Aviation Industry Anticipates Strong Profits, “Soft Landing” in 2017

Despite the threat of rising fuel prices, the airline industry’s largest trade organization is expecting healthy returns throughout the next business year.

The International Air Transport Association (IATA) is predicting that 2017 will be another year of strong profitability for the airlines. The airline industry trade organization concedes that challenges including higher oil prices and currency fluctuations will put a strain on the bottom line over the next year, but analysts are still bullish on next year’s outlook. In fact, the IATA is anticipating a third straight year in which airlines will make returns on invested capital that exceed the weighted average capital investment.

“Airlines continue to deliver strong results. This year we expect a record net profit of $35.6 billion,” IATA CEO Alexandre de Juniac told members in a statement announcing the upbeat forecast. “Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That’s a very soft landing and safely in profitable territory. These three years are the best performance in the industry’s history—irrespective of the many uncertainties we face. Indeed, risks are abundant— political, economic and security among them. And controlling costs is still a constant battle in our hyper-competitive industry.”

Juniac cautioned that the rather rosy forecast doesn’t mean there won’t be some big losers along with winners among the industry. He also reminded members that the ailing industry’s historic struggles make the current upward trend seem more impressive than it might otherwise be viewed.

“We need to put this into perspective,” Juniac explained. “Record profits for airlines means earning more than our cost of capital. For most other businesses that would be considered a normal level of return to investors. But three years of sustainable profits is a first for the airline industry. And after many years of hard work in restructuring and re-engineering the business the industry is also more resilient. We should also recognize that profits are not evenly spread with the strongest performance concentrated in North America.”

The IATA report noted that while 2017 is expected to be a good year for the industry as a whole, North American airlines are expected to return the strongest performance. European carriers are anticipated to maintain healthy profits but will earn nowhere near the $7.5 billion earned this year.

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