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Global Confidence Survey of Airline CFOs, Heads of Cargo

When surveyed in early-July, airline CFOs and heads of cargo reported that they do not expect profits to improve over the next 12 months;
· July’s survey results also indicate that industry profitability fell slightly in year-on-year terms during Q2 2016, reflecting the impact of recent terrorist attacks and wider pressure on yields;
· On the demand side, July’s survey results were consistent with the robust start to the year for air passenger volumes – albeit with an easing in recent demand conditions – and were in line with the subdued Q2 for air cargo;
· Expectations for growth over the coming 12 months remain positive for both passenger and cargo businesses. But while the latter stabilized in July’s survey, the outlook for cargo continues to be held back by structural headwinds;
· Despite the rally in oil prices since the start of the year, the majority of survey respondents expect operating costs to fall further or to remain unchanged over the next 12 months. This relates to hedging practices in the industry, but also in part to the partial recovery in most currencies against the US dollar over recent months;
· That said, in a reflection of strong competition in the passenger market, airline CFOs expect yields to fall by slightly more than input costs over the year ahead. On the freight side, ongoing increases in freight capacity are also expected to continue to weigh heavily on freight yields over the year ahead;
· Airline employment activity increased for the sixth consecutive quarter in Q2 2016. The forward-looking indicator dropped back from April’s survey, but remains consistent with airlines adding more staff over the next 12 months.

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