Despite the recent terrorist attacks in Paris, the International Air Transport Association (IATA) recently stated that low oil prices and travel demand will help boost airline profits in 2016.
Based in Geneva, IATA represents over 250 airlines, that account for over 80 percent of air traffic worldwide. Members range from Cathay Pacific to Delta, and Qatar Airways. The organization stated that net profit would hit a high level of $36.3 billion in 2016, after seeing $33 billion this year; where over a half of those earnings are being brought in by North American airlines. The prior forecast for 2015 profits for the industry was $29.3 billion.
General Tony Tyler, IATA Director, stated there would be a net profit margin of 5.1 percent and 4.6 percent for 2016, and 2015.
Reuters reports that for the first time, the industry’s return on capital for both years is anticipated to exceed the cost of capital, which is a tremendous boost for investors.
Still, there is some anticipation that profits in North America will decrease a little bit in 2016, from $19.4 billion in 2015, to $19.2 billion; which is a reflection on how U.S. carriers had benefited from low fuel prices this year, while European carriers will not see this benefit until next year.
There has also been an increase in travel in 2015, which can be pointed to the economies improving, where lower fuel costs help increase spending, especially when it comes to vacations and trips.
Unfortunately, with the recent attacks on holiday destinations, there has been a cloud of gloom cast over the travel industry. IATA reported that share prices for Worldwide airline fell six percent, partly due to security fears.
Tyler also added, while people will not stop traveling, the impact of the Paris attacks will have an effect on the sector for about six to nine months.