Global airline share prices outpaced global equity markets to rise 29 per cent in 2017 on the back of robust industry-wide profit margins that hit double digits in all regions.
The airline industry outperformed the global equity market for the year by 7 percentage points as shares continued to rise in December and posted a 4.4 per cent increase.
The latest International Air Transport Association financial monitor shows airline share prices in Europe did particularly well to end the year 68 per cent higher as they recovered from the 2016 Brexit shock amid a robust economic and passenger demand backdrop.
“The North American index had a more mixed year, but shares rallied at year-end in line with the wider equity market after the Trump tax plan was passed,’’ IATA said.
The third-quarter industry margin on earnings before interest and tax (EBIT) was broadly the same as last year at 14.7 per cent. European carriers led the way at 19.7 percent as they benefitted from a seasonal peak.
All regions recorded double digit EBIT margins with Latin America the weakest at 10.2 percent.
Oil prices remained a worry with prices continuing to trend higher into the New Year.
The report said Brent Crude prices of about $US70 per barrel were the highest since December, 2014, bolstered by production cuts from OPEC and Russia.
“The net impact of lower supply from OPEC and other traditional producers and increasing supply from US light-oil producers will be one of the key determinants of oil prices in the coming years,’’ the analysis said.
“The futures market is continuing to point to a modest decline in oil prices from current levels, to around $US61/bbl in late-2019.”
IATA still expects passenger yields, a measure of average fares, to rise modestly in 2018 but said they remained broadly unchanged from where they were a year ago in adjusted terms.
“The change in the yield trend has occurred alongside a strengthening in global economic conditions, as well as upward pressure on some key input costs, including oil and labor,’’ it said.
“With global economic growth expected to remain robust this year, and given the rising trend in fuel costs, we forecast passenger yields to rise modestly during 2018.”
Passenger and freight demand both had solid momentum as they entered 2018.
Year-on-year passenger demand growth of 8 percent in November was the fastest in five months while the increase in freight demand hit 8.8 per cent.
IATA expects another year of above trend passenger growth in 2018 but believes it will be slightly slower than 2017.
Read: Fewer spare seats as airlines boost profits and fares.
Passenger and freight capacity were both trending upwards broadly in line with demand, with available seat kilometres up 6.3 per cent year-on-year in November and available freight tonne kilometres up 4 percent.
Global trade conditions also helped boost premium traffic to, from and within Asia.
However, it lagged in Europe, the Middle east and between North and South America.
