(MENAFN- The Peninsula) The Peninsula
DOHA: The airline financial data for Q2 2018 reaffirm the signs of a fall in profitability observed by IATA last month. The EBIT margin for its sample of 70 airlines dipped to 7.5 percent in Q2, 2018, from 10.6 percent a year ago, IATA said in its Airlines Financial Monitor (July-August) released yesterday.
The moderation in profitability is widely spread across regions, suggesting that, in part, the steady rise in global fuel prices may be taking its toll. The largest impact on profits is coming from North America and the Asia Pacific. In Europe, margins have also eased, but to a lesser extent.
IATA's updated sample of airlines (now totaling 51) shows an aggregate cash flow performance that is essentially unchanged in Q2 2018 vs a year ago.
Net cash flow is currently 17.5 percent of revenues and free cash flow 4.0 percent. Airlines in North and Latin America both saw a rise in net cash flows vs a year ago, and the former also recorded a solid gain in free cash flow. In contrast, European airlines saw free cash flows almost halve, to 6.0 percent of revenues currently, with this mainly reflecting an increase in capex spend vs a year ago.
Overall, jet fuel prices remained steady in August 2018, at just under $90/bbl their level of the past three months. Over the same period, oil prices have drifted slightly lower, easing by around 1 percent per month.
As a result, the crack spread has widened a little, returning to around 20 percent, broadly in line with its long-run average.
The key drivers of the upwards trend in oil and jet fuel prices since early-2017 are the gradual reduction in oil inventories, as well as various geopolitical tensions and uncertainties.
Global passenger yields (total) continue to trend moderately lower, notwithstanding a small uptick in August. The gap between the premium and economy cabin yields was maintained in the latest data, with the former partly unwinding the previous month's sizeable decline.
Going forward, ongoing international trade tensions represent a key source of downside risk both to yields particularly for the premium-class cabin and broader industry financial outcomes.
Premium-class passengers accounted for 5.3 percent of total international origin-destination traffic in the first six months of 2018 unchanged from the share seen in the same period of 2017.
In terms of revenue, premium-class passengers accounted for 31 percent of passenger revenues over the first half of 2018.
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