Airline profitability remains unchanged in Q4

PROFITABILITY for airlines in the fourth quarter of 2016 was unchanged compared to a year ago, according to airline chief financial officers and heads of cargo in the quarterly Airline Business Confidence Index.

When surveyed in early January, some 31 per cent of respondents reported an annual increase in operating costs in Q4 2016, its highest proportion since July 2014.

Nearly two-thirds of respondents reported lower passenger yields in Q4 2016 compared with the same period in 2015, underlining the challenging profitability environment.

Half of the respondents reported a year-on-year increase in passenger traffic during Q4 2016. This ties in with a pick-up in the upward trend in seasonally-adjusted passenger traffic in the latest monthly data from the period.

In line with a strong 2016 peak season for air freight, 52 per cent of respondents reported an annual increase in cargo volumes in the final quarter of last year.

Some 42 per cent expect profits to increase over the next 12 months, which is still below the 60-70 per cent level that was the norm a few years ago as momentum in the profitability cycle has weakened.

Given the recent pick-up in the economic cycle, 74 per cent of respondents expect passenger volumes to increase over the next 12 months - the highest proportion since October 2013.