By Shweta Jain
Deputy Business Editor
Geneva: The global airlines industry will return to record profit in 2018 on the back of strong travel demand and recovering world economies, besides an expected jump in airfares, the International Air Transport Authority (IATA) said in its financial outlook on Tuesday in Geneva.
The industry will see net profits rising 11.3 per cent to $38.4 billion (Dh141.04 billion) in 2018, marking slight improvement from the $34.5 billion it will make this year (revised up from the $31.4 billion forecast in June).
Emphasising the forecast record profit of $38.4 billion for 2018, Alexandre de Juniac, IATA’s director-general and chief executive, said: “It is for an entire industry. And it is still $10 billion shy of Apple — a single company — announced for 2016.”
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.
“But remember, 2017 was a bad year, so challenges remain,” de Juniac told Gulf News on the sidelines of the conference.
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.
Record passengers
For the first time, more than four billion passengers will be travelling this year, according to the aviation watchdog, and that number is expected to go up to 4.3 billion next year.
“Strong growth expected next year for commercial aviation,” said Brain Pearce, IATA’s chief economist. “And we will see record load factors in 2018... something like 81.4 per cent.”
The average net profit per departing passenger will also rise slightly to $8.90 next year, from $8.45 in 2017.
Revenue jump
The industry will see a rise in overall revenues to $824 billion in 2018, up 9.4 per cent from $754 billion in revenues expected this year, as per IATA estimates.
“These are good times for the global air transport industry. More people than ever are travelling. The demand for air cargo is at its strongest level in over a decade. More routes are being opened, and airlines are achieving sustainable levels of profitability,” said de Juniac.
Challenges
The biggest challenge to profitability in 2018, however, will be rising costs, according to IATA, with oil prices posing a key challenge.
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.
Jet fuel prices are expected to rise even more quickly to $73.8 per barrel (up 12.5 per cent on $65.6 in 2017).
“The fuel bill is expected to be 20.5 per cent of total costs in 2018 [up from 18.8 per cent in 2017],” IATA’s chief economist pointed out.
“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]. This will outpace an expected 3.5 per cent increase in unit revenues,” Pearce said.
