Airlines have more positive expectations about the profit outlook for 2015, consistent with improvements in their recent performance, according to the latest quarterly survey of the International Air Transport Association (IATA).
Results of the January 2015 poll of airline CFOs and cargo heads showed that profits started to improve in the third quarter of 2014 compared to the same period a year ago after posting no gains in the second quarter, and the outlook remains positive, suggesting further growth in profitability.
Findings showed that falling input costs and growth in volumes were responsible for the better recent financial performance as well as the positive outlook.
This as respondents reported seeing a decline in input costs in the fourth quarter, largely due to a fall in crude oil prices over recent months, and they expect the trend to continue during the year ahead.
“January survey results show that input costs have declined during the past 3 months, continuing a downward trend started mid-year,” noted IATA.
Moreover, survey respondents expected the trend to continue during the year ahead, with an outlook for further declines in input costs. Prior surveys’ responses included reference to cost-cutting measures as reasons for declines in current and future cost expectations, but the recent decline in fuel prices has pushed future cost expectations down further.
Both passenger and cargo volumes were reported to have expanded during the last quarter of the previous year, which was consistent with latest air traffic statistics.
Passenger traffic increased during the last quarter of 2014 year-over-year, and latest data show that air transport continues to expand at a rate of 5% to 6%.
“Looking ahead, the demand backdrop suggests that growth in passenger volumes in the coming months will continue, but at a slightly slower pace than was indicated in the previous (October) survey. This is consistent with uncertainty about global growth, as indicated by recent weakness in business confidence,” said IATA.
Similarly for airfreight, respondents reported acceleration in growth volumes over recent months compared to the third quarter survey, which is consistent with freight data and signs of improvement in world trade volumes, particularly for Asia-Pacific and North America.
The outlook for cargo volumes remains positive with 71% of respondents expecting an increase in demand over the next 12 months, said the report.
Industry stakeholders are also more confident that air transport volumes will continue to expand over the next 12 months, despite rising concerns about the health of the global economy.
Respondents continue to report declines in yields in both business, for the recent past and the coming year, potentially reflecting the expected decline in fuel-related costs.
Survey respondents indicated that passenger yields continue to decline, and at a faster rate in the fourth quarter compared to the third quarter.
Consistent with recent signs of improvement in cargo demand, cargo yields were reported to have declined at a slightly slower pace in the last quarter of 2014 compared to earlier in the year. But similar to the expectation for the passenger business, cargo heads anticipate weakness in cargo yields over the next 12 months.
Photo: Heidas
