Air transport will grow in Europe in 2017 according to IATA – however expected industry net post-tax profit for the region should reach US$5.6 billion, down from an estimated US$7.5 billion in 2016.
The International Air Transport Association (IATA) continues to express confidence over the evolution of air transport in Europe. IATA economic experts see European economies recovering and growing in 2017. This would definitely have a favourable economic impact on air transport although the rise in oil prices will be passed on air tickets and could weaken air travel demand.
Europe is the world’s second largest air transport market with a market share of 26.7%, just behind of Asia/pacific with a share of 31.5% and ahead of North America with a market share of 24.7%. European carriers saw October demand climb 5.7% over October 2015 following a surge of 5.1% in September compared to the same month of 2015. Capacity in October increased 6.2% and load factor slipped 0.4 percentage points to 83.2%. International demand for European carriers appears to be returning to normal after the disruption caused by terrorism and political instability earlier this year; According to Olivier Jankovec, Director General of ACI Europe, which represents most airports on the continent, “the negative impact of the terror attacks that took place earlier in the year and of the failed coup in Turkey were gradually receding in September and October with passenger’s traffic picking up due to a generally improved macro- economic environment, especially in the EU.
IATA forecasts for 2017 revenue growth to accelerate from 3.8% in 2016 to 4.0% in 2017, while the average load factor within the continent would show a modest slide of 0.2%. IATA forecasts a load factor of 66.8% next year compared to 67% in 2016. Breakeven load factors – which are highest in Europe compared to the rest of the world because of low yields due to a very competitive air transport market and high regulatory costs- are expected to be at 63.7% compared to 63.2% this year.
The difference between the break-even rate and the expected load factor will still translate into a net profit for the European air transport industry. IATA sees European airlines recording a net-post tax profit of US$5.6billion in 2017, down by 25.3% over an expected net profit of US$7.5 billion in year 2016. The net profit per passenger would consequently be down from US$7.84 in 2016 to US$5.65 next year.
Among the events influencing positively air transport in Europe in 2017 are the recovery of the Russian market as the economy stabilised since mid-2016; a continuous demand in air transport in Central Europe with double-digit growth at airports such as Warsaw, Prague or Budapest; and finally the growth of the low cost airline segment in the long-haul market. Altogether, all these elements will help Europe to retain its position as the world’s second largest air market (26.7% market share in October 2016) just behind Asia/Paci c and ahead of North America.