LAHORE: Although the airline industry is subject to changes in the world economy, grave recessions, high fuel costs and cut throat competition etc, the global airliners would still succeed in earning a net profit of $36.3 billion, up from $33 billion in 2015 and way over the $6 billion financial gains pocketed in 2011.
One wonders if successive managements and employees of the state-owned Pakistan International Airlines (PIA) have ever thought of converting their colossal accumulative losses into profits by being part of the profitable global aviation industry, instead of being at daggers drawn against each other.
The $36.3 billion net profit figure for the global airline industry was cited on December 10, 2015 by the International Air Transport Association (IATA) in its airline industry outlook report for 2016.
Remember, in 2008, the international airline industry had suffered a loss of $26.1 billion and hence strived very hard to achieve excellence.
In both 2015 and 2016 the industry’s return on capital (8.3 per cent and 8.6 per cent respectively) is expected to exceed the industry’s cost of capital (estimated to be just under 7.0 per cent in 2015 and 2016 because of low bond yields).
Basically, lower oil prices (forecast to be $55/barrel Brent in 2015 and averaging a lower $51/barrel in 2016) are giving airline profits a boost. However, this is strongly moderated in many markets by the appreciation of the US dollar.
Moreover, stronger economic performance in some key economies (including a faster than expected recovery in the Eurozone) is outweighing the overall impact of slower growth in China and the downturn in the Brazilian economy.
The Global GDP growth is expected to improve to 2.7 per cent in 2016 (up from 2.5 per cent for 2015). In 2016, total passenger numbers are expected to rise to 3.8 billion travelling over some 54,000 routes.
The major drivers of performance in 2016 include revenues, which are expected to rise by 0.9 per cent to $717 billion, up from $710 billion in 2015 and down from $758 billion in 2014.
The increase in revenues in 2016 is expected to be wholly due to the contribution of the passenger side of the business ($525 billion in 2015 rising to $533 billion in 2016). Cargo revenues are expected to decline slightly to $50.8 billion (from $52.2 billion in 2015).
The demand for passenger travel is expected to grow by 6.9 per cent (similar to the 6.7 per cent growth expected in 2015) with 3.8 billion passengers expected to travel in 2016.
The Passenger capacity is expected to grow slightly ahead of demand at 7.1 per cent which is an acceleration from the 5.5 per cent capacity expansion in 2015.
Demand for air cargo is expected to accelerate in 2016 to 3.0 per cent, ahead of the 1.9 per cent growth in 2015. This is slightly ahead of GDP growth which is expected to average 2.7 per cent in 2016. In total, the industry is expected to uplift 52.7 million tonnes of cargo in 2016.
The region-wise 2016 global aviation profit break-up is as follows:
North America ($19.2billion), Europe ($8.5billion), Asia Pacific ($6.6billion), Middle East ($1.7billion) and Latin America ($0.4billion). However, the African flag carriers would suffer losses to the tune of $0.1billion.
The region-wise 2016 global aviation profit break-up is as follows:
North America ($19.4billion), Europe ($6.9billion), Asia Pacific ($5.8billion) and Middle East ($1.4billion). However, the Latin American and African flag carriers had suffered losses to the tune of $0.3billion and $0.1 billion respectively.
Some interesting facts about world airlines:
The first time someone actually paid to fly by plane was about 101 years ago.
A year ago, the world celebrated the 100th anniversary of the first commercial flight ever.
During the past 100 years, many airlines developed and fought for the flattering title of the most profitable airline company and the most valued by the passengers.
From the paper ticket to the electronic ticket, from KLM’s first scheduled flight (London-Amsterdam) in 1929 to the first scheduled biofuel flight in 2011, the airline industry is today connecting nations, countries and continents.
The 96-year old KLM airlines or the Royal Dutch Airlines of Holland happens to be the oldest airline in the world, reveals a research conducted by the "Jang Group and Geo Television Network" on some interesting facts pertaining to the world of aviation.
Created on October 7, 1919, it had started operations just after World War I. KLM has since merged with Air France in 2004 to give birth to the group, Air France-KLM, which is also currently one of the largest airlines in the world.
