But downward pressure on profitability is increasing
According to the latest Airlines Financial Monitor released by IATA, the global airline industry reported solid operating profits in Q2 2012. Airline financial performance during the quarter was good, with operating profits held close to last year’s level despite the fact that investors see the impact of surging fuel prices as negative for the second half of this year. Overall, airline share prices fell 3% in August, underperforming the rest of the market.
However, the second half of 2012 looks more challenging with falling business confidence undermining passenger traffic growth and jet fuel prices surging back to earlier levels.
Passenger yields have continued to improve so far this year, helped by tight supply-demand conditions in a number of markets but also driven higher by rising costs. Airlines have responded to slower demand and higher fuel prices by slowing capacity expansion, and this has stabilised load factors. But downward pressure on airline profitability appears to have increased at the start of Q3.
[pictured: Stockholm Arlanda check-in; photo by Daniel Asplund, courtesy Swedavia]