Wednesday 17 July 2019

Profit margins at airlines decline as fuel costs soar

Buckle up: Airlines could see yields come under pressure due to continuing trade wars and slowing global economic growth. Stock image
Buckle up: Airlines could see yields come under pressure due to continuing trade wars and slowing global economic growth. Stock image
John Mulligan

John Mulligan

Airlines across the world are making less money compared to a year ago as fuel costs rise, according to the International Air Transport Association (IATA).

It said that the earnings before interest and tax margin for a sample of 99 airlines fell to 7.8pc in the second quarter of 2018 from 10.3pc during the second quarter of 2017.

IATA noted that global passenger yields - the average price per ticket - have moved slightly higher in recent months, with yields for premium cabins continuing to show "more resilience" than economy seats. It said those higher premium yields have helped to offset some of the impact of rising input costs.

Premium passengers accounted for 5.2pc of total international air traffic in the first seven months of 2018, according to IATA, but generated 30.4pc of total passenger revenue in the period.

Oil prices have risen about 40pc in the past year, heaping pressure on airlines, while trade tensions and weaker global economic outlook could see yields come under more pressure.

Ryanair CEO Michael O'Leary has predicted that the high fuel price will push some carriers out of business. He also said yesterday that a no-deal Brexit could ground UK flights for up to three weeks.

IATA said that passenger demand across the globe has continued to outpace capacity, which rose 5.5pc year-on-year in August. Passenger demand was 6.4pc higher that month.

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