Cargo chiefs optimistic on 2018 profitability

30 / 01 / 2018

The majority (56%) of airline chief financial officers and heads of cargo expect their profitability levels to improve further over the coming 12 months. 

An early January 2018 survey for the IATA Airline Business Confidence Index saw the passenger and cargo executives indicate an improvement in year-on-year profitability in the final quarter of 2017 compared with the same period in 2016. 

The positive outlook on profitability in 2018 is being supported by “robust demand growth on both the passenger and freight sides of the business” said IATA.

The proportion of respondents who expect profits to fall over the next 12 months rose to its highest level since Q2 2017, with many citing an expected impact of higher oil prices on profitability.

However, this was offset by a larger increase in the share expecting profitability to increase over the period. Notwithstanding some volatility during 2017, the forward-looking score has trended upwards since falling below the 50-mark in Q2 2016.

The backward and forward-looking questions for freight demand saw 63% of respondents report that a year-on-year rise in demand over the previous three months was the highest share for this measure since Q2 2011. 

Meanwhile, the proportion who reported a decline (7%) was the lowest in more than seven years. 

Rising fuel prices were cited as a key driver for the 34% of respondents in passenger and freight who expect input costs to increase over the coming 12 months. 

Some 22% expect input costs to decrease over the year ahead, driven in part by internal productivity gains and cost reduction programs, including the adoption of more fuel-efficient aircraft.

The survey found that 41% of respondents reported an annual increase in freight yields in Q4 2017 – the second highest share since July 2011. 

The bulk of respondents (48%) expect yields to remain unchanged over the year ahead, while 32% expect yields to increase further.