Moody’s lifts sees clearer skies ahead for airline earnings

MOODY’S Investors Service has upgraded its outlook for global airlines to positive on the back of the sharp drop in fuel prices and an expected boost in operating profit margins. The credit ratings agency changed its outlook from stable as it upgraded projected profit margins for the global industry to 12 to 14 per cent this year and 11.5 per cent to 13.5 per cent next year. This is significantly above its estimate of 8.5 per cent to 9.95 per cent in 2014. It expects US airlines to lead the resurgence but says yields, a measure of fares, will remain flat or rise at most by 2 per cent. Traffic is expected to continue to grow strongly with revenue per passenger kilometres growing 5 per cent to 6 per cent. The International Air Transport Association predicts fares will fall about 5 per cent this year but Moody’s expects this to be mainly driven by capacity growth outstripping the rise in demand. IATA is predicting capacity in the region will rise by 8.5 per cent this year but traffic demand will grow by only 7.7 per cent. Steve Creedy