Iata cuts forecast of world airlines' profits to $45b

Airlines in the Asia-Pacific can expect strong demand for their services to continue in all the major markets in the region, as well as on long-haul services to Europe and the United States. To prepare for this and to stay on top, carriers such as Si
Airlines in the Asia-Pacific can expect strong demand for their services to continue in all the major markets in the region, as well