Home » Politics » PROFITABILITY, CASH FLOW OF GLOBAL AVITATION INDUSTRY REMAINS SOLID, SAYS IATA

The International Air Transport Association (IATA) says the profitability and cash flow of the world aviation industry remained solid in the second quarter (Q2) of this year.

IATA represents some 260 airlines accounting for 83 per cent of global air traffic. The industry supports 6.8 million jobs and generates 72.5 billion US dollars of economic activity in Africa alone.

According to the September report of Airlines Financial Monitor, the association said profit margins for airlines remained "robust" by historical standards. Global airline share prices rose by 0.9 per cent in September but remained well below where they started the year at.

"The latest financial results indicate that industry profitability and cash flow remained solid in Q2 2016, although the industry profitability cycle is showing signs of peaking," IATA said.

"Developments in passenger traffic continue to reflect the net influence of a number of factors. The upward trend in traffic has eased, but the seasonally-adjusted industry-wide load factor remains at historically high levels."

It said the index for North American carriers rose by 4.3 per cent during the month, while that for the Asia-Pacific region fell by 4.7 per cent. European airline shares saw a more modest 0.4 per cent gain, but have fallen the most since the start of the year to minus 29 per cent.

IATA said economic and market uncertainty and investor concerns about the impact of lower unit revenues on profitability, have weighed onshare prices during much of 2016.

"Global airline shares ended the month more than 17 percent lower than their level at the start of 2016 and have lagged behind the wider equity market by a wide margin so far this year," it said.

Net post-tax profits in their large sample in Q2 2016 were around 20 per cent lower in US dollar terms than in Q2 2015, reflecting the impact of lower unit revenues. The EBIT margin edged up to 9.9 per cent from 9.8 per cent in the same period in 2015.

IATA said said net cash flow in its sample of 64 airlines rose to 21 per cent of revenues in Q2 2016, up from 19.6 per cent in the same period last year, while net cash flow increased in most regions, except Latin America and Asia Pacific.

It said airlines increased capital expenditure as a share of revenues to a greater extent over the period. "As a result, free cash flow in Q2 in the sample dropped to 4.9 per cent of revenues from 5.8 per cent," it said.

Annual growth in industry-wide traffic slowed to 4.6 percent in August, from an upwardly-revised 6.4 per cent in July this year, it said.

Source: NAM NEWS NETWORK

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