KUALA LUMPUR (Nov 15): Global airline share prices fell by 10.1% in October – the biggest monthly decline since June 2016, according to the International Air Transport Association (IATA).  

In its September – October 2018 Airlines Financial Monitor released yesterday, IATA said investor concerns over the impact of rising costs on industry profitability mean that the global airline share price index has underperformed the wider equity market by some margin since start-2018.

IATA said the global airline share price index has now fallen by 19.8% since the start of 2018, and by 12.4% relative to a year ago.

It said the underperformance of airline shares relative to global equities over both periods reflects investor concerns about the impact of rising costs on airline financial performance.

It explained that the initial airline financial releases for Q3 2018 indicate that the squeeze on profit margins from higher input costs persisted into the quarter, and point to a modest decline in free cash flow generation relative to Q3 2017 as well.

IATA said oil and jet fuel prices both reached four-year highs during October, but have fallen back sharply since.

“At the time of writing, the Brent crude benchmark is around 20% lower than its early-October peak at around US$69/bbl,” it said.

IATA said global passenger yields have continued to edge higher in recent months (recall that our series covers base fares only).

It said the premium cabin has provided a useful buffer for airline financial performance over the past year or so.   

IATA said the industry-wide passenger load factor remains elevated by historical standards, although passenger demand momentum weakened in Q3.

Meanwhile, it said although the upward trend in freight demand remains moderate, cargo yields are still holding up.