Airlines’ profit rises to $38.4bn

The International Air Transport Association (IATA) forecasts global industry net profit to rise to $38.4 billion in 2018, an improvement from the $34.5 billion expected net profit in 2017.
Releasing the figure in Geneva, Switzerland, the Director-General and Chief Executive Officer of IATA, Alexandre de Juniac, said strong demand, efficiency and reduced interest payments will help airlines improve net profitability in 2018 despite rising costs.
He said 2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital (9.4 per cent) exceeding the industry’s average cost of capital (7.4 per cent).
“These are good times for the global air transport industry. Safety performance is solid. We have a clear strategy that is delivering results on environmental performance. More people than ever are traveling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability. It is still, however, a tough business, and we are being challenged on the cost front by rising fuel, labor and infrastructure expenses.
“The industry also faces longer-term challenges. Many of them are in the hands of governments. Aviation is the business of freedom and a catalyst for growth and development. To continue to deliver on our full potential, governments need to raise their game—implementing global standards on security, finding a reasonable level of taxation, delivering smarter regulation and building the cost-efficient infrastructure to accommodate growing demand. The benefits of aviation are compelling—2.7 million direct jobs and critical support for 3.5% of global economic activity. And the industry is ready to partner with governments to reinforce the foundations for global connectivity that are vital to modern life,” said de Juniac.
He said passenger numbers are expected to increase to 4.3 billion in 2018 with passenger traffic (revenue passenger kilometers or RPKs) rising 6.0 per cent (slightly down on the 7.5 per cent growth of 2017 but still ahead of the average of the past 10-20 years of 5.5 per cent), which will exceed a capacity expansion (available seat kilometers or ASKs) of 5.7 per cent.
Cargo volumes are expected to grow by 4.5per cent% in 2018 (down from the 9.3 per cent growth of 2017).
However, de Juniac said the biggest challenge to profitability in 2018 is rising costs.
He said oil prices are expected to average $60/barrel for Brent Crude in 2018 (up 10.7 per cent from $54.2/barrel in 2017); jet fuel prices, $73.8 per barrel (up 12.5 per cent on $65.6 in 2017).
Overall unit costs are expected to grow by 4.3 per cent in 2018 (a significant acceleration on the 1.7 per cent increase in 2017).
All regions are expected to report improved profitability in 2018 and all regions are expected to see demand growth outpace capacity expansion. Carriers in North America continue to lead on financial performance, accounting for nearly half of the industry’s total profits.
Airlines North America is expected to generate the strongest financial performance with net profits of $16.4 billion in 2018 (up from $15.6 billion in 2017); Asia Pacific carriers, $9 billion in 2018 (up from $8.3 billion in 2017) while European airlines are expected to deliver a net profit of $11.5 billion in 2018 (up from $9.8 billion in 2017).
Airlines in Latin America are forecast to generate a $900 million net profit in 2018 (up from $700 million in 2017).