IATA reports decline in airline profits with rise of oil costs

IATA has reported a fall in profitability according to airline financial data in the second quarter 2018, the company said.

The EBIT margin for its sample of 70 airlines dipped to 7.5 percent in Q2, 2018, from 10.6 percent a year ago, IATA said in its Airlines Financial Monitor (July-August) released yesterday.

The moderation in profitability is widely spread across regions, suggesting that, in part, the steady rise in global fuel prices may be taking its toll. The largest impact on profits is coming from North America and the Asia Pacific. In Europe, margins have also eased, but to a lesser extent.

IATA´s updated sample of airlines (now totaling 51) shows an aggregate cash flow performance that is essentially unchanged in Q2 2018 vs a year ago.

Net cash flow is currently 17.5 percent of revenues and free cash flow 4.0 percent. Airlines in North and Latin America both saw a rise in net cash flows vs a year ago, and the former also recorded a solid gain in free cash flow. In contrast, European airlines saw free cash flows almost halve, to 6.0 percent of revenues currently, with this mainly reflecting an increase in capex spend vs a year ago.

Overall, jet fuel prices remained steady in August 2018, at just under USD 90/bbl — their level of the past three months. Over the same period, oil prices have drifted slightly lower, easing by around 1 percent per month.

Global airline shares in the second quarter 2018 (Q218) declined in airline profitability compared to the same quarter last year, said the International Air Transport Association (IATA) in its July-August 2018 airline financial monitor.

IATA said airline shares are still 10 per cent lower than the beginning of the year versus a modest 1.7 per cent rise in global equity.