IATA: Tonnage up but rates to shrink in 2015

Airlines are expected to post a collective global net profit in 2014 of some US$19.9 billion; this looks set to rise to US$25.0 billion in 2015.


Economic Performance of the Air Transport Industry forecast IATA Tony Tyler


The International Air Transport Association (IATA) announced an outlook for improved industry profitability in its Economic Performance of the Air Transport Industry report. Airlines are expected to post a collective global net profit in 2014 of some US$19.9 billion (up from the US$18.0 billion projected in June). This looks set to rise to US$25.0 billion in 2015.

Lower oil prices and stronger worldwide GDP growth are the main drivers behind the improved profitability.

Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through. The airline industry is highly competitive. After adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1 per cent on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8 per cent.

The expected US$25 billion net post-tax profit represents a 3.2 per cent margin. On a per passenger basis, airlines will make a net profit of US$7.08 in 2015. That is up on the US$6.02 earned in 2014 and more than double the US$3.38 earnings per passenger achieved in 2013.

The return on invested capital (ROIC) is expected to grow to 7.0 per cent. This is a substantial improvement on the 6.1 per cent ROIC expected to be achieved in 2014.This is still 0.8 percentage points below the 7.8 per cent weighted average cost of capital (WACC), so there is still some ground to cover before achieving sustainable margins.