IATA: With passenger growth will come higher airline profits

Side view of Lufthansa cargo plane

FUELLED by a rebound in the cargo market and strong passenger demand, Asia Pacific airlines are expected to rake in profits to the tune of US$9 billion in 2018, up from an expected bottom line of US$8.3 billion for 2017.

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.

IATA also expects costs to rise as jet fuel and labor expenditures go up.

"Despite the challenges, there is positive momentum heading into 2018".

This year's profit forecast for the region's airlines has, however, been revised downwards from the $400 million profit IATA forecast in June, which was a 63.6 per cent drop from the $1.1 billion the airlines made in 2016.

This was contained in IATA's latest analysis of demand for passenger air transport.

Middle East airlines, meanwhile, will see net profits doubling to $600 million in 2018, up from the $300 million they will make this year, IATA said.

Aside Africa, virtually all the continent's airlines from Asia Pacific, Europe, Middle East, North America and Latin America recorded appreciable traffic growth.

The forecast growth rates are slower than the 7.5% y-o-y seen in 2017 for passengers and the 9.3% cargo volume growth expected this year.

"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]".

Ryanair, whose chief executive is Michael O'Leary, pictured, carried 128.7m passengers in the 12 months to the end of November, an 11pc increase on the previous 12-month period.

"Cargo yields are expected to improve by 4% in 2018 (down from the 5% in 2017)". IATA is a trade body that claims to represent more than 80 percent of air traffic.

While the total number of reported incidents past year actually fell by nearly 10 percent to 9,837, the portion that were deemed a higher risk increased from 2015.

Capacity increased 6.2 percent, and load factor increased 0.8 percent.

Oil prices are expected to average $60 a barrel for Brent Crude in 2018, up 10.7 per cent from $54.2 per barrel in 2017, according to IATA.

Europe added 4.5 percent more capacity in October.

"The focus is really on the pressure from cost (increases)", said Pearce. As a result, operating margins will decline from 8.3% this year to 8.1%, according to the forecast.

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