IATA: Airlines seeing yield weakness with lower oil prices and stronger capacity growth

IATA released (07-Jul-2015) its 'Airlines Financial Monitor' for Jun-2015

• Airline share prices have been falling because of investor profit taking, particularly in the US, but in Jun-2015 they were still up by 10% compared to a year ago. The decline in airline share prices during the recent past is due to small rallies in jet fuel prices as well as the strengthening US dollar;
• 1Q2015 financial results show large improvement in profits, especially for US carriers - where consolidation and cost cutting has resulted in a significant boost to profitability and lower fuel costs - but also in the Asia Pacific, with Chinese carriers recording solid 1Q2015 profit results;
• Crude oil prices fell in Jun-2015 after a little rally in May-2015, pushed down by expectations of supply increases from Iran and the US - levels are now down 45% on 2014 highs;
• Passenger yields in the US are down 5% year-on-year and fares in other regions have fallen further. This recent weakness in yields likely reflects downward pressure from earlier declines in fuel related costs and stronger growth in capacity relative to demand;
• Air transport volumes continue to expand robustly. In addition, recent improvements in business confidence in some advanced economies should help support growth in international travel;
• FTKs stayed flat. This development is consistent with a trend change in world trade, particularly in emerging Asia, were trade showed a notable decline in 1Q2015 and remains weak in 2Q2015;
• Growth in seats accelerated in May-2015, as more aircraft came out of storage, surpassing expansion in demand;
• Air freight load factors fell further in May-2015, sinking to levels not seen since mid-2009;
• Passenger load factors were sustained above 80%. Domestic load factors have shown improvement since mid-2014, supported by stronger growth in volumes. International load factors have shown slight improvement this year, after showing patches of weakness in 2H2014. [more - original PR]