The International Air Transport Association (IATA) announced that it expects the global airline industry to make a net profit in 2017 of USD 29.8 billion. On forecast total revenues of USD 736 billion, that represents a 4.1% net profit margin. This will be the third consecutive year (and the third year in the industry’s history) in which airlines will make a return on invested capital (7.9%) which is above the weighted average cost of capital (6.9%).
IATA revised slightly downward its outlook for 2016 airline industry profitability to USD 35.6 billion (from the June projection of USD 39.4 billion) owing to slower global GDP growth and rising costs. This will still be the highest absolute profit generated by the airline industry and the highest net profit margin (5.1%).
“Airlines continue to deliver strong results. This year we expect a record net profit of USD 35.6 billion. Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning USD 29.8 billion. That’s a very soft landing and safely in profitable territory. These three years are the best performance in the industry’s history—irrespective of the many uncertainties we face. Indeed, risks are abundant— political, economic and security among them. And controlling costs is still a constant battle in our hyper-competitive industry,” said Alexandre de Juniac, Director General and CEO, IATA.
“We need to put this into perspective. Record profits for airlines means earning more than our cost of capital. For most other businesses that would be considered a normal level of return to investors. But three years of sustainable profits is a first for the airline industry. And after many years of hard work in restructuring and re-engineering the business the industry is also more resilient. We should also recognize that profits are not evenly spread with the strongest performance concentrated in North America,” said de Juniac.?