Apr-2016 IATA Business Confidence Survey shows easing expectations of profitability gains

IATA released (26-Apr-2016) its April 2016 Business Confidence Survey. Key points include:

• Airline CFOs and heads of cargo survey points to further year-on-year gains in profitability during 1Q2016, following a record year in 2015;
• Expectations of further gains in profitability over 2016 "have eased markedly in recent surveys", as yields have come under strong downward pressure and expectations of future cost reductions have diminished;
• • On a weighted-average basis, the score for profitability over the previous three months has fallen to 56.5 from a peak of 79.3 in Jan-2015 (for 4Q2014);
  • Just under 42% of respondents expected profitability to increase over the next 12 months, but the proportion expecting profitability to remain unchanged increased to 33%. All told, the weighted-average score was the lowest in four years;
• Apr-2016 survey results were consistent with the strong start to 2016 for passenger volumes, and are in keeping with the mixed start of the year for air cargo. The vast majority of respondents expect passenger demand to increase over the next 12 months. The weighted average score "remained firmly in positive territory, broadly in line with its average level since 2013";
• Long-run expectations for growth "remain positive" for both passenger and cargo businesses, although expectations of the latter have moderated since the start of 2015 as structural headwinds - notably the ongoing weakness of global trade growth - have risen to the fore;
• More than two-thirds of respondents reported a decrease in operating costs in 1Q2016, consistent with wider developments in the crude oil market. The price of jet fuel, which accounts for around one-third of total industry costs, was 39% lower in 1Q2016 in year-on-year terms;
• Lower input costs and increased competition are putting downward pressure on passenger yields, while ongoing increases in freight capacity are expected to continue to weigh heavily on freight yields over the year ahead;
• Airline employment activity was reported to have increased in 1Q2016, and the survey results are consistent with airlines expecting to add more staff to meet higher demand levels over the next 12 months. [more - original PR]