Economy Rates Drop But Airlines Buoyed By Premium Fares

Open Jaw

IATA says the latest financial results posted by its members continue to indicate a robust Q1 2016 for industry profitability.

The strongest financial results were once again posted by North American airlines - which are seeing improved free cash flows too. As is usual in Q1, European airlines in IATA’s sample posted a modest operating loss, albeit smaller than a year ago.

Brent crude oil prices broke through the $50 per barrel mark at the end of May, although they were still 27% lower than the same month in 2015. IATA says the market still expects prices to remain at reasonably low levels for the foreseeable future.

Nonetheless, the annual comparison is going to become less favourable over the coming months, with the year-on-year growth rate set to move back into positive territory in August.

Airfares have fallen by around 5% year-on-year in constant exchange rate terms in 2016 so far. Airfares are expected to decline further in the near future as prior declines in jet fuel prices feed through the system. But with oil prices up more than 80% since January, IATA says the stimulus to demand from lower airfares is likely to fade in the 2nd half of the year.

The airline organization says premium airfares continue to offer an important buffer for overall airline financial performance and have held up better than their economy counterparts on many of the key premium routes so far this year.

Disruption from the BRU terrorist attacks weighed on annual growth in air passenger traffic in April, although the global market has made a robust start to 2016 this year to date.

(will not be published)