DOHA: Nearly 75% of airline CFOs and Heads of Cargo indicated an improvement in year-on-year profitability in Q4 2017 compared with the same period in 2016.
The majority (56 percent) reported that they expect their profitability levels to improve further over the coming 12 months, according to IATA’s airline business confidence index.
This positive outlook is being supported by robust demand growth on both the passenger and freight sides of the business.
The survey conducted in early January found 86 percent of respondents expect passenger volumes to rise over the year ahead – the highest proportion in more than a decade.
Thirty eight percent of respondents reported an increase in input costs in Q4 2017 compared to the same period a year ago, with many singling out the impact of higher fuel prices.
The upward trend in oil prices is expected to continue to impact airline costs in the year ahead.
That said, partly as a result of the strength of the economic backdrop and current demand/supply balances, our respondents appear confident about the outlook for both passenger and freight yields over the year ahead; both the forward-looking weighted-averages scores are currently above the 50-mark.
In terms of demand growth, 38 percent of respondents reported an increase in unit input costs in Q4 2017; this was the highest proportion since Q1 2017, with many noting the impact of higher fuel prices.
With 41 percent reporting no change in input costs, the backward-looking weighted-average score came in above the 50-mark for just the third time in 19 quarters.“Looking ahead, rising fuel prices were cited as a key driver for the 34 percent of respondents who reported that they expect input costs to increase over the coming 12 months.
22 percent expect input costs to decrease over the year ahead, driven in part by internal productivity gains and cost reduction programs, including the adoption of more fuel-efficient aircraft.”, IATA report said.
Fifty five percent of IATA respondents reported higher passenger yields in Q4 2017 compared to a year ago; this was a decline from 65 percent in the last survey but was still the second highest proportion since mid-2012.
This result suggests that passenger yields are finally starting to trend upwards, although we are still waiting to see clear evidence of this in the ticketing data that we track.
Looking ahead, 80 percent of respondents expect yields to remain steady or to increase over the year ahead.
The forward-looking weighted-average score has trended upwards since reaching a trough in Q1 2016.
