IATA boosts forecast; McCormick joins CALC

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By TESTCustomwebLP TESTCustomwebLP June 10, 2015 14:27

IATA boosts forecast; McCormick joins CALC

IATA projections have always been wildly amended but a 42%+ revision is exceptional even for IATA. The industry association has boosted its forecasted 2015 collective net profit for the world’s airlines to $29.3 billion, up 47.2% over a net profit of $19.9 billion projected in December 2014.

“For the first time in our history, the airline industry as a whole will earn its cost of capital,” IATA DG and CEO Tony Tyler stated. North American airlines are expected to account for more than half of the global industry’s 2015 net profit, earning $15.7 billion while making $18.12 per passenger, according to IATA. “The US is our industry’s most impressive turnaround story,” Tyler said. “Airlines [in the US] are investing more than $1 billion per month in their product and adding service to meet rising demand for connectivity.” Compare that to the Asia-Pacific region where airlines are expected to earn just $4.24 per passenger and post a net profit of $5.1 billion in 2015. IATA said North American airlines will post an earnings before interest and taxation (EBIT) margin of 12%.

As airlines have been able to cut expenses and drive down cost per seat, mainly due to lower fuel costs and retirement of older aircraft, lower maintenance bills and improved labour contracts. Older aircraft have also given many operators a nice surprise, which in this current market has seen airlines selling aircraft that they had thought would be written off for scrap. However revenue growth is slowing for many airlines in all major regions, airlines are expected to see a collective 0.7% decline in year-on-year revenue to $727 billion and as investors the world over have noted of late. This comes at a time when capacity is increasing rapidly. We have seen exceptional fleet management over recent years and we will need to see a great deal more in the years to come. We may in the process see the expected large number of older aircraft coming onto the secondary market that will depress values and lease rates of the same, a blip we can handle with ease, a slightly depressed market due to macro-economic issues the market can handle, so only massive shocks to the system can really de-rail the buoyant aviation sector at this time, that said could the Chinese black swan be a bigger problem than many of us would like to admit? See the May/June issue of Airline Economics for more on that by clicking here.

Christian McCormick, formerly of Natixis Transport Finance, is to join CALC (China Aircraft Leasing Company) as Corporate Finance Director through his own company Athyenia from July, according to our sources. McCormick’s Athyenia was featured in the March/April issue of Airline Economics, click here to access the story.

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By TESTCustomwebLP TESTCustomwebLP June 10, 2015 14:27