USA-AIRLINES/IATA 2015 global airline profits rise to $29 bln forecast

Record ID: 150512

  • Title: USA-AIRLINES/IATA 2015 global airline profits rise to $29 bln forecast
  • Date: 8th June 2015
  • Summary: MIAMI BEACH, FLORIDA, UNITED STATES (JUNE 8, 2015) (REUTERS) REPORTERS (SOUNDBITE) (English) DOUGLAS PARKER, CHAIRMAN AND CEO OF AMERICAN AIRLINES GROUP, SAYING: "The governments are still trying to work out the bilateral agreements in terms of trade but American is prepared to begin service to the extent that ever happens, when and if that happens." WIDE OF PRESSER DELEGA
  • Embargoed: 23rd June 2015 13:00
  • Keywords:
  • Topics: General
  • Reuters ID: LVA2KR3SY0N8H1GBSKE1ORN6WVE1
  • Aspect Ratio: 16:9
  • Story Text: The International Air Transport Association (IATA) on Monday (June 8) announced a profit forecast rise during a gathering of 260 member airlines, crediting lower oil prices as the main factor pushing the industry further into the black. But the windfall could be muted by the rise in the value of the dollar and widespread airline fuel hedging.
    "Some airlines are doing well. North American airlines are contributing over half of the industry's profits, about $15.7 billion dollars, but many airlines are still facing huge challenges. But overall even though $29.3 billion may seem like a large number it's on revenues of $727 billion so it is a hard earned 4 percent net profit margin," IATA Director General Tony Tyler said at a press briefing.
    IATA had previously forecast a $25 billion 2015 profit.
    It said the industry's average net profit margin would almost double to 4 percent from last year's 2.2 percent. It saw the fuel bill dwindling to $191 billion from $226 billion in 2014, when airlines made a restated profit of $16.4 billion.
    At the same time, planes are expected to fly fuller than ever before as the industry continues to match capacity more closely to demand, though some airline bosses meeting in Miami are worried such discipline could start to fray.
    The forecasts came alongside figures showing that airlines are set for a significant breakthrough in 2015, delivering returns on capital invested in them that exceed the average cost of that capital for the first time in the industry's history.
    Although some airlines generate significant profits when the economy is strong, high costs such as labour and fuel, and intense competition, have given air transport a chronic reputation for destroying value for investors.
    An expected 7.5 percent net profit margin in North America, fuelled by profits of $15.7 billion, contrasts with profit margins of 2.5 and 2.8 percent in Asia and Europe respectively.
    Asian carriers are exposed to doldrums in the cargo industry and China's slowdown, while Europe is hurt by the weaker euro.
    Douglas Parker, CEO of the American Airlines Group, the largest carrier in the Caribbean, said his fleet is ready to increase flights to Cuba if and when trade deals allow for it. American Airlines currently has 1,000 charter flights a year to the island.
    "The governments are still trying to work out the bilateral agreements in terms of trade but American is prepared to begin service to the extent that ever happens, when and if that happens," he said.
    In an interview with Reuters at the conference, Fabrice Bregier, CEO of aviation giant Airbus, said he expects to increase orders at the Paris Airshow beginning next week.
    "I believe it will be a good show because the market show remains extremely positive. In 2015 after two fantastic years with 3,000 net orders we expect to have a book to bill ratio above one. If I had to bet I would say a couple of hundred but it could be lower or it could be higher than that," he said.
    Bregier said that in the long run, he expects more orders for Airbus's super jumbo jet, the A380, as the economic outlook for airlines continues to grow.
    "I am a strong believer in the long term future of the A380. The market is growing everywhere and if you have the passengers you can carry than you can have a cash machine in the A380," he said.
    When asked competitor Boeing, Bregier said he welcomes competition.
    "This battle between Boeing and Airbus, as you say, helps both of us to maintain as leaders on our market and the entry of newcomers is of course a lot tougher than it use to be than 10 or 15 years ago," he said.
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