Airlines' profit rises on global economic uptick and lower costs

Carriers benefit from highest passenger numbers in 12 years

Iata says airline profitability improved in the second quarter for a sample for 24 airlines. Mona Al Marzooqi/ The National

Global airlines posted better earnings in the second quarter than in the year-earlier period, thanks to a pick up in global economic activity, higher profit margins and lower costs, the International Air Transport Association (IATA) said on Wednesday.

“The initial airline financial results from Q2 2017 have been robust, and provide the clearest sign that the squeeze on airline profit margins – from weak yields and higher costs – peaked in the first quarter,” said IATA.

A sample of 24 airlines posted a 10.7 per cent increase in net post-tax profit to US$6.4 billion in the second quarter, compared with $5.78bn in a year-earlier period, the aviation body said in a report.

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The earnings before interest and taxes (Ebit) margin also rose to 13.2 per cent in the second quarter from 12.7 per cent in a year-earlier period.

“The turnaround in the long-standing downward yield trend reflects a combination of factors, including a pick-up in global economic activity, as well as upward pressure on some key input costs, including labour, in a number of countries,” said Iata.

“All told, signs that passenger yields are improving are helping to underpin investors’ confidence about airline financial performance over the year ahead.”

More travellers took to the skies in the first half of this year, with international passenger traffic rising to a 12-year high of 7.9 per cent compared to the previous year thanks to a “brighter economic picture and lower airfares,” Iata said earlier this month.

Globally, freight demand rose 10.4 per cent in the first half, the best six month performance since 2010, and almost triple the industry’s average growth rate of 3.9 per cent over the past five years.

Meanwhile, demand for premium travel has in some cases outperformed demand for economy, thanks to stronger economic growth in markets including the Pacific region and selected Asian markets. Premium demand softened however in other areas including routes between Europe and the Middle East.

International passenger and freight capacity is also rising, with available seat kilometres (ASKs), increasing 6.1 per cent year-on-year in the first half.  Available freight tonne kilometres (AFTKs) grew by 3.6 per cent year-on-year for the same period.