IATA forecasts record profit of $35.6B this year for the airline industry, a downward revision from a prior prediction of $39.4B.
A profit margin of 5.1% is anticipated for airlines in 2016.
Looking ahead, IATA warns on the impact of higher oil prices next year. Jet fuel prices are expected to increase to $64.90/bbl from $52.10/bbl this year. Traffic is seen slowing to 5.1% growth and load factor is seen slipping below 80%.
IATA says the strongest region next year will be North America with net post-tax profits of $18.1B.
Wolfe Research analyst Hunter Keay isn't worried that higher oil prices in the future will be a negative for airline companies.
He thinks the impact of capacity discipline is more important than the bottom line of a lower fuel spend. Keay's analysis is below.
"Multiples drive about 70 percent of the movement in stock prices. And multiples are dictated by the perception of pricing power, and pricing power is dictated by capacity control. Excess capacity drives pricing down... It’s not about profits, it’s about how they make the profits, about pricing power. Capacity discipline and fundamental behaviors are far more important than the amount of money they earn."
Oil prices are up 0.7% on the day, but have dropped sharply over the last month.
Don't count out airline stocks as growth stocks just yet. A forecast from the IATA calls for a doubling of the number of global passengers to 7.2B by 2035.
The CAGR (compound average growth rate) on the outlook works out to 3.7%, with steady growth across regions (China +4.7% CAGR, North America +2.8%, Europe +2.5%, Latin America +3.8%, Middle East +4.8%, Africa +5.1%).
All operations at London's City Airport have been suspended after nine protesters occupied the runway by erecting a tripod and locking themselves together.
Following a series of conflicting reports on which campaign group had led the protest, U.K. Black Lives Matter released a statement on its social media accounts: "London City Airport is shutdown to protest the U.K.'s environmental impact on black people."
A cascade of terrorist attacks in Europe is driving away tourists at the height of the summer rush, casting a pall over hotel chains, airline companies and luxury retailers that are already grappling with Britain's vote to leave the EU.
Germany was the latest country to get hit by a series of violent incidents over the weekend, including a suicide bombing and stabbing by two Syrian refugees and a German-Iranian teenager that shot and killed nine people at a mall in Munich.
It may turn out to be an even worse upcoming tourist season for Europe.
The U.S. State Department is warning Americans of possible terrorist attack threats across the continent this summer, saying targets could include "tourist sites, restaurants, commercial centers and transportation."
It also pointed to two events in particular - the Catholic Church's World Youth Day in Poland and France's European Soccer Championship.
Global demand for air travel may be "shifting down a gear," according to global aviation group IATA, which signaled a cautious outlook for passenger traffic after growth in April rose just 4.6% on year - the lowest pace since January 2015.
While some of the slowdown could be attributed to the Brussels terror attacks, there are still signs that underlying traffic growth could be decelerating, Director General Tony Tyler said. "The stimulus from lower oil prices appears to be tapering off. And the global economic situation is subdued."
Aer Lingus (OTC:AIRXY) said it's using Dublin as a gateway to connect the U.S. and Europe.
Ryanair's (NASDAQ:RYAAY) aggressive pricing is identified as a major factor in Europe that's unlikely to reverse anytime soon.
A major theme has been industry consolidation with several execs pointing to more M&A opportunities in Europe and Asia. Foreign ownership of U.S. airlines is seen as opening up in the future, with today's joint ventures called a "precursor" to that evolution.