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IATA sees airline profit boost in 2018
Bahrain International Airport. © Bahrain Ministry of Transport and Telecommunications

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).

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