Videos circulated on social media showed protesters throwing supplies from the trucks on to the ground
Dubai - Driven by lower oil prices and stronger worldwide economic growth, global airlines are on track to boost their collective global net profit in 2014 to $19.9 billion from the previous estimate of $18 billion, and to a much higher level of $25 billion in 2015, the International Air Transport Association (Iata) said on Wednesday.
For Middle East carriers, which have one of the lowest breakeven load factors (58.6 per cent), post-tax net profits are expected to grow to $1.6 billion in 2015, up from $1.1 billion in 2014. This represents a profit of $7.98 per passenger and a net profit margin of 2.5 per cent, the global organisation of airlines said in its latest its “Economic Performance of the Air Transport Industry” report.
“Average yields of Middle Eastern carriers are low but unit costs are even lower, partly driven by the strength of capacity growth. Passenger capacity is expected to expand by 15.6 per cent in 2015 (up from 11.4 per cent in 2014),” Iata said.
“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 report said.
Tony Tyler, Iata’s director-eneral and chief executive, said the industry outlook is improving as the global economy continues to recover and the fall in oil prices poised to strengthen the upturn next year.
“While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2 per cent net profit margin. The industry story is largely positive, but there are a number of risks in today’s global environment — political unrest, conflicts, and some weak regional economies-among them. And a 3.2 per cent net profit margin does not leave much room for a deterioration in the external environment before profits are hit,” said Tyler.
He said consumers, travellers as well as shippers will see lower costs in 2015 as the impact of lower oil prices kick in. Airline investors will see return on invested capital (ROIC) move closer to the weighted average cost of capital (WACC). “And a healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last,” said Tyler.
On a per passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on the $6.02 earned in 2014 and more than double the $3.38 earnings per passenger achieved in 2013. The ROIC is expected to grow to seven 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.”
With oil prices falling, jet fuel prices are expected to average at $99.9/barrel in 2015 for a total fuel spend of $192 billion which represents 26 per cent of total industry costs. It is important to note that the impact of lower fuel prices will be realized with a time lag, due to forward fuel-buying practices, Iata said. Fuel efficiency is estimated to have improved by 1.8 per cent in 2014 and a further improvement is expected in 2015, Iata said.
—issacjohn@khaleejtimes.com
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