IATA sees airline profit boost in 2018
The International Air Transport Association sees global industry net profit rising to $38.4bn in 2018, an 11% improvement from the $34.5bn expected in 2017.
The International Air Transport Association (IATA) forecasts global industry net profit to rise to $38.4bn in 2018, an 11% improvement from the $34.5bn expected in 2017.
Highlights of expected 2018 performance include:
- slight decline in operating margin, to 8.1% (vs 8.3% in 2017),
- 9.4% rise in overall revenues, to $824bn,
- 6% increase in passengers, to 4.3 billion,
- 4.5% increase in cargo carried, to 62.5 million tonnes.
2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital (9.4%) exceeding the industry’s average cost of capital (7.4%).
IATA Director General and CEO Alexandre de Juniac comments: “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.”
According to IATA, the biggest challenge to profitability in 2018 is rising costs.
Oil prices are expected to average $60/barrel for Brent Crude in 2018 (up 10.7% from $54.2/barrel in 2017). Jet fuel prices are expected to rise even more quickly to $73.8 per barrel (up 12.5% on $65.6 in 2017). The fuel bill is expected to be 20.5% of total costs in 2018 (up from 18.8% in 2017).
Labor costs have been accelerating strongly and are now a larger expense item than fuel (30.9% in 2018).
Overall unit costs are expected to grow by 4.3% in 2018 (a significant acceleration on the 1.7% increase in 2017). This will outpace an expected 3.5% increase in unit revenues.
Predicted net profits for airlines in the main regions are as follows:
- North America $16.4bn in 2018 (vs. $15.6bn in 2017),
- Europe $11.5bn (vs. $9.8bn),
- Asia Pacific $9bn (vs. $8.3bn),
- Middle East $600m (vs. $300m).