IATA financial health check-up: High load factors, mixed profit margins

In its September report of the Airlines Financial Monitor, the International Air Transport Association (IATA) highlighted several indicators of financial health for global airlines – most notably that profit margins for European and Latin American airlines widened, that seasonally adjusted load factors for airfreight hit a three-year high in August, and that oil prices are likely to remain relatively stable over the next four years.

Overall, global airlines reported a slight decline in earnings before income and taxes (EBIT) margins during the second quarter, from 9.8 percent in Q2 2016 to 9 percent in Q2 2017, but the decline was seen primarily in North America and Asia-Pacific – the former of which posted the strongest overall margin of 14.5 percent for the second quarter. Meanwhile, margins actually increased for Latin American and European carriers, with improving economics in both regions.

As has been widely noted elsewhere, freight volumes, compared with the prior year, continued to rise through August, pegged by IATA at a 12.1 percent, year-over-year, increase during the month, while available capacity in freight tonne kilometers grew by a much slower y-o-y pace of 4.7 percent. The increasing daily utilization rates of widebody freighters helped push seasonally adjusted load factors to a three-year high.

Weak yields in the first quarter of 2017 strengthened during Q2, but global oil prices also increased in recent months, following production cuts and a period of strong demand. However, based on the futures market, IATA estimates that oil prices should remain stable near current levels during the next four years.