By Andy Sambidge
Carriers in the region are forecast to see net profits rise to $1.6bn next year, up $500m on this year
Middle East airlines are forecast to see net profits rise to $1.6 billion in 2015, driven by passenger capacity growth of more than 15 percent, the International Air Transport Association (IATA) said on Wednesday.
Net profits are expected to rise by $500 million compared to this year, representing a profit of $7.98 per passenger and a net profit margin of 2.5 percent, IATA said in a statement.
The aviation authority said carriers in the Middle East have one of the lowest breakeven load factors (58.6 percent).
Average yields are low but unit costs are even lower, partly driven by the strength of capacity growth which is expected to expand by 15.6 percent in 2015, up from 11.4 percent in 2014.
Globally, IATA announced an outlook for improved industry profitability. Airlines are expected to post a collective global net profit in 2014 of some $19.9 billion (up from the $18 billion projected in June). This looks set to rise to $25 billion in 2015.
Lower oil prices and stronger worldwide GDP growth are the main drivers behind the improved profitability, IATA said.
It added that consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through.
After adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1 percent on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8 percent.
The expected $25 billion net post-tax profit represents a 3.2 percent margin. On a per passenger basis, airlines will make a net profit of $7.08 in 2015. That is up on the $6.02 earned in 2014 and more than double the $3.38 earnings per passenger achieved in 2013.
Tony Tyler, IATA’s director general and CEO, said: “The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year. While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2 percent net profit margin.
"The industry story is largely positive, but there are a number of risks in today’s global environment—political unrest, conflicts, and some weak regional economies- among them. And a 3.2% net profit margin does not leave much room for a deterioration in the external environment before profits are hit.”