% of respondents key points weighted score (50 = no · pdf fileiata economics briefing october...

IATA Economics: www.iata.org/economics 1

AIRLINE BUSINESS CONFIDENCE INDEX OCTOBER 2017 SURVEY KEY POINTS

80% of airline CFOs and Heads of Cargo indicated an improvement in year-on-year profitability in Q3 2017

compared with the same period in 2016 – the strongest outcome in 10 years.

Furthermore, 87% of respondents believe that the profit outlook will be unchanged or improve over the year

ahead, supported by ongoing robust demand; none of this quarter’s survey respondents expect to see a reduction

in either their passenger or freight volumes over the next 12 months.

A higher share of respondents have seen their input costs increase this quarter compared with the Q2 survey,

driven by gains in the world oil price. This upward trend in oil prices is broadly expected to continue to impact

airline costs in the year ahead.

Matching the rise in input costs, 65% of respondents indicated that passenger yields have risen in Q3 – the

highest proportion in six years, further supporting the view that passenger yields have bottomed. Almost half of

respondents indicated an increase in freight yields over the same period.

The outlook for industry employment over the next 12 months remains positive, with more than 40% of

respondents expecting to increase employment and a further 28% expecting to maintain current levels.

PROFITABILITY OUTLOOK How has profitability changed? How do you expect it to change over the next twelve months?

a) October 2017 survey b) Compared to previous surveys

20.0%

0.0%

80.0%

13.3%

46.7%40.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Deterioration / Decrease No-change Improvement / Increase

Last Three Months Next Twelve Months

% of Respondents

0

10

20

30

40

50

60

70

80

90

100

Oct 20

07

Apr

20

08

Oct 20

08

Apr

20

09

Oct 20

09

Apr

20

10

Oct 20

10

Apr

20

11

Oct 20

11

Apr

20

12

Oct 20

12

Apr

20

13

Oct 20

13

Apr

20

14

Oct 20

14

Apr

20

15

Oct 20

15

Apr

20

16

Oct 20

16

Apr

20

17

Oct 20

17

Last three months Next twelve months

Weighted Score (50 = No Change)

The results of our latest survey of airline CFOs and Heads of Cargo, conducted in early-October, point to a

continued strong financial performance into the second half of the year. An even 80% of respondents reported

that profitability increased in year-on-year terms in Q3 2017 – up from just 36% in Q1, which appears to be the

high point of the squeeze on industry finances. This response represents the strongest outcome in 10 years, and

contributed to the modest gain in the backward-looking weighted average score this quarter.

The weighted average score for the year-ahead profitability outlook fell back this quarter but remains

comfortably within expansionary territory. The number of respondents expecting to see their profit performance

increase in the coming year eased to 40%, down from 69% last quarter. At the same time, the share of

respondents expecting a decrease in profitability rose from its seven-year low of 4% in Q2, to 13% this quarter.

http://www.iata.org/economics

IATA Economics Briefing October 2017 Survey


DEMAND GROWTH

On the passenger side, the October survey indicates that the robust demand environment also continued into

the second half of the year. A very strong 86% of respondents experienced an increase in year-on-year demand

in Q3 2017, up from 71% in last quarter’s survey. This response took the backward-looking weighted-average

score to its highest level since April 2008.

Almost ¾ of respondents (71%) expect passenger volumes to rise further over the year ahead, down from 81%

last quarter. However, in the latest survey none of the respondents expect their volumes to decrease over the

coming 12 months. The forward-looking weighted-average score retraced some of its recent gains, but remains

at an elevated level.

For freight, the October survey showed 58% of respondents – unchanged from last quarter – reported a year-on-

year rise in volumes in Q3 2017. Interestingly, on this occasion, just 12% of respondents experienced a

decrease in freight volumes, down significantly from 32% last quarter. Consequently, the backward-looking

weighted-average score stepped up, rising to its highest level since July 2011.

Looking ahead, 48% of respondents reported that they expect a further increase in freight volumes over the year

ahead, down from 58% last quarter. However, as was the case with the passenger segment, none of the

respondents currently expect their volumes to decrease over the next 12 months, down from 11% last quarter.

The forward-looking weighted average score ticked up slightly, but remains broadly in line with its performance

over the past three quarters.

Recent and expected change in traffic volumes

a) Passenger b) Cargo

9.5%4.8%

85.7%

0.0%

28.6%

71.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



% of Respondents

11.5%

30.8%

57.7%

0.0%

52.0%48.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



% of Respondents

Compared to previous surveys


0

10

20

30

40

50

60

70

80

90

100

Oct

20

07

Ap

r 2

00

8

Oct

20

08

Ap

r 2

00

9

Oct

20

09

Ap

r 2

01

0

Oct

20

10

Ap

r 2

01

1

Oct

20

11

Ap

r 2

01

2

Oct

20

12

Ap

r 2

01

3

Oct

20

13

Ap

r 2

01

4

Oct

20

14

Ap

r 2

01

5

Oct

20

15

Ap

r 2

01

6

Oct

20

16

Ap

r 2

01

7

Oct

20

17



0

10

20

30

40

50

60

70

80

90

100

Oct 200

7

Apr

20

08

Oct 200

8

Apr

20

09

Oct 200

9

Apr

20

10

Oct 201

0

Apr

20

11

Oct 201

1

Apr

20

12

Oct 201

2

Apr

20

13

Oct 201

3

Apr

20

14

Oct 201

4

Apr

20

15

Oct 201

5

Apr

20

16

Oct 201

6

Apr

20

17

Oct 201

7






INPUT COSTS Developments in input costs divided respondents relatively evenly this quarter. 31% saw their unit input costs

decrease in Q3 2017 compared with a year ago – down from 50% in Q2. Those experiencing either no change

or an increase in costs were equally split at 35%, with the latter up from 19% last quarter.

Looking ahead, 40% of respondents expect input costs to increase over the coming 12 months – a sharp

turnaround from last quarter, where only 19% expected input costs to rise. Numerous respondents highlighted

recent developments in oil prices, and the expectation of further price increases to come, as a key input into their

response. A modest 20% expect input costs to ease over the year ahead, down from 35% in Q2, and primarily

driven by internal productivity gains and cost reduction programs.

How have your unit input costs changed? How do you expect them to change over the next twelve months?


31.0%34.5% 34.5%

20.0%

40.0% 40.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Decrease No-change Increase


% of Respondents

0

10

20

30

40

50

60

70

80

90

100

Oct 2007

Ap

r 2

008

Oct 2008

Ap

r 2

009

Oct 2009

Ap

r 2

010

Oct 2010

Ap

r 2

011

Oct 2011

Ap

r 2

012

Oct 2012

Ap

r 2

013

Oct 2013

Ap

r 2

014

Oct 2014

Ap

r 2

015

Oct 2015

Ap

r 2

016

Oct 2016

Ap

r 2

017

Oct 2017



YIELD ENVIRONMENT 65% of our respondents reported higher passenger yields in Q3 2017 compared to a year ago – up from 43%

last quarter and the highest proportion since July 2011. This result confirms broader signs that the downward

trend in passenger yields has bottomed out as input costs have increased. Looking ahead, 90% of respondents

expect yields to remain steady or increase over the year ahead, evenly divided between the two. The share of

respondents expecting yields to rise jumped a sizeable 20pp, from 25% last quarter.

Almost half (48%) of our respondents reported an annual increase in freight yields in Q3 2017 – the highest

share since July 2011. Only 8% saw a decrease in yields. For the coming year, the bulk of respondents (56%)

expect no change in yields (down from 72% last quarter), while 32% now expect yields to increase (up from

11%). The weighted average score rebounded this quarter, to its highest level in four years.

Recent and expected change in yields


5.0%

30.0%

65.0%

10.0%

45.0% 45.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



% of Respondents

8.0%

44.0%48.0%

12.0%

56.0%

32.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



% of Respondents




Compared to previous surveys


0

10

20

30

40

50

60

70

80

90

Oct 2007

Apr

2008

Oct 2008

Apr

2009

Oct 2009

Apr

2010

Oct 2010

Apr

2011

Oct 2011

Apr

2012

Oct 2012

Apr

2013

Oct 2013

Apr

2014

Oct 2014

Apr

2015

Oct 2015

Apr

2016

Oct 2016

Apr

2017

Oct 2017



0

10

20

30

40

50

60

70

80

90

Oct 2007

Apr

2008

Oct 2008

Apr

2009

Oct 2009

Apr

2010

Oct 2010

Apr

2011

Oct 2

011

Apr

2012

Oct 2012

Apr

2013

Oct 2013

Apr

2014

Oct 2014

Apr

2015

Oct 2015

Apr

2016

Oct 2016

Apr

2017

Oct 2

017



EMPLOYMENT 45% of survey respondents reported an increase in employment levels in Q3 2017 relative to the same period in

2016, slightly above the outcome for Q2. 21% of respondents reported a decrease in employment levels in Q3,

up from 15% last quarter, and enough to drive a modest dip in the backward-looking weighted-average score on

this occasion.

41% of respondents reported that they expect to increase employment levels over the year ahead, down slightly

on the 44% figure reported last quarter. Almost 1/3 of respondents indicated that they expect to decrease

employment levels in the next 12 months as part of broader cost reduction programs. As such, the forward-

looking weighted-average score unwound some of its recent gains but remains firmly in expansionary territory.

How has your employment level changed? How do you expect it to change over the next twelve months?


20.7%

34.5%

44.8%

31.0%27.6%

41.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



% of Respondents

20

30

40

50

60

70

80

90

100

Oct 2007

Apr

2008

Oct 2008

Apr

2009

Oct 2009

Apr

2010

Oct 2010

Apr

2011

Oct 2011

Apr

2012

Oct 2012

Apr

2013

Oct 2013

Apr

2014

Oct 2014

Apr

2015

Oct 2015

Apr

2016

Oct 2016

Apr

2017

Oct 2017



IATA Economics 26

th October 2017

E-Mail: [email protected]

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% of respondents key points weighted score (50 = no · pdf fileiata economics briefing october...

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