In 2014, the Dutch airline KLM was found to be the most punctual in the large international airlines category, with 88.66 per cent on time arrivals, immediately followed by Scandinavian Airlines with 88.62 per cent and Iberia with 88.46 per cent.
On August 7, 2015, the Uzbek National airlines (Uzbekistan's flag carrier) had announced it would start weighing its passengers to calculate the total weight of planes before take off and thus apply necessary measures to ensure the security of the flights.
To reassure future passengers, the airline had also announced this personal data would remain strictly confidential.
"According to the rules of International Air Transport Association, airlines are obliged as a rule to weigh passengers with their hand baggage to ensure flight safety," the Uzbekistan Airlines had said in a statement.
Samoa Air, the Samoa Islands airline, is also well-known for weighing its passengers and applying separate fees according to body and baggage weight. Keep in mind that Samoa Islands suffers from a severe obesity epidemic with over 80 per cent of the population overweight.
Ryanair, an Irish low-cost airline, had introduced the world's cheapest return ticket a few years ago. For a Strasbourg-London flight, the Ryanair ticket had cost only 5.98 British Pounds!
The most expensive airline ticket of $25,000 was introduced by Etihad, the National airline of United Emirates. It had unveiled the first private multi-room cabin in the world in a commercial plane.
The 12 square metre suite includes a living corner, a bedroom with double bed, a bathroom and a butler. All of this for just 25000 USD for a one-way ticket.
In 2015, Qantas Airways of Australia was nominated safest airline by AirlineRatings.com, which evaluates the security of every airline in the world each year. With no lethal accidents in the last 50 years, Qantas Airways had won the first place, immediately followed by Air New Zealand, British Airways, Cathay Pacific Airways and Emirates.
The seven-day November 2015 strike of Lufthansa Airlines had caused the cancellation of about 22 per cent — 4,679 — of the German airline’s flights. Between January and November 2015, there were 14 days of strikes, causing the cancellation of 7,758 flights.
In 2014, during about two weeks of strikes, Lufthansa had cancelled more than 7,329 flights, costing the airline about €232 million.
By fleet size, the American Airlines Group is the largest with 1,494 planes. It has 113,300 employees. Delta Airlines has 1,280 planes. It has 79,655 employees. The United Continental Holdings has 1,264 planes. It has about 84,000 employees.Lufthansa Group has 616 planes. It has 118,781 employees. Air France-KLM has 572 planes. It has 94,666 employees.
The International Airlines Group has 525 planes. It has 59,484 employees.
The Southwest Airlines Group has 683 planes. It has 46,278 employees.
The China Southern Airlines has 509 planes. It has 82,132 staffers.
The All Nippon Airways of Japan has 208 planes. It has 12,360 staffers.
The China Eastern Airlines has 414 planes. It has 68,874 staffers.
The Fedex Express has 649 planes and has 300,000 staffers on its pay-roll.
With 396 planes, Turkish Airlines flies to 118 countries. Lufthansa and Emirates fly to 83 countries each. KLM, Air France, British Airways fly to 78 countries each. Qatar Airways flies to 74 countries. Delta Airlines flies to 71 countries. Singapore Airlines flies to 66 countries and American Airlines flies to 60 countries.
There is no doubt that company bankruptcies are more common in the airline business than most other businesses, but American Airlines is one of the companies that had recovered from its bankruptcy and now it is America’s largest airline company by revenue and fleet size.
In the past 20 years, around 200 world airline companies have filed for bankruptcy protection. These include the PanAm World Airways, Eastern Air Lines, America West Airlines, Continental Airlines, Trans World Airlines and Hawaiian Airlines etc.
In fact, the PanAm World Airways did it twice during the 1990s. It was the principal and largest international air carrier in the United States from 1927 until its collapse on December 4, 1991.
Some of the airline companies that filed for bankruptcy protection since 2000 are: American Airlines (2012), Delta Air Lines (2005), Northwest Airlines (2005), US Airways (2004), United Airlines (2002).
The longest bankruptcy was the one of the United Airlines in 2006 and it had lasted for 150 days.