IATA: Most airlines expect profit to deteriorate or remain flat over next 12 months

IATA released (14-Jul-2016) its Jul-2016 Airline Business Confidence Survey. Key points of the early Jul-2016 survey include:

• Airline CFOs and heads of cargo reported that they do not expect profits to improve over the next 12 months - 45.7% project a deterioration in profit in the next 12 months, while only 40% expect an increase;
• Survey results also indicate that industry profitability fell slightly in year-on-year terms during 2Q2016, reflecting the impact of recent terrorist attacks and wider pressure on yields;
• On the demand side, the survey results were consistent with the robust start to the year for air passenger volumes - albeit with an easing in recent demand conditions - and were in line with the subdued 2Q2016 for air cargo;
• Expectations for growth over the coming 12 months remain positive for both passenger and cargo businesses. Passenger expectations stabilised, while the outlook for cargo continues to be held back by structural headwinds;
• Despite the rally in oil prices since the start of 2016, the majority of survey respondents expect operating costs to fall further or to remain unchanged over the next 12 months. This relates to hedging practices in the industry, but also in part to the partial recovery in most currencies against the US dollar over recent months;
• In a reflection of strong competition in the passenger market, airline CFOs expect yields to fall by slightly more than input costs over the year ahead. On the freight side, ongoing increases in freight capacity are also expected to continue to weigh heavily on freight yields over the year ahead;
• Airline employment activity increased for the sixth consecutive quarter in Q2 2016. The forward-looking indicator dropped back, but remains consistent with airlines adding more staff over the next 12 months. [more - original PR]