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LOW OIL, FULLER PLANES

Global airlines' profit to hit $29bn in 2015

MIAMI, June 9, 2015

Airlines are making more profits than ever before, boosted by lower fuel prices and carrying more passengers on fuller planes, according to the industry's global body.

The International Air Transport Association (IATA) said global profits will almost double to $29.3 billion in 2015, with American-based airlines having a particularly lucrative year on the back of a strong dollar.

Iata's director general Tony Tyler said the industry was "collectively more profitable than at any time in our history" but criticised George Osborne's demands that airlines cut fares because of falling oil prices.

Tyler said that a four per cent profit margin on expected revenues of $727 billion owed much to "favourable but fragile" conditions. Half of the global profits will be generated in North America – although international competitors were suffering from the dollar's sharp rise against most global currencies, offsetting potential savings on fuel.

Brent crude oil is forecast to average $66 a barrel this year compared with $101 in 2014. Yet Tyler insisted that far more than the fuel price was responsible for the changing fortunes, saying: "The strongest driver is efficiency: airlines are filling more seats" with load factors, or the proportion of occupied seats, reaching 82.7 per cent.

He warned that European aviation still faced a "quadruple whammy" of faltering economies, high taxes, onerous regulation and the slow progress in co-ordinating European airspace.

Tyler took a swipe at the UK chancellor whohas called for airlines to cut fares in the light of cheaper oil . "It's astonishing that some politicians wrongly interpret hard-earned financial sustainability... No politician is asking for iPad prices to fall," Tyler said.

He said Osborne should instead abolish air passenger duty, which he described as "the most stringent air passenger tax in the world, it's unnecessary and bad for the UK economy. Once the Scottish authorities have powers to abolish it [England] will be even more isolated. It's such a no-brainer, I don't why he hasn't already."

The Iata chief said he was pessimistic that the Airports Commission's impending verdict would lead to action on expanding London's airport capacity. He said the debate was "buffeted by politics and parochial interests". "If we can get past those hurdles, challenging and time consuming debates on funding and regulation are bound to follow."

Brian Pearce, chief economist of Iata, said that airlines would be transporting goods worth $6,000 billion, around 35 per cent of all world trade. Aviation will now be employing 2.5 million people – back above pre-2001 levels, with the industry having seen a huge downturn after the 9/11 terrorist attacks on the US.

Many of those jobs now are on considerably worse terms and conditions. The burgeoning profits of American airlines have not been unremarked: catering workers supplying inflight meals were outside the Iata summit to call for a nickel on ticket prices to boost wages that are now lower in dollars per hour than in 2001.-Reuters




Tags: Iata | profit | planes | Airlines | low fuel |

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