Airlines report growing profit for 2015
Things are starting to look bright for the aviation industry, as it shows a record $29.3 billion net profit projection. The International Air Transport Association (IATA) on Monday issued a revised profit forecast which is 17.3% higher than its previous projection of $25 billion, and is 78.65% more than the $16.4 billion registered in 2014. This shows a considerable amount of increase in profitability since the past year, which is due to lower fuel prices and has been the prime factor for raising profitability. The other reason might be because of the appreciation in the US dollar.
This year’s revised profit into average net earning totals to 4%, a record in more than a decade and with almost double from last year’s 2.2%. The industry’s fuel bill has decreased by $35 billion since last year when it dropped from $226 to $191 billion. But the funny thing is that even though, the profits from the aviation industry are not greater than what other industries make so there is still more room for profit maximization. The passenger numbers are still expected to top 3.5 billion for the first time in 2015.
Also, for the first time in the aviation industry the average return on invested capital will be in excess of its cost of capital to reach 7.5%. This industry average is dominated by airlines in the US, which have benefited the most from the fall in USD denominated fuel prices. The average non US airline is still struggling with returns below the cost of capital and significant debt burden quoted by the IATA chief.
The expected profit for this year has been dominated by carriers in North America which are expected to generate $15.7 billion out of the total $29.3 billion. On the other hand carriers in Latin America only expect $600 million from a break-even performance since in 2014.Carriers in the Asia-Pacific region are expected to generate a $5.1 billion profit with Middle Eastern airlines to make $1.8 billion. European airlines are expected to post a collective profit of $5.8 billion. Lastly, carriers from the Africa only expect a profit of $100 million, the thinnest of all regions.
