Airlines project higher profits for 2016 but still get outdone by Starbucks

The world’s airlines have revised their 2016 profit forecast up by nearly 9%, but the industry still pales in comparison to a financial powerhouse such as coffee peddler Starbucks.

That was the message from the International Air Transport Assn., the trade group that revised its annual profit forecast this week to $39.4 billion, up from the forecast in December of $36.3 billion. That equates to a 5.6% profit margin on revenue of $709 billion.

The trade group attributed the higher profit forecast to lower fuel costs, a strong revenue stream from passenger fees, improved efficiency and record rates of filled seats. The strongest financial performance is expected from North American carriers, which are forecast to generate $22.9 billion of this year’s profit.

“The result: Consumers are getting a great deal and investors are finally beginning to see the rewards they deserve,” said Tony Tyler, director-general and chief executive of the IATA.

But in his profit forecast, Tyler bemoaned that the industry’s profit margin still falls short of some other industries.

For every $100 in sales, Starbucks earns about $11, he said, while the airline industry only earns $5.60.

“We don’t begrudge Starbucks their profitability,” Tyler said. “But there is clearly still upside for airline profits.”

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hugo.martin@latimes.com

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