Moody's says outlook for airline industry is stable

Credit ratings agency Moody’s expects a stable outlook for airlines and aircraft leasing companies in 2018, with US carriers topping the profitability league. The ratings agency said in its 2018 outlook for the global transportation sector that the industry’s stable outlook was driven by projections of 8.5 per cent to 10 per cent operating margins for Moody's-rated airlines through 2019. It said US would remain the most profitable as global industry grows by about 4 per cent, offsetting higher labor and fuel costs. "Steady global economic growth will support rising demand for air travel over the next 12 to 18 months," Moody’s vice president Jonathan Root said in a statement. "Developing countries will continue to lead capacity growth, followed by Europe and the US." The ratings agency said the aircraft leasing industry was expected to see stable net interest margins of 8-9 percent over the next year or so but faces competition from new entrants that would “limit upside”. Moody’s said global air travel growth was currently tracking about 200 basis points above its long-term trend of around 4.5 per cent, with capacity expansion remaining in line with growth in demand. The Moody’s expectations are broadly in line with a recently released forecast from the International Air Transport Association. IATA predicted earlier this month as the number of global passengers would rise 6 per cent to 4.3 billion in 2018 as global airline profit rises to $US38.4 billion. IATA tipped passenger growth to be below the 7.5 per cent seen in 2017 but still ahead of the long-term average over the past 10 to 20 years of 5.5 per cent as global GDP growth hits its strongest level since 2010. Fuller planes were expected to see yields rise by 3 per cent and the average net profit per departing passenger rise from $US8.45 to $US8.90, according to the forecast.