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Thu 2 Jun 2016 02:00 PM

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MidEast airlines set to make $1.6bn profit in 2016

New IATA forecast says introduction of airport fees in regioin could dampen cost competitiveness

MidEast airlines set to make $1.6bn profit in 2016

Middle East carriers are expected to post a $1.6 billion profit in 2016, up slightly on the $1.4 billion reported for 2015, the International Air Transport Association (IATA) has said in a new forecast.

The global aviation authority said capacity in the region is set to grow by 12.2 percent, outpacing an expected 11.2 percent expansion in demand.

IATA said in a statement that efficient hubs in the likes of Dubai continue to gain market share on connecting markets for the region’s major carriers, although local markets have been weakened by the impact of falling commodity revenues.

"Economic changes in the region’s oil economies are manifesting themselves in a spate of increases of charges and taxes which could dampen the region’s cost competitiveness," IATA said, referring to Dubai's plan to introduce a fee of AED35 ($9.50) to be collected from passengers using the emirate's airports from June 30.

Globally, IATA revised its 2016 financial outlook for global air transport industry profits upwards to $39.4 billion from $36.3 forecast in December 2015.

That is expected to be generated on revenues of $709 billion for an aggregate net profit margin of 5.6 percent. 2016 is expected to be the fifth consecutive year of improving aggregate industry profits.

In 2015 airlines generated a global aggregate profit of $35.3 billion. IATA said all regions are making a contribution to the $4.1 billion boost over 2015 profits with improved results; but there are stark regional differences in performance.

Over half of the industry profits will be generated in North America ($22.9 billion) while African carriers are forecast to continue generating an overall loss (-$0.5 billion).

Tony Tyler, IATA’s director general and CEO, said: "Lower oil prices are certainly helping—though tempered by hedging and exchange rates. In fact, we are probably nearing the peak of the positive stimulus from lower prices.

"Performance, however, is being bolstered by the hard work of airlines. Load factors are at record levels. New value streams are increasing ancillary revenues. And joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition."

On average, airlines will make $10.42 for each passenger carried, he added.

The outlook is based on oil averaging $45 per barrel (Brent) over the course of the year which is significantly lower than the $53.9 average price in 2015. 

IATA said the cargo side of the business remains in the doldrums with 2.1 percent growth in demand globally. Cargo yields are expected to fall by 8 percent this year and overall cargo is expected to generate $49.6 billion in revenues, down from $52.8 billion in 2015.

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