A recent study found that chief financial officers and heads of cargo in the airline industry across the world expect slight increases in profitability by year-end 2017, but say they remain challenged by annual increases in operating costs.
The International Air Transport Association's (IATA) Airline Business Confidence Index January 2017 survey showed that profitability for the fourth quarter of 2016 was unchanged in the same period of 2015.
However, the survey's participants are concerned that a trend of weakening in the profitability cycle for the airline industry could begin. The report revealed that 31 percent of respondents reported an annual increase in operating costs during the final quarter of 2016, and nearly two-thirds reported lower passenger yields, "underlining the challenging profitability environment".
Nevertheless, the report pointed out that airline employment activity increased for the eighth consecutive quarter in the last quarter of 2016.
"Half of the respondents expect to keep employment levels unchanged at current levels over the next 12 months," the report said.
In terms of demand growth, 74 percent of respondents expect passenger volumes to increase over the next 12 months.
"In keeping with signs of a strong 2016 peak season for air freight, 52 percent of respondents reported an annual increase in cargo volumes in the final quarter of last year. The wider global trade backdrop remains weak, but the weighted-average score for volumes over the next 12 months increased again in the January survey," the report said.
With fuel representing a major component of total industry costs, 31 percent of respondents reported an annual increase in input costs in last year's final quarter.
And 34 percent of respondents expect input costs to increase over the coming 12 months as the oil market slowly rebalances and troubling signs of "emerging labor cost pressures" appear.

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