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Global Airlines Financial Monitor: May 2O16

Key Points:

· Global airline share prices fell by 3.0% in May, and have now fallen by nearly 11% since the start of the year;
· However, the latest financial results continue to indicate a robust Q1 2016 for industry profitability;
· Brent crude oil prices broke through the $50/bbl mark at the end of May, although the market still expects prices to remain at reasonably low levels for the foreseeable future (below $55/bbl until mid-2018);
· Airfares have fallen by around 5% year-on-year in constant exchange rate terms in 2016 so far. But with oil prices up more than 80% since January, the stimulus to demand from lower airfares is likely to fade in H2 2016;
· Premium airfares continue to offer an important buffer for overall airline financial performance, and have held up better than their economy counterparts on many of the key premium routes so far this year;
· Disruption from the Brussels terrorist attacks weighed on annual growth in air passenger traffic in April, although the global market has made a robust start to 2016 this year to date;
· Annual growth in freight volumes jumped to 3.2% in April, as the one-off boost to air freight from disruption at US west coast seaports in Q1 2015 dropped out of the annual comparison.
· However, rising capacity and low freight loads are keeping intense pressure on cargo yields and revenues.

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