IATA forecasts strong airline profitability in 2018
Montreal - The International Air Transport Association (IATA) is forecasting record traffic and profit for airlines in 2018
According to the association's forecasts published on December 5, airlines worldwide are expected to achieve a collective net profit of $ 38.4 billion in 2018, up sharply from $ 34.5 billion in 2017. The turnover of the sector will reach 824 billion dollars, up 9.4% from 754 billion in 2017. The net margin will be slightly improved to 4.7% against 4.6%.
IATA expects the number of passengers to increase by 6.0% to 4.3 billion in 2018 compared to 4.1 billion in 2017. Traffic growth (6.0% in PKT) is expected to surpass the increase in capacity (5.7% in SKO), hence the increase in the seat occupancy rate forecast at the record level of 81.4%. Average net income per passenger is expected to be $ 8.90, up from $ 8.45 in 2017.
In the freight sector, the quantity of goods transported is expected to rise from 59.9 million tonnes to 62.5 million tonnes in 2018, an increase of 4.5%.
The challenge of costs
However, IATA considers that the biggest challenge of 2018 will be the increase in costs. The fuel bill is expected to account for 20.5 percent of total costs next year, up from 18.8 percent in 2017, based on oil price at $ 60 per barrel.
Another area of concern is the cost of labor. It has increased sharply in recent years and now represents a larger expense item than fuel (30.9% of costs in 2018), the association says.
Strong regional contrasts
Geographically, all regions are expected to record higher profitability in 2018. Nevertheless, strong regional disparities will persist. North American carriers will still be at the forefront of financial results, garnering nearly half of the industry's total profits.
Despite increased competition on the transatlantic and Brexit uncertainties, European airlines should see their net profits rise from $ 9.8 billion in 2017 to $ 11.5 billion in 2018.
The other regions will experience various fortunes. Asia-Pacific airlines are expected to make $ 9 billion in profits in 2018 (up from $ 8.3 billion in 2017). Those in the Middle East will make a collective profit of $ 600 million. In Latin America, airlines' net profits are expected to grow from $ 700 million to $ 900 million in 2018. In contrast, carriers in Africa are expected to experience small collective losses of $ 100 million next year, similar to this year.
IATA expects all regions to experience higher demand growth than capacity growth.
Another trend highlighted by the association is the increase in connectivity worldwide.
The number of new routes has exceeded 20,000 in 2017 (1,351 more than in 2016, and twice the 10,000 links in 1996). It saves time for travelers and opens new avenues for tourism, trade, and investment, says IATA.