Business

Airline industry profits 'to jump 12% in 2016'

An Airbus A340-313

Global airline industry profits are expected to jump by almost 12% in 2016, the International Air Transport Association (Iata) said.

Lower oil prices will help airlines achieve profits of $39.4bn (£27.3bn) this year, compared to $35.3bn in 2015, the body said in its quarterly report.

North American airlines will account for more than half of the industry's profits, it said.

However, Iata predicts a slowdown in passenger demand.

It expects 6.2% growth in 2016, down from 7.4% in 2015.

The organisation, which represents 83% of global air traffic, said 2016 is likely to be the fifth consecutive year of improving industry profitability.

"Lower oil prices are certainly helping - though tempered by hedging and exchange rates," Tony Tyler, Iata's director general and chief executive, said in a statement. "In fact, we are probably nearing the peak of the positive stimulus from lower prices."

Airlines' performance had also been boosted by record passenger load factors - the average percentage of seats filled per flight - as well as joint ventures and growth in ancillary revenues, Mr. Tyler said.

Regional divide

The industry is expected to generate revenues of $709bn in 2016.

"Looked at from a different angle, Starbucks will earn about $11 for every $100 in sales while airlines will make $5.60," said Mr Tyler.

The fortunes of carriers vary dramatically by region. North American airlines will generate $22.9bn in profits, more than half of the industry's profits. Airlines in most other regions are expected to record an increase in profits, but Iata forecasts a loss of $500m for African carriers, compared to a $700m loss in 2015.

"Carriers in the region continue to confront a plethora of challenges including intense competition on long-haul routes, political barriers to growing intra-African traffic, high costs and infrastructure deficiencies," Iata said. "In addition, many major economies in the continent have been hit hard by the collapse in commodity prices."

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