IATA Expects Low Oil Prices, Healthy Demand for Travel to Boost Airline Profits in 2016

Lower oil prices and healthy demand for passenger travel will give airline profits a boost next year, according to the airline industry outlook for 2016 released on Thursday by the International Air Transport Association (IATA).

IATA, which represents some 250 airlines comprising 83 percent of total air traffic, expects total net profits to rise by 10 percent, from $33 billion (30.12 billion euros) in 2015 to $36.3 billion (33.13 billion euros) next year. More than half of the industry’s total profits in both 2015 and 2016 are expected from North American carriers.

The positive industry performance is attributed to a combination of factors: lower oil prices; strong demand for passenger travel (+6.7 percent growth in 2015 and +6.9 percent in 2016), which is making up for the low cargo performance, due to sluggish growth in trade; stronger economic performance in some key economies; record high load factors and increased capacity.

“The airline industry has strengthened its profitability to an ordinary, not an extraordinary level, IATA’s Director General and CEO, Tony Tyler, was reported  saying while talking in Geneva at IATA’s Global Media Day.

IATA expects a 4.6 percent net profit margin this year and an average net profit margin of 5.1 percent in 2016.