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Lower crude oil, demand growth drives global airline profits

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Global airline industry October highlights

The global airline industry’s overall growth in demand was slightly higher than supply in October. Plus, passenger traffic and capacity growth was higher than in September. The Middle East region recorded the highest growth in air traffic, and air travel growth was stronger in Europe and Asia Pacific compared to North America.

Even air freight volume and capacity increased at a higher rate in October compared to September, but profitability remains low due to reduced yield and utilization rates. However, there was a slowdown in premium traffic growth in October, reflecting a lower demand for business travel. New aircraft deliveries were decreased compared to September, and storage activity increased.

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Fuel prices

According to the IATA (or International Air Transport Association), share prices of global airline companies were up by 6% in October and 14% in November due to the continued decline in crude oil and jet fuel prices. Share prices of US airlines reported the highest gains, and even previously declining European airline share prices have risen recently.

Traffic, profitability

Four of the top six airlines by scheduled passenger kilometers were US airlines. United (UAL) had the highest traffic, followed by Delta (DAL), Emirates, American Airlines (AAL), China Southern Airlines (ZNH), and Southwest Airlines (LUV).

North American airlines continue to post the highest profitability. Apart from higher returns on transportation ETFs such as the iShares Transportation Average ETF (IYT) and the SPDR S&P Transportation ETF (XTN), the improved performance of airlines also benefited governments by adding to their tax revenues.

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