Corrected: Airline industry set for record profit in 2018 - IATA



Middle East carriers recorded a 6.9 percent rise in demand in October year on year, up from 3.9 percent in September, said the International Air Transport Authority (IATA) in its monthly report released Monday.

According to the forecast by the industry's global trade association, combined net profits will hit $38.4 billion, from a revised $34.5 billion in 2017, with United States carriers weighing in with nearly half.

Overall, revenues are expected to expand by 9.4% to $824-billion, with passenger revenues growing to $581-billion in 2018, a 9.2% rise on this year, and cargo revenues rising 8.6% to $59.2-billion in 2018.

IATA said demand to and from North America in particular fell in year-on-year terms for the seventh consecutive month.

Oil prices are expected to average $60 a barrel for Brent Crude in 2018, up 10.7 per cent from $54.2 per barrel in 2017, according to IATA. Capacity grew 9.1 percent, but load factor decreased.3 percent.

The IATA data showed that India's domestic RPK - which measures actual passenger traffic - rose by over 20 per cent in October compared to the corresponding month of the previous year. "While restocking cycles are usually short-lived, the growth of e-commerce is expected to support continued momentum in the cargo business beyond the rate of expansion of world trade in 2018", the association added.

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Over the same period, airline service costs for consumers have fallen from US$0.86 per one tonne kilometre to US$0.80, a 7% decline over two decades according to IATA. More people than ever are travelling.

Meanwhile, Pearce told that competition remains intense in Southeast Asia, which generally depresses profitability.

"The focus is really on the pressure from cost (increases)", said Pearce.

Jet fuel prices are expected to rise even more quickly to $73.8 per barrel (up 12.5 per cent on $65.6 in 2017). New low-cost market entrants in the Asean region is intensifying and contributing to keeping profitability low. We have a clear strategy that is delivering results on environmental performance. Notably, North America was one of just two regions to post a load factor decline and IATA believes inbound travel to the USA is still being deterred by the additional security measures involved with travelling to the country.

Overall, IATA is expecting the industry-wide operating margin to squeeze to 8.1% next year from 8.3% in 2017, though it sees net margins rising to 4.7% next year from 4.6% this year.

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