Airline Yields Falling But Premium Segment Remains Strong

Open Jaw

Despite a seemingly tumultuous global environment, IATA reports that initial financial results from Q2 2016 point to another solid quarter for industry profitability and cash flow.

Global airline share prices increased by 5.9% in July, though they remain well down on where they started the year.

There’s good news on the fuel front: Brent crude oil prices fell back sharply in July, driven largely by a near-term glut in supply. The futures curve has also shifted down in recent weeks, with oil prices now expected to remain below $55 per barrel for the foreseeable future.

Yields have fallen by around 6.5% year-on-year in constant exchange rate terms in 2016. Ongoing downward pressure on yields may be a negative, but it is expected to provide further stimulus to demand during the rest of the year. 

Again, that’s good news because while the global air pax market grew solidly in annual terms during the 1st half of 2016, the upward trend has eased in recent months on the back of modest economic growth and cumulative impacts of terrorist attacks.

Available seat kilometres grew by 5.6% year-on-year in June. However, IATA says airlines have ratcheted down the upward trend in capacity growth somewhat in recent months in line with slowing demand.

The industry-wide passenger load factor was 79.2% in the 1st half of 2016 – just 0.2 percentage points lower than the all-time period high reached in 2015. The industry has managed to keep the seasonally-adjusted load factor broadly stable at around 80% over the past 5 months. High achieved passenger loads have helped to support robust financial results in recent years.

IATA reports that the premium segment continues to offer an important buffer for overall airline financial performance. Premium airfares have held up better than their economy counterparts on many of the main premium routes so far this year.

You can view the full report here:

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