Average roundtrip airfares in 2015 will decline 5.1 percent year over year, adjusted for inflation and not counting taxes and surcharges, according to a report issued on Wednesday by the International Air Transport Association.
The association projects that airlines collectively will earn $19.9 billion in profit this year and $25 billion in 2015. The 2014 estimate is about $2 billion higher than IATA's projection in June, which the association attributes to lower oil prices and stronger gross domestic product growth globally. Per passenger, airlines will net $6.02 this year and $7.08 next year, more than double the $3.38 per passenger airlines earned in 2013, according to the association.
The report projects passenger traffic in 2015 will grow 7 percent year over year, and capacity will grow even faster at 7.3 percent.
IATA director general and CEO Tony Tyler in a statement said strong airline performance also meant the industry would be highly competitive, leading to lower prices for travelers. Even so, he cautioned that airlines' profitability remains somewhat tenuous, as the 2015 profit projects represent a 3.2 percent net profit margin.
"The industry story is largely positive, but there are a number of risks in today's global environment—political unrest, conflicts and some weak regional economies—among them," according to Tyler. "A 3.2 percent net profit margin does not leave much room for a deterioration in the external environment before profits are hit."
While net profitability will increase in all regions, North American airlines are seeing the strongest financial performance, according to IATA. Airlines in the region should earn $13.2 billion in 2015 net post-tax profits at a 6 percent profit margin, higher than the peak reached in the late 1990s, the report indicates.
European airlines, meanwhile, will net only $4 billion in profits next year at a 1.8 percent profit margin. Though load factors are high in the region, the airlines are "hampered by high regulatory costs, infrastructure inefficiency and onerous taxation," according to IATA.
Projected profit margins are slightly better for airlines in the Asia/Pacific region (2.2 percent), the Middle East (2.5 percent) and Latin America (2.6 percent).