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Most airlines see profit rise, but share prices fall, in first quarter

22nd June 2018

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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The profitability of the global airline industry improved during the first quarter of this year (1Q18), compared with 1Q17, the International Air Transport Association (Iata) has reported. The prime driver of this improvement was a turnaround by European airlines. On the other hand, airline share prices worldwide fell by 2.8% in May, the fourth consecutive month of declining airline share prices. This was a reflection of shareholder concern about rising fuel prices, which increased again in May and were 60% higher than they had been 12 months earlier.

While European airlines had made losses of $1.125-billion, and had an earnings before interest and taxes (Ebit) margin of –2.2% in 1Q17, during 1Q18, they made a net after-tax profit of $103-million and had an Ebit margin of 2%. Airlines in Latin America and parts of the Middle East also delivered better financial performance. Latin American airlines went from a profit of $143-million and an Ebit margin of 6.9% during 1Q17 to a profit of $232-million and an Ebit margin of 8.9% in 1Q18. Middle Eastern and African airlines were grouped as ‘Others’ and this category saw its profits rise from $52-million (1Q17) to $169-million (1Q18) and Ebit go from 1.4% to 3.2%.

Contrariwise, Asia-Pacific airlines saw their profits drop from $2.311-billion to $2.231-billion, and their Ebit reduce from 6.4% to 6.3%. North American airlines saw their profits up (from $1.619-billion to $1.636-billion) but their Ebit down (7.9% to 7.7%).

Global airline share prices have declined by 8.5% since the start of this year. This represents an “underperformance”, compared with global equity markets over the same period. The main falls in airline share prices were reported by Asian-Pacific and European carriers. In May alone, Asian-Pacific airline share prices fell by 3%, and European share prices by 1.4%. Since the start of the year, Asian-Pacific carrier share prices have fallen by 1.2%, European share prices by 8% and North American share prices by 11.5%. (North American airline share prices actually went up in May, but by a mere 0.4%.)

“The seasonally adjusted trends in passenger and freight demand have continued to diverge,” noted the Iata report (‘Airlines Financial Monitor April–May 2018’). “All told, while the industrywide passenger load factor has continued to set new record highs in seasonally adjusted terms in recent months, the corresponding freight load factor has fallen back to levels last seen at the start of 2017.” The passenger load factor rose 0.2% in April, compared with April 2017, resulting in a record high figure for the month of 82.3%. But the freight load factor across the industry was down 0.5% this past April, compared with the same month last year.

Regarding the global airline fleet, the number of available seats in April was 0.8% higher than in March and 5.7% higher than in April 2017. April 2018 also saw 111 airliners delivered (slightly fewer than the 114 delivered during April 2017), while another 132 were returned to service after being temporarily grounded. Only 51 airliners were grounded during April, which was about 33% of the number grounded in April 2017. During the first four months of this year, 448 new airliners were delivered, slightly below the 454 deli- vered during the same period last year.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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