Credit rating agency Moody’s Investors Service says the outlook for the global airline industry in 2017 is stable, but pronounces the prospects for the global shipping industry as negative.
In a new forecast on the global transportation industry, Moody’s gave the global airline industry a stable outlook, but said profitability will weaken slightly in the year ahead, as stiff competition impacts on aircraft lessors’ margins.
“Moody’s outlook for the global airline industry is stable. Operating margin is expected to come in at around 9.5%, while operating profit will decline by about 11%,” it said, adding that passenger demand will grow about 5.2%, trailing capacity expansion by about half a percentage point.
“Growth in passenger demand will remain slow overall, due to lackluster global economic growth, geopolitical uncertainties and the threat of terrorism,” said Moody’s analyst Jonathan Root. “But increasing demand in developing markets, supported by rising disposable incomes and loosening regulations, will act as an offset.”
Developing markets will also continue to lead capacity expansion, spurred by the still low cost of fuel, the rising number of low-cost carriers and deliveries of new aircraft that need to be placed in service.
For the maritime industry, shipping companies will continue to be challenged by an oversupply of vessels, eliciting a darker assessment from the rating firm.
“Moody’s outlook for the global shipping industry in 2017 is negative, reflecting continued oversupply and a 7%-10% decline in EBITDA. Dry bulk freight rates will remain low due to subdued demand, though deferred vessel deliveries, cancellations and scrapping will help curb net capacity growth,” Moody’s said.
In contrast, the International Air Transport Association (IATA) is more optimistic about airlines’ prospects in its 2017 forecast released earlier.
It said the global airline industry in the aggregate is seen to post net earnings of US$29.8 billion next year, a 4.1% net profit margin as total revenues are expected to amount to $736 billion.
“This will be the third consecutive year (and the third year in the industry’s history) in which airlines will make a return on invested capital (7.9%) which is above the weighted average cost of capital (6.9%),” said IATA.
Photo: Milan Suvajac
