Published: Wed, December 06, 2017
Worldwide | By Victor Meyer

Growth and robust global travel demand lifts airlines

Growth and robust global travel demand lifts airlines

Net income for 2017 is likely to total $34.5 billion, $3.1 billion higher than forecast in June, the International Air Transport Association said Tuesday in a statement.

Strong demand, efficiency and reduced interest payments would help airlines improve net profitability in 2018 despite rising costs.

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".

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

The price of jet fuel is forecast to jump nearly 13 percent, weighing on earnings at carriers with limited hedging, such as those in the US and China.The upgraded estimate for this year is still slightly below 2016's $34.8 billion earnings figure, but the 2018 prediction to $38.4 billion would represent a new industry high as passenger numbers top 4.3 billion.

European airlines will record a net profit of $11.5 billion next year, according to the forecast. De Juniac has said insolvency filings at carriers including Air Berlin Plc and Alitalia SpA reflect over-capacity rather than market weakness.

The value of goods carried by airlines is expected to exceed $6.2 trillion in 2018, representing 7.4% of world GDP. That part of the world also "remains the only global market not to have grown in annual terms this year". African airlines are projected to lose $100 million.

Global tourists travelling by air are expected to spend more than $750 billion in 2018, a rise of 15% in just over 2 years. "This will outpace an expected 3.5 per cent increase in unit revenues", Pearce said.

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In Europe, capacity increased 4.5pc year-on-year in October, while the overall load factor was 1.3 percentage points higher at 84.9pc. "We expect this combination of factors to see passenger traffic continue to trend upwards into 2018, broadly in line with its current rate".

IATA's statistics show that, when compared to the same month in 2016, passenger traffic in China grew by an impressive 10 percent in October.

"Airlines are achieving sustainable levels of profitability", he said while highlighting the challenges of rising fuel costs and well as labour and infrastructure expenses.

The demand mean for global air freight in October slowed from the 9.2 percent annual growth reported in September.

A slight decline in the operating margin to 8.1%, down from 8.3% in 2017.

Passenger numbers are expected to increase to 4.3 billion in 2018.

But Mr de Juniac pointed out the industry also faces longer-term challenges, many of them are in the hands of governments.

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.

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