Airline Industry Achieved Record Operating Profit in 2016

The airline industry is expected to end 2016 with another record operating profit of around $60 billion and an operating margin of 8 percent, ICAO reported Jan. 2.

The International Civil Aviation Organization (ICAO) has released preliminary figures showing a total of 3.7 billion passengers traveled on scheduled services during 2016, representing a 6 percent increase from 2015. Total departures rose to approximately 35 million globally and world passenger traffic increased by 6.3 percent to 7,015 billion scheduled revenue passenger-kilometers (RPKs), although that rate was down from 7.1 percent achieved in 2015.

"Over half of the world's tourists who travel across international borders each year were transported by air. Air transport carries some 35 percent of world trade by value. More than 90 percent of cross border Business to Consumer e-commerce was carried by air transport," ICAO reported Jan. 2.

ICAO reported the forecast of world real gross domestic product (GDP) growth in 2016 was expected to be at around 2.4 percent, down from a 2.9 percent projection at the start of the year. "The revision is due to sluggish growth in advanced economies, stubbornly low commodity prices, weak global trade, and diminishing capital flows. Despite the weak economic conditions, global passenger traffic continued to grow helped by the lower air fares owing to the fall in oil prices," the organization reported.

North American domestic scheduled air services rose by 6.2 percent in 2016, down from 7.3 percent growth recorded in 2015. But growth in the Asia/Pacific region was 10 percent year over year. Low-cost carriers accounted for approximately 28 percent of total world scheduled passengers in 2016, carrying more than 1 billion passengers in all, while worldwide scheduled freight traffic measured in freight tonne-kilometers (FTK) grew by 2.6 percent in 2016, a slight improvement from 1.7 percent growth registered in 2015.

ICAO said fuel accounted for nearly one-fifth of the industry's operating costs in 2016 after accounting for one-third in 2015. "Significant decrease in fuel costs helped airlines to maintain their operating profit at the same level as the previous year: the airline industry is expected to end 2016 with another record operating profit of around USD 60 billion and an operating margin of 8.0 per cent. This comes after an operating profit of USD 58 billion and an operating margin of 8.0 per cent in 2015. For a consecutive year, more than a third of the profits are expected to come from the carriers of North America, whose domestic market represents 66 per cent of their total operations. Improving economic conditions forecast by the World Bank will see traffic growth and air carrier profitability momentum continuing in 2017," the organization reported.

ICAO will publish final figures in July 2017 in the annual report of ICAO Council.