IATA sees cheaper airfares in 2015 as airline profits rise

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The International Air Transport Association (IATA) forecasts strong profit growth for airlines in the Asia Pacific region next year which would lead to lower airfares.

IATA said airlines in the region are expected to achieve a net profit of $5 billion in 2015, up from $3.5 billion in 2014, for a 2.2-percent net profit margin. Per passenger, IATA said the net profit margin would translate to $4.30 per passenger.

“Some strengthening of cargo markets, particularly important in this manufacturing region, plus lower fuel costs, are expected to drive the moderate improvement on 2014,” it said.

In its Economic Performance of the Air Transport Industry report, IATA said airlines around the world are expected to post a collective net profit of some $19.9 billion this year, higher than the $18 billion it had projected in June, rising to $25 billion in 2015.


Lower oil prices and stronger worldwide GDP growth are the main drivers behind the improved profitability, it said.

Consumers will benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through, IATA said.

The airline industry is highly competitive. After adjusting for inflation, average return airfares excluding taxes and surcharges are expected to fall by some 5.1 percent on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8 percent.

“The industry outlook is im “The industry outlook is improving. The global economy continues to recover and the fall in oil prices should strengthen the upturn next year. While we see airlines making $25 billion in 2015, it is important to remember that this is still just a 3.2-percent net profit margin,” said Tony Tyler, IATA’s director general and chief executive officer.

“The industry story is largely positive, but there are a number of risks in today’s global environment—political unrest, conflicts, and some weak regional economies among them. And a 3.2-percent net profit margin does not leave much room for a deterioration in the external environment before profits are hit,” he added.

In the case of the Philippines, flying to member countries of the Association of Southeast Asian Nations (Asean) and other global destinations is expected to become more convenient with more airlines to choose from.

In September, the Civil Aeronautics Board (CAB) approved a series of petitions by airline companies seeking additional flights.

CAB is the government agency mandated to regulate the economic aspect of air transportation. It has supervisory powers and exercises control and jurisdiction over the country’s air carriers.

AirAsia Zest is the latest airline petitioner given an entitlement of 1,260 seats to Yangon, Myanmar.

“I am very happy with the decision of CAB to grant us 1,260 seats to Yangon, but sadly there is yet no decision on our application for Bangkok,” AirAsia Zest chief executive officer Joy Caneba said.

Earlier, Cebu Pacific (CEB), the nation’s largest low-cost carrier, started its three times a week, non-stop flights from Manila to Kuwait after CAB gave the green light for the airline to mount additional flights to five international destinations.

Starting September 9, CEB now also flies non-stop to and from Sydney four times a week.

On October 4, CEB inaugurated its thrice-a-week non-stop flights between Manila and Dammam, Saudi Arabia. Flights will depart from Manila every Monday, Thursday and Saturday at 9:55 pm, and will arrive in Dammam at 2:40 am the next day. The return flights will leave Dammam every Tuesday, Friday and Sunday at 4:10 am, and will arrive in Manila at 6:35 pm.

Meanwhile, Philippine Airlines (PAL) has also been cleared for an additional seven weekly flights to Canada. This would double PAL’s weekly flights to Canada, serving the Vancouver and Toronto routes.

The Philippines also conducted successful air negotiations with the governments of France in January, Singapore in February, and New Zealand in March.

The Philippine government is pursuing air talks as part of its open skies policy. Under Executive Order 29, airports other than the Ninoy Aquino International Airport are to be opened to accommodate more foreign traffic.

“Stronger industry performance is good news for all. It’s a highly competitive industry and consumers—travelers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in. And a healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last,” said Tyler.

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