Business - Markets Reports and Financial News

Airlines Post-Tax Profit Per Passenger Increases to $6 from $2

Written by - Reviewed by Glozine Team

Published: Jun 5, 2014 | Last Updated: Jun 5, 2014

According to the International Air Transport Association (IATA), the average net profit airlines earn from each passenger is $5.42, which is a figure that improved from a post-tax profit of $2.05 a passenger two years ago.

IATA CEO Tony Tyler said the average net profit margin airlines get per passenger is 2.4%.

During IATA’s 70th AGM held in Doha, Qatar, Tyler said, there is a wide gap between the value that the airline industry provides to the economies and the profit it earns.

Since the average net income per passenger has increased to nearly $6 from $2, the industry expects to make a total post-tax income of $18 billion for 2014. This is an increase from a record amount of $10.6 billion last year.

IATA chief economist Brian Pearce warns that the spike in total profit is attributed to total revenue and it is not coming from the record in profit margin. He said it is very critical and that for over 20 years, the average net profit margin when it comes to the revenue of airlines has been zero.

It is amazing how airlines still manage to make a profit despite the ever-increasing prices of oil for the past several years, he said.

Willie Walsh from International Airline Group said people from other industries would laugh with a 2.4 % profit margin.

According to Pearce, if fuel price, which is one of the airline industry’s biggest expenses, would fall, it would be the customers that would benefit considering the competitive nature of the airlines business.

The profit of the airline industry mainly comes from cost cutting, consolidation, improved efficiency, how they package the products, and even baggage charges and seat preferences.

Ultimately, the major complain of IATA is the high taxation amidst the low profitability of the business.

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