IATA: Airline industry cycle showing signs of peaking

IATA released (11-Oct-2016) its 'Airlines Financial Monitor' for Sep-2016. Key points include:

• The latest financial results indicate that industry profitability and cash flow remained solid in 2Q2016, although the industry profitability cycle is showing signs of peaking. Net post-tax profits in the quarter were around 20% lower in dollar terms than in 2Q2015, reflecting the impact of lower unit revenues;
• Global airline share prices rose by 0.9% in Sep-2016, but remain well below where they started the year. The index of North American carriers rose by 4.3% during the month, while the Asia Pacific index fell by 4.7%. European airline shares saw a more modest 0.4% gain, but have fallen the most since the start of the year (-29%);
• Brent crude oil prices rallied towards the end of Sep-2016 following an agreement by OPEC to cut oil output. A rebalancing in the market is slowly taking place, with prices expected to trend upwards weakly in the years ahead;
• The intense downward pressure on passenger yields looks to have eased during the middle months of 2016, in keeping with the change in the trend of oil prices;
• The premium segment continues to offer a buffer for overall airline financial performance. Premium airfares have held up better than those in economy on many of the main premium routes so far in 2016. Origin-destination premium international journeys grew 5.3% of the total over the first seven months of 2016, down from 5.7% a year ago;
• Developments in passenger traffic continue to reflect the net influence of a number of factors. The upward trend in traffic has eased, but the seasonally-adjusted industry-wide load factor remains at historically high levels;
• Conditions for air freight have improved from earlier in the year, but wider weakness in world trade volumes continues to present a stiff headwind. Low loads continue to keep cargo yields and revenues under pressure. [more - original PR]