North American carriers are now expected generate net profits of almost $16 billion this year, accounting for over half the projected industry figure this year and almost matching last year's total profit for the entire industry.
IATA is projecting North American airlines will post collective profits of $15.7 billion this year. This marks a $4.5 billion improvement on 2014 and is $2.5 billion more than IATA was projecting for the region six months ago.
US carriers' already strong financial performance, driven by consolidation, tight capacity management and an improving economy, has been further underlined by the sharp strengthening of the US dollar. This has risen around 20% against other currencies, and has mitigated the significant savings opportunity from lower fuel prices for those non-dollar based operators.
"We've seen a substantial fall in the oil price but at the same time there US dollar has soared," says IATA chief economist Brian Pearce. As a result the gains for US carriers - especially once hedging deal unwind - are greater than those for non US dollar based operators. This is compounded by the latter also facing a higher dollar based price for other its other costs. "This is causing a big divergence," notes Pearce.
While strong North American airline profits is nothing new - if IATA's forecast is correct they will have delivered net profits of over $34 billion since 2013 - IATA also sees an improved picture in Europe. It raised its profits outlook for Europe by almost $2 billion since its December forecast $5.8 billion. That improved outlook means IATA now expects European carriers to be more profitable this year than Asia-Pacific carriers. The latter carriers are seen making $5.1 billion this year.
"People are travelling in increased number within Europe and I think that is a reflection of a pick-up in confidence," says Pearce.
He highlights the wide mix of fortunes in for several key markets. "When we drill down into different market, its very different. The growth in domestic markets in India and China we are seeing is very strong. But the two other BRIC economies, Brazil and Russia, are having a very different experience. Both are in recession."
Source: Cirium Dashboard
