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Profit expectations ease - airline CFOs

Cape Town - Expectations of further gains in profitability over the year ahead have eased markedly in recent surveys among airline CFOs, the International Air Transport Association (Iata) said on Tuesday.

This is as yields have come under strong downward pressure and expectations of future cost reductions have diminished.

Iata's latest quarterly survey of airline CFOs and heads of cargo, however, points to further year-on-year gains in profitability during the first quarter of 2016, following a record year in 2015.

April’s survey results were consistent with the strong start to the year for passenger volumes, and are in keeping with the mixed start of the year for air cargo, according to Iata.
 
It said long-run expectations for growth remain positive for both passenger and cargo businesses, although expectations of the latter have moderated since the start of 2015. This is as structural headwinds – notably the ongoing weakness of global trade growth – have risen to the fore.
 
More than two-thirds of respondents reported a decrease in operating costs in the first quarter of 2016, consistent with wider developments in the crude oil market.
 
At the same time, lower input costs and increased competition are putting downward pressure on passenger yields, while ongoing increases in freight capacity are expected to continue to weigh heavily on freight yields over the year ahead.
 
As for airline employment activity, it was reported to have increased in the first quarter of 2016, and the survey results are consistent with airlines expecting to add more staff to meet higher demand levels over the next 12 months.

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