Iata says airline profitability improved in the second quarter for a sample for 24 airlines.  Mona Al Marzooqi/ The National
Iata says airline profitability improved in the second quarter for a sample for 24 airlines. Mona Al Marzooqi/ The National

Airlines' profit rises on global economic uptick and lower costs



Global airlines posted better earnings in the second quarter than in the year-earlier period, thanks to a pick up in global economic activity, higher profit margins and lower costs, the International Air Transport Association (IATA) said on Wednesday.

“The initial airline financial results from Q2 2017 have been robust, and provide the clearest sign that the squeeze on airline profit margins – from weak yields and higher costs – peaked in the first quarter,” said IATA.

A sample of 24 airlines posted a 10.7 per cent increase in net post-tax profit to US$6.4 billion in the second quarter, compared with $5.78bn in a year-earlier period, the aviation body said in a report.

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The earnings before interest and taxes (Ebit) margin also rose to 13.2 per cent in the second quarter from 12.7 per cent in a year-earlier period.

“The turnaround in the long-standing downward yield trend reflects a combination of factors, including a pick-up in global economic activity, as well as upward pressure on some key input costs, including labour, in a number of countries,” said Iata.

“All told, signs that passenger yields are improving are helping to underpin investors’ confidence about airline financial performance over the year ahead.”

More travellers took to the skies in the first half of this year, with international passenger traffic rising to a 12-year high of 7.9 per cent compared to the previous year thanks to a “brighter economic picture and lower airfares,” Iata said earlier this month.

Globally, freight demand rose 10.4 per cent in the first half, the best six month performance since 2010, and almost triple the industry’s average growth rate of 3.9 per cent over the past five years.

Meanwhile, demand for premium travel has in some cases outperformed demand for economy, thanks to stronger economic growth in markets including the Pacific region and selected Asian markets. Premium demand softened however in other areas including routes between Europe and the Middle East.

International passenger and freight capacity is also rising, with available seat kilometres (ASKs), increasing 6.1 per cent year-on-year in the first half.  Available freight tonne kilometres (AFTKs) grew by 3.6 per cent year-on-year for the same period.

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At a glance

Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.

 

Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year

 

Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month

 

Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30 

 

Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse

 

Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth

 

Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances

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Under the UK government’s proposals, migrants will have to spend 10 years in the UK before being able to apply for citizenship.

Skilled worker visas will require a university degree, and there will be tighter restrictions on recruitment for jobs with skills shortages.

But what are described as "high-contributing" individuals such as doctors and nurses could be fast-tracked through the system.

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The plans also call for stricter tests for colleges and universities offering places to foreign students and a reduction in the time graduates can remain in the UK after their studies from two years to 18 months.

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