The International Air Transport Association (IATA) anticipates the airline industry will amass $3.63 billion in total net profit in 2016, an average net profit margin of 5.1 percent.
The airline industry’s return on capital for both 2015 and 2016 should surpass the industry’s cost of capital, which will be “a historic achievement for an industry that has been notorious for destroying capital throughout its history,” according to Tony Tyler, IATA Director and Chief Executive Officer. While the airline industry’s profit growth is certainly not a bad thing, Tyler reports that the results are not outstanding when compared to other industries in the global economy.
The airline industry’s positive performance can be connected to a number of factors, including: decreased oil prices, increased passenger travel demand, stronger economic conditions (in some important economies), record high load factors, and increased aircraft capacities.
While the industry’s economic performance is promising, Tyler has called safety the industry’s “top priority.” At the IATA’s Global Media Day in Geneva, safety, and better tracking of planes was a primary topic of discussion for those in attendance. Together, the IATA and International Civil Aviation Organization (ICAO) worked on the “normal aircraft tracking implementation initiative,” to both test proposed tracking criterion and suggest new practices to improve and advance airlines’ tracking abilities.
Though it is not the only threat to safety, terrorism plays a large part in the IATA’s focusing on increasing safety within the airline industry. The IATA chief recognized that “the threat of terrorism is present and active and the sad reality is that [the airline] industry – despite being an instrument of peace – continues to be a target.” Terrorism has been a major concern for the airline industry since September 11, 2001, and continues to evolve, posing new threats and problems to airline industry safety regulations. Tyler urges travelers and airline personnel to rest assured that the airline industry does their absolute best to keep everyone safe, but reminds us that there is no perfect system.
Terrorism’s impact on the airline industry is felt most seriously in the Middle East region, but has not stopped the region’s collective profits from exceeding $1 billion in 2015. Unfortunately, the effect of recent terrorist acts on the global airline industry will have affects on the industry’s performance forecasts.
Aside from terrorism, climate change is a very important topic of conversation for the airline industry. The recent COP21 conference on climate change held in Paris will help inform and set the mood for decisions made by the aviation industry in 2016.
Last year, the aviation industry contributed around 7 tons of CO2 emissions, accounting for close to 2 percent of global human CO2 emissions. The IATA goals regarding climate change and the environment for the next few years are to continue to improve fuel efficiency and stabilize its CO2 emission levels across the board. For more information regarding 2016 airline and IATA predictions contact our concierge representative today! Read More.
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