Published: Wed, December 06, 2017
Markets | By Rosalie Gross

Airline earnings to jump 11% as fares rise and cargo rebounds

Airline earnings to jump 11% as fares rise and cargo rebounds

The global airlines' industry is projected to record a higher net profit of United States dollars 38.4 billion in 2018, primarily bolstered by strong demand, industry grouping IATA said on Tuesday.

The organisation - which represents more than 270 airlines accounting for 83pc of global air passenger traffic - said that passenger demand jumped 7.2pc in October compared to October 2016, with demand in Europe rising 6.2pc year-on-year.

"2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital (9.4 per cent) exceeding the industry's average cost of capital (7.4 per cent)", IATA said in its "State of the Industry and Global Economic Outlook" report. It will on Tuesday present its updated economic forecasts for the industry at a media event in Geneva. In September, global passenger demand had increased 6.6 percent from the previous month.

"It is still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses", he said.

IATA said the global air passenger performance in October was helped by a lack of weather-related impacts. The demand for air cargo is at its strongest level in over a decade.

"But remember, 2017 was a bad year, so challenges remain", de Juniac told Gulf News on the sidelines of the conference.

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Asia Pacific continued to lead the way with an 8.9 percent increase in capacity, followed by the Middle East on 5.4 percent and North America on 5.3 percent.

At the moment, however, traffic in India is growing at the fastest rate in the world.

While the total number of reported incidents past year actually fell by nearly 10 percent to 9,837, the portion that were deemed a higher risk increased from 2015.

Demand will also overtake expected capacity growth of 5.7 per cent. It is based on data provided by IATA member airlines during October 2017. Cargo revenues will continue to do well in 2018, reaching $59.2bn, up 8.6 per cent from expected 2017 revenues of $54.5bn.

In terms of air freight, cargo volumes are similarly expected to rise at a slower pace than this year, down from 9.3 per cent in 2017 to 4.5 per cent in 2018, to reach 62.5 million tonnes.

"We believe industry profitability is on a more sustained path so even in weakened business conditions we think the industry will perform better than it has in the past because of the (load factor) gap", said Pearce, noting that while low oil prices have contributed, the load factor gap has been above breakeven level since before 2015.

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