TORONTO – IATA has released its Airlines Financial Monitor report for May, which reveals that global airline share prices fell by 3.0% during the month and ended at nearly 11% below their level at the start of the year. However, despite this significant dip, the latest financial results continue to indicate a robust Q1 2016 for industry profitability.
The strongest financial results were once again posted by North American airlines, which are seeing improved free cash flows. By contrast, as is usual in Q1, European airlines posted a modest operating loss, albeit smaller than a year ago.
The report also revealed fares are falling; average global fares in U.S. dollars have fallen by around 9% year-on-year so far this year. Adjusting for the impact of earlier gains in the dollar, IATA estimates that airfares fell by around 5% in constant exchange rate terms in early 2016. However, given the sharp fall in the dollar in recent months, the distortions caused by its prior strength will ease over the months ahead.
Airfares are expected to decline even further in the near future as prior declines in jet fuel prices feed through. However, with oil prices now up more than 80% since their January low, the stimulus to demand from lower airfares is likely to fade in the second half of 2016.
Premium international passenger traffic has grown more slowly than its economy counterpart so far this year. Premium fares have held up better than those in economy on many of the key premium routes. In fact, premium’s share of revenues has increased slightly on the key North Atlantic market.
Annual growth in global passenger traffic slowed to 4.6% in April, its slowest pace since January 2015. This decline was partly due to the Brussels terror attacks in March, although the global air passenger market has made a robust start to 2016 in year-on-year growth terms.
The number of available seats in the global airline fleet increased by 0.4% in April compared to the previous month, and by 5.5% compared to April 2015. Moreover, 125 new aircraft were delivered in April.
