The International Air Transport Association (IATA) is forecasting a 5.1 per cent increase in airline profits in 2016.

The organisation, which represents some 260 airlines and 83 per cent of global air traffic, expects profits in the industry to rise to $36.3 billion up from $33 billion in 2015.

This growth is attributed to dropping oil prices and a greater demand for travel, with 3.8 billion passengers expected to travel over 54,000 routes in 2016. 

The forecast also projects that the industry’s return on capital will exceed it’s cost of capital in both 2015 and 2016.

IATA’s CEO, Tony Tyler, said: “This is an historic achievement for an industry that has been notorious for destroying capital throughout its history. Airlines are finally meeting the minimum expectations of their shareholders.”

However, as the industry looks to be reaching the top of the business cycle, Tyler warns that the profitability is better described as “fragile than sustainable”.

North America still leads the industry’s performance, and is expected to generate more than half of the industry’s total profits ($19.4 billion), while European carriers are also expected to see a significant increase in profits from $5.8 billion in 2015 to $8.5 billion in 2016.

According to IATA, total industry revenues are expected to rise by 0.9 per cent to $717 billion.

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