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


The recent data release by the International Air Transport Association (IATA) indicated a spur of 5.9 percent in the overall global air freight markets in October 2017, compared to the same period, last year. The inventory-to-sales ratio in the USA is looking sideways, thereby indicating that the period when companies look to restock inventories quickly-which often gives air cargo a boost-has ended.

Capacity in the region was 5.2pc higher, and the load factor fell 1.1 percentage points to 79.2pc.

Capacity increased 6.2 percent, and load factor increased 0.8 percent.

Middle East carriers are forecast to see net profits improve to US$600 million in 2018, up from $300m this year, with demand expected to grow by 7 per cent, outpacing announced capacity expansion of 4.9 per cent, according to the International Air Transport Association (Iata). "We remain on course for another year of above-trend growth".

Asia-Pacific was the growth leader in October, with passenger traffic growth of 10.3pc.

Besides, IATA expects the value of worldwide trade shipped by air next year to be Dollars 6.2 trillion while tourists travelling by air in 2018 are anticipated to spend USD 776 billion.

"It's still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses", said Alexandre de Juniac, Iata's director general and chief executive. Average net profit per passenger is also forecast to rise to $8.90, up from $8.45 in 2017.

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Traffic has been heavily affected by the now-lifted ban on portable electronic devices, as well as from the proposed travel bans to the US.

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

Earnings will also increase in the Asia-Pacific region and Latin America.

IATA said the biggest challenge to profitability in 2018 would be rising costs linked to the higher oil prices and other factors.

This year's profit forecast for the region's airlines has, however, been revised downwards from the $400 million profit IATA forecast in June, which was a 63.6 per cent drop from the $1.1 billion the airlines made in 2016.

Projecting these figures into the future, IATA predicted that China will be the largest aviation market in the world by 2025, with the United States of America in second position and India in third.