Airline Industry Economic Performance - End year December 2016

Airline industry forecast to generate 7.9% return on invested capital 2017

Key Points:

  • Consumers benefit from lower real travel costs, more routes, and will spend 0.9% of world GDP on air transport in 2017.
  • Economic development is a big winner from the doubling of city pairs and halving of air transport costs over the past 20 years.
  • Governments gain substantially from $123bn of tax next year and from over 69 million 'supply chain' jobs.
  • Load factors are forecast to slip a little as demand slows faster than capacity, and breakeven rises as unit costs start to rise.
  • Equity owners see further gains in 2017; industry ROIC falls from record 2016 levels, but remains above the cost of capital.
  • Credit metrics in 2017 not quite as good as 2016, but free cash flow yield remains positive and balance sheet metrics are stable.
  • Jobs in the industry should reach 2.67 million, productivity improves by 2.8% and GVA/employee is over $100,000.
  • Infrastructure use costs are high, plus inefficiencies in Europe alone add €2.8bn to airline costs next year.
  • N American airlines perform best with a forecast 8.5% net post-tax profit margin in 2017. Africa is the weakest with a 5.7% loss.

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