Driven by lower oil prices and a robust passenger demand, the Middle East carriers are expected to post a $1.6bn in profit this year, up slightly on the $1.4bn reported for 2015, the International Air Transport Association (IATA) stated in its ‘2016 financial outlook’ in Dublin yesterday.
The Middle Eastern capacity, dominated by three GCC carriers, including Qatar Airways, is forecast to grow at 12.2%, outpacing an expected 11.2% expansion of demand. 
The IATA also revised its 2016 financial outlook for global air transport industry profits upwards to $39.4bn (from $36.3bn forecast in December 2015). That is expected to be generated on revenues of $709bn for an aggregate net profit margin of 5.6%. 
“2016 is expected to be the fifth consecutive year of improving aggregate industry profits,” IATA’s outgoing director-general and CEO Tony Tyler said at a media event at the Royal Dublin Society (RDS).
In 2015, airlines had generated a global aggregate profit of $35.3bn (re-stated from $33bn estimated in December 2015). All regions are making a contribution to the $4.1bn boost over 2015 profits with improved results; but there are stark regional differences in performance. 
Over half of the industry profits will be generated in North America ($22.9bn) while African carriers are forecast to continue generating an overall loss (-$0.5bn).
In the Middle East, “efficient hubs” continue to gain market share on connecting markets for the region’s major carriers, although local markets have been weakened by the impact of falling commodity revenues. Economic changes in the region’s oil economies are manifesting themselves in a spate of increases of charges and taxes which could dampen the region’s cost competitiveness, IATA said. 
Tyler said,  “Lower oil prices are certainly helping — though tempered by hedging and exchange rates. In fact, we are probably nearing the peak of the positive stimulus from lower prices. Performance, however, is being bolstered by the hard work of airlines. Load factors are at record levels. New value streams are increasing ancillary revenues. And joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition. The result: consumers are getting a great deal and investors are finally beginning to see the rewards they deserve.” 
“On average, airlines will make $10.42 for each passenger carried,” Tyler remarked and noted, “In Dublin, that’s enough to buy four double-espressos at Starbucks. Looked at from a different angle Starbucks will earn about $11 for every $100 in sales while airlines will make $5.6. We don’t begrudge Starbucks their profitability. But here is clearly still upside for airline profits,” said Tyler.
For the second year in a row and only the second time in the airline industry’s history, he pointed out the return on invested capital (9.8%) will exceed the cost of capital (estimated to be 6.8%). This is the minimum expectation level for investors. The airline industry is beginning to generate profits that would be expected of any normal business.
“The job of shoring up resilience by repairing balance sheets is under way. We have had a few years of good profits and some airlines have started to pay down debt. It will, however, take a longer run of profits before balance sheets are returned to full health,” said Tyler.
Repaying accumulated debt will take several years of profitability to achieve. Airlines in North America and in some parts of Europe have seen the gearing of their balance sheets fall towards investment grade levels. But for much of the rest of the industry, it is a continuing challenge.
“Airlines are producing solid results even with some strong economic headwinds. It’s an impressive performance and the mood of the industry is generally optimistic,” said Tyler.