Airline industry profit outlook improves as Europe bounces back

Global airline earnings will fall less than previously forecast this year as Europe rebounds from a weak 2016 and Asian carriers tap a surge in cargo shipments, according to the industry’s main trade group. Net income is likely to total $31.4b worldwide in 2017, the IATA said Monday. While that’s $1.6b higher than suggested last December, it would still represent a near 10% decline from 2016’s $34.8b figure. Passenger and cargo demand has been “stronger than expected” this year, Alexandre de Juniac, IATA’s CEO, told airline leaders at the body’s annual meeting. European earnings should be E1.8b higher than first projected as bookings recover from a spate of terrorist attacks, while the outlook for Asia was lifted by $1.1b as freight volumes surge in a region that accounts for two-fifths of global shipments. Though revenues are gaining, earnings face a squeeze from an increase in spot prices for jet fuel, and the average net margin is set to shrink to 4.2 percent from 4.9% in 2016, De Juniac cautioned, adding that recent terrorist attacks in the UK demonstrate the potential for “negative impacts” on demand. “There is not much buffer,” said De Juniac, who was previously CEO of Air France-KLM Group. “That’s why airlines must remain vigilant against any cost increases, including from taxes, labor and infrastructure.” Some $15.4b of the industry’s net income will be generated by carriers in North America, $2.7b less than previously forecast but still around half of the industry total, IATA said. Passenger demand is forecast to increase by 2.3 percentage points compared with IATA’s previous estimate, to 7.4%, matching 2016’s growth rate.<br/>