IATA: Squeeze on airline operating profit margins intensified in Q2 2018
The results of IATA’s latest survey of airline CFOs and Heads of Cargo, conducted in early-July, suggest that the squeeze on airline operating profit margins intensified during Q2 2018.
This is consistent with increased reports of higher input costs, mainly reflecting developments in jet fuel prices. Many of our respondents (54%) expect to see further increases in input costs over the year ahead.
The majority (57%) expect their level of profitability to improve further over the coming 12 months, however, which reflects the fact that passenger and freight yields are expected to partly offset further increases in input costs.
The positive outlook for profitability also reflects confidence about the strength of the demand outlook, particularly on the passenger side of the business; 84% of respondents expect passenger volumes to rise over the year ahead – the second highest proportion in ten years.
The outlook for cargo demand has softened slightly in the past two surveys, which partly reflects uncertainty caused by the recent pick-up in global trade tensions. Nonetheless, the majority (58%) of our respondents expect air freight volumes to rise further over the year ahead.
Encouragingly, 43% reported an increase in employment levels in Q2 relative to the same period a year ago, and more than 50% of respondents expect to increase employment levels further over the next 12 months.
The International Air Transport Association is a trade association of the world’s airlines. Consisting of 290 airlines, primarily major carriers, representing 117 countries, the IATA’s member airlines account for carrying approximately 82% of total Available Seat Miles air traffic. IATA supports airline activity and helps formulate industry policy and standards. It is headquartered in Montreal, Quebec, Canada with Executive Offices in Geneva, Switzerland.
IATA was formed in April 1945 in Havana, Cuba. It is the successor to the International Air Traffic Association, which was formed in 1919 at The Hague, Netherlands. At its founding, IATA consisted of 57 airlines from 31 countries. Much of IATA’s early work was technical and it provided input to the newly created International Civil Aviation Organization (ICAO), which was reflected in the annexes of the Chicago Convention, the international treaty that still governs the conduct of international air transport today.