“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.
Airline investors will see ROIC move closer to the WACC.
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
Oil prices have fallen substantially in recent months
and this is expected to continue into 2015 with the
full-year average price expected to be $85/barrel
(Brent). If that assumption is correct, it would be the
first time that the average oil price has fallen below
$100/barrel since 2010 (when oil averaged $79.4/barrel).
Jet fuel prices are expected to average at $99.9/barrel
in 2015 for a total fuel spend of $192 billion which
represents 26% of total industry costs. It is important
to note that the impact of lower fuel prices will be
realized with a time lag, due to forward fuel-buying
practices. Improving fuel efficiency continues to be a
priority for airlines. Fuel efficiency is estimated to
have improved by 1.8% in 2014 and a further improvement
is expected in 2015. Fuel efficiency improvements could
be accelerated by reducing the 5% of wasted fuel burn as
a result of airspace and airport inefficiencies.
Global GDP is expected to grow by 3.2% in 2015, up from
2.6% in 2014. This will be the first time that global
GDP has broken over 3.0% since 2010 (when global GDP
grew by 4.1% in a post-recession bounce back), this time
boosted by the fall in oil prices.
Passenger traffic is expected to grow by 7.0% in 2015
which is well-above the 5.5% growth trend of the past
two decades. Capacity growth is expected to outstrip
this slightly at 7.3%, pushing the passenger load factor
to 79.6% (slightly down on the 79.9% expected for 2014).
The fall in the price of fuel is expected to lead to
cheaper airfares for consumers. After adjusting for
inflation, average return air fares (excluding
surcharges and taxes) are expected to fall by 5.1% to
$458 in 2015. Total passenger numbers are expected to
grow to 3.5 billion and passenger revenues are expected
to grow to $623 billion.
Cargo volumes are expected to grow by 4.5% in 2015
(slightly ahead of the 4.3% growth expected for 2014).
The air cargo business has faced weak markets and
increasing competition since 2011. There has been an
uptick in demand recently but cargo remains a tough
business. The real cost of transporting goods in 2015 is
expected to fall by 5.8%. In total, some 53.5 million
tons of air cargo is expected to be flown in 2015. Total
cargo revenues are expected to rise to $63 billion, but
that is still some 5% lower than in 2010.
All regions are expected to report improved net
profitability in 2015 over 2014. However, there are
stark differences in profitability among the regions.
Current and forward-looking industry financial
assessments should not be taken as reflecting the
performance of individual airlines, which can differ
The strongest financial performance by far is being
delivered by airlines in North
America. Net post-tax profits are the
highest at $13.2 billion next year (up from $11.9
billion in 2014). That represents a net profit of $15.54
per enplaned passenger, which is a marked improvement
from just three years earlier. Net profit margins
forecast at 6% exceed the peak of the late 1990s. This
improvement has been driven by consolidation, helping to
raise load factors (passenger + cargo) to 65% this year,
lower fuel prices and ancillaries, which together push
breakeven load factors down below 60% next year.
European airlines continue to struggle as evidenced by
the highest breakeven load factors among all regions
(64.7%). European airlines compete vigorously in the
continent’s open aviation area. But they are hampered by
high regulatory costs, infrastructure inefficiency and
onerous taxation. As a result, and despite the industry
in the region achieving the second highest load factor,
financial performance has been poor. Net profits of $4
billion next year (up from $2.7 billion in 2014)
represent only $4.27 per passenger and a net profit
margin of 1.8%.
Airlines in the Asia-Pacific region are expected to
achieve a net profit of $5.0 billion in 2015 (up from
$3.5 billion in 2014) for a 2.2% net profit margin. That
translates into $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.
airlines have one of the lowest breakeven load factors
(58.6%). Average yields are low but unit costs are even
lower, partly driven by the strength of capacity growth.
Passenger capacity is expected to expand by 15.6% in
2015 (up from 11.4% in 2014). Post-tax net profits are
expected to grow to $1.6 billion in 2015 (up from $1.1
billion in 2014). This represents a profit of $7.98 per
passenger and a net profit margin of 2.5%.
Latin American airlines have faced a mixed environment.
Weak home markets have hampered performance, but a
degree of consolidation and some long-haul success is
expected to boost net profits to $1 billion in 2015 (up
from $700 million in 2014). That would be a profit of
$3.53 per passenger and a net profit margin of 2.6%.
is the weakest region, as in the past 2 years. Profits
are barely positive ($200 million in 2015 which is an
improvement on the break-even performance in 2014), and
represent just $2.51 per passenger. Breakeven load
factors are relatively low, as yields are a little
higher than average while costs are lower. However, few
airlines in the region are able to achieve adequate load
factors, which are the lowest among the regions by
almost five percentage points. Performance is improving,
The number of aviation jobs is rising although the pace
of hiring is expected to taper slightly in 2015. Total
direct employment in the sector is expected to reach
2.45 million (up 1.5% on 2014). The total airline
payroll in 2015 is expected to reach $149 billion (up
from $142 billion in 2014). Average unit labor costs are
expected to fall by 2% in 2015 as productivity per
employee improves by 4.8% (almost double the 2.5%
improvement in 2014). Airline employees are also
extremely productive for the economies in which they
work, generating gross value added (GVA – which is the
company level equivalent to GDP) of $108,610 per
employee in 2015 (up 6.3% on 2014).