IATA Forecasts for 12% Rise in Profitability of Global Aviation Industry During 2016

International Air Transport Association (IATA) has forecast for a 12% rise in profits of the global airline industry during 2016. If the prediction turns real, the improving trend in profitability is going to sustain for the fifth consecutive year. However, the global aviation’s trade body urges the industry-men to work for retaining the improvement in future amid warns for decrease in passenger demand following global economic uncertainty.

According to IATA furnished projection, lower oil prices will contribute $39.4 billion (£27.3 billion) in profits for the airlines. Aviation industry has been able to record $35.3 billion profit during 2015 from this segment, informs BBC citing the aviation body’s quarterly report as the source. Of the oil price induced windfall profit, North American Airlines has been predicted to bag more than half of the industry’s profit.         

IATA has also reviewed its December prediction in terms of pasFinancial Times represents the IATA analysis.
senger demand slashing from 6.9% to 6.2%. The aviation industry has recorded 7.4% growth during the previous year. Notably mentioning, IATA controls over 83% of the global air traffic. Robust growth of airline industry following expansion of fleets to accommodate larger passenger number has ultimately cost the appetite of passengers for air travels;

The aviation trade body expects for global sales revenue of $709 billion. The association also forecasts for loss of $500m for African carriers, compared to a $700m loss in 2015. Meanwhile, the European airlines are expected to record £5.2 billion in profit during this year. IATA believes, European airlines will be able to achieve the profit despite terrorist attack induced dampening effect on demand in some key tourist centers, according to a report published in Sky News.

Intriguingly, the entire projection has been done considering oil prices at a level of $45 per barrel. But crude oil is now being traded at a level of $50 a barrel.

Lower oil prices have been aiding airlines earning more profits certainly, but the aviation industry is unable to enjoy the feature fully. The amount saved from reduced expense gets tempered with hedging and exchange rates.

However, the industry has probably enjoyed the peak of the positive stimulus from lower prices and hence performance will be the only key to withstand the load factors in the near future, cautions Tony Tyler, IATA’s director general and chief executive. He finds hope over the future of aviation industry since customers have started enjoying great offers as an impact of intensifying competition among the carriers. Investors of the aviation industry have also started to gain desired reward, cites Tyler.