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December/Year-End 2017 Economic performance of the airline industry

2017 Year-end Economic Performance of the airline industry


This semi-annual report takes a broad look at how the airline industry is adding value for its consumers, the wider economy and governments, as well as for its investors.


Highlights 

  • Consumers benefit from lower real travel costs, more routes, and will spend 1% of world GDP on air transport in 2018.
  • 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 $136bn of tax in 2018 and from over 70 million ‘supply chain’ jobs.
  • Stronger economic growth is pushing traffic ahead of capacity growth, but breakeven loads rising as unit costs grow significantly.
  • Equity owners see further gains in 2018; industry ROIC falls from record 2016 levels, but remains above the cost of capital.
  • Credit metrics in 2018 not quite as good as 2016, but free cash flow yield is positive and balance sheet metrics are improving.
  • Jobs in the industry should exceed 2.7 million, and GVA/employee is over $109,000, but unit labour costs are rising.
  • Infrastructure use costs are high, plus inefficiencies in Europe alone add €3bn to airline costs next year.
  • N American airlines perform best with a forecast 7.1% net post-tax profit margin in 2018. Africa is the weakest with a 0.3% loss.

Wider Economy

Economic development worldwide is getting a significant boost from air transport. This wider economic benefit is being generated by increasing connections between cities - enabling the flow of goods, people, capital, technology and ideas - and falling air transport costs. The number of unique city-pair connections is estimated to have exceeded 20,000 this year, more than double the connectivity by air twenty years ago. The price of air transport for users continues to fall, after adjusting for inflation. Compared to twenty years ago real transport costs have more than halved. Lower transport costs and improving connectivity have boosted trade flows; trade itself has resulted from globalizing supply chains and associated investment.


Regions: Africa

Africa is the weakest region, as in the past 4 years. Losses have emerged again due to regional conflict and the impact of low commodity prices. Breakeven load factors are relatively low, as yields are a little higher than average and costs are lower. However, few airlines in the region are able to achieve adequate load factors, which average the lowest globally at 58.6% in 2018. Performance is improving, but only slowly. 
Download the December/Year-End 2017 Economic performance of the airline industry document here.

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