Airline CFOs are a bullish bunch when it comes to passenger growth it seems but are less optimistic about yields. Travel managers, then, can look forward to lower fares but more crowded planes for their business travellers.
These are the findings of the latest Business Confidence Survey from airline association IATA. The survey distills the sentiment of airline finance bosses on a quarterly basis and is a good barometer for the year ahead.
The chart below shows what CFOs think about passenger traffic in the months ahead. You can clearly see that most believe that passenger volumes will increase.
Chart 1: Expected change in passenger volumes
The organisation says that the results are consistent with a strong start to 2016 for the passenger market, where almost 62% of respondents saw an increase in traffic in year-on-year terms in Q1 2016. It says that the increase has partly occurred because "the gloomiest fears of a hard landing in China's economy have eased".
With demand increasing, where are yields (and, by inference, the combined level of fares and ancillaries) going?
Chart 2: Expected change in yields
The chart shows that CFOs are gloomy about yields, with levels of pessimism almost the same as in the aftermath of the start of the global economic crisis.
The organisation said, "Lower input costs and increased competition are putting downward pressure on yields, and tie in with expectations of slower profit growth."
However, the question is whether lower yields will put more pressure on some ailing carriers, with the potential to jeopardise the supply chain.