IATA: Airlines results improving in 2Q2016, yield pressure expected to continue through year

IATA reported (09-Aug-2016) the following highlights from its Jul-2016 'Airlines Financial Monitor':

• The initial financial results from 2Q2016 point to another solid quarter for industry profitability and cash flow. Sampled net post-tax profits were down 15% year-on-year, but the EBIT margin edged up 0.6 ppts, to 13.6%;
• Global airline share prices increased by 5.9% in Jul-2016, but they remain well down on where they started the year. North American (+7.9%) and Asia Pacific (+4.8%) carriers saw the biggest increases, alongside a more modest rise for European airlines;
• Brent crude oil prices fell back sharply in Jul-2016, driven largely by a near-term glut in supply. The futures curve has shifted down in recent weeks, with oil prices now expected to remain below USD55 per barrel "for the foreseeable future";
• Yields have fallen by around 6.5% in constant exchange rate terms in 2016 (adjusting for distortions from earlier gains in the dollar). Ongoing downward pressure on yields is expected to provide further stimulus to demand during the rest of the year;
• Airlines in all regions of our sample increased capital expenditure as a share of revenues over the period, but not to the same extent as the pick-up in net cash flow. As a result, free cash flow also rose, from 8.4% of revenues to 9.1%;
• The premium segment continues to offer an important buffer for overall airline financial performance. Premium airfares have held up better than their economy counterparts on many of the main premium routes so far this year;
• Premium international passenger traffic growth has continued to lag behind that of economy. Origin-destination premium international journeys accounted for 5.5% of the total over the first five months of 2016, from 5.9% in the same period a year ago;
• The global air passenger market grew solidly in annual terms during H1 2016. That said, the upward trend has eased in recent months on the back of modest economic growth and cumulative impacts of terrorist attacks;
• The latest freight volumes data point to an improvement from the weak conditions seen earlier in 2016. But familiar headwinds persist, and low freight loads are keeping downward pressure on cargo yields and revenues. [more - original PR]