SINGAPORE, 1 February 2018: If you think 2018 the Year of the Dog will be more profitable, you are not alone; 56% of airline chief financial officers think the same, according to the latest IATA Airline Business Confidence Index released Wednesday.
The International Air Transport Association latest assessment, based on a survey of airline CFOs and heads of cargo, showed 75% of them indicated an improvement in year-on-year profitability in Q4 2017.
Chinese New Year, 16 February, ushers in the Year of the Dog and the enthusiastic barks should herald prosperous wealth for the airline industry as well as good news for tourism in the Asia-Pacific region where nations enjoyed record high tourist arrivals in 2017.
IATA’s positive outlook is being supported by robust demand growth in both passenger traffic and cargo uplift.
The confidence index noted 86% of respondents expect passenger volumes to rise over the year ahead – the highest proportion in more than a decade.
There concerns over rising cost especially higher fuel costs with 38% of the CFO surveyed reporting an increase in input costs in Q4 2017 compared to the same period a year ago,
The upward trend in oil prices is expected to continue to impact airline costs in the year ahead and this could curb expansion plans specifically by low-cost airlines.
But despite worries over rising costs, the index claimed that due in part to the strength of the economic backdrop and current demand/supply balances, respondents appeared confident about the outlook for both passenger and freight yields over the year ahead.
On the passenger trending, the January survey results were consistent with other signs that demand is carrying momentum into 2018.
81% of respondents reported an increase in year-on-year demand in Q4 2017.
86% of respondents reported that they expect passenger volumes to rise further over the year ahead – the highest proportion in more than a decade. With less than 5% expecting a fall in demand.
Looking ahead, rising fuel prices were cited as a key driver for the 34% of respondents who reported that they expect input costs to increase over the coming 12 months.
22% expect input costs to decrease over the year ahead, driven in part by internal productivity gains and cost reduction programmes, including the adoption of more fuel-efficient aircraft.
55% of respondents reported higher passenger yields in Q4 2017 compared to a year ago; this was a decline from 65% in the last survey, but was still the second highest proportion since mid-2012. This result suggests that passenger yields are finally starting to trend upwards.
Looking ahead, 80% of respondents expect yields to remain steady or to increase over the year ahead.