The recent improvement in the airline industry’s financial state help to insulate it from the impact of a future rise in interest rates.
PricewaterhouseCoopers US transportation and logistics director Bryan Terry says that while a rise in interest rates would be an overall negative for the industry, the potential for stronger credit ratings could dampen that effect.
“As airlines are getting more financially healthy, they are starting to get closer and some are starting to secure investment-grade ratings and that will dampen the rise in interest rates. Overall though I think it is a negative on the industry,” he says.
Nevertheless, Terry observes that for now, “there doesn’t seem to be too much concern about rising interest rates or rising cost of capital.”
IATA revealed at its Annual General Meeting that, for the first time in its history of keeping the records, the industry overall delivered a net positive return on capital. It also raised its forecast for the industry’s collective profit for the full year to $29.3 billion, largely on the back of lower oil prices and strong financial performances for North American carriers.
Source: Cirium Dashboard