Airlines feeling the squeeze on profit margins, says IATA October report

Airlines feeling the squeeze on profit margins, says IATA October report

GENEVA — IATA’S October report of the Airlines Financial Monitor indicates an ongoing squeeze on airline profit margins in the third quarter of 2018.

The EBIT margin for IATA’s sample of 27 airlines fell to 13.5% of revenues in the third quarter, from 16.5% a year ago, while net post-tax profits were also around $1.2 billion lower. European airlines posted the widest margin (16.6%) during the key period of demand over the northern hemisphere summer.

Global airline share prices fell by 10.1% in October, their biggest monthly decline since June 2016, alongside a wider fall in global equities. All three regional airline sub-indices fell during the month, led by declines in Europe and North America (-12.5% and -11.5%, respectively).

The global airline share price index has now fallen by 19.8% since the start of 2018, and by 12.4% relative to a year ago. The underperformance of airline shares relative to global equities over both periods reflects investor concerns about the impact of rising costs on airline financial performance.

Crude oil and jet fuel prices rose to their highest levels in around four years in October, driven in large part by concerns about the impact of U.S. sanctions on Iran on global supply.

Passenger demand momentum has weakened, with year-on-year growth in industry-wide revenue passenger kilometres (RPKs) slowing to an eight-month low of 5.5% in September.

Meanwhile, capacity is currently outpacing demand for passengers, with industry-wide available seat kilometres (ASKs) growing by 5.8% year-on-year in September. Passenger demand in continuing to trend upwards in seasonally adjusted terms at a slightly faster rate than capacity.

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