transport Association (IATA) expects the airline industry to finish 2016 with a record $35.6 billion profit on total revenues of $736 billion. Although the achievement would mark the seventh consecutive year of profits for the group’s members, the figure didn't match the $39.4 billion predicted at IATA’s annual meeting last June. Forecasts for 2017 call for profits to slip further, to $29.8 billion.

Speaking at the IATA Media Day in Geneva on Thursday, IATA chief economist Brian Pearce blamed the projected slowdown on weak global economic growth and rising oil prices in the wake of last week’s decision by OPEC oil producers to cut output. Pearce termed the profit decline “a very soft landing,” arguing that airlines now stand better placed to withstand a weakening market due to factors such as moves toward denser seating configurations on aircraft and additional income from sources such as baggage charges.

However, IATA’s new director-general, Alexandre de Juniac, noted a lack of uniform financial performance across the industry. North American carriers will account for nearly 60 percent of overall industry profits ($20.3 billion), while European and Asia-Pacific carriers each contribute more than $7 billion. But Middle Eastern airlines appear set to generate less than $1 billion in profits this year, and next year's projections call for a drop to $300 million, the same as Latin America’s 2016 net profits. In Africa, carriers face an $800 million loss this year and around the same again in 2017.

De Juniac, who led Air France-KLM until taking over IATA from Tony Tyler in September, also warned of :an infrastructure crisis,” citing Eurocontrol’s prediction of a 12 percent shortfall in airport capacity by 2035. “The promised benefits of the Single European Sky are far from being achieved,” he said. An IATA-commissioned study estimates that accelerating European Union airspace modernization could create a million new jobs and add $265 billion of economic benefit.

The IATA leader also criticized the U.S. Federal Aviation Administration's NextGen airspace program, which, he said, “is being held captive to a politicized budgeting process and special interests.” De Juniac expressed concern about the “protectionist rhetoric” during the recent U.S. presidential election, Britain’s recent vote to leave the European Union and populist movements in other European countries. “We are worried about what we see everywhere. This is not good news for the aviation industry,” he concluded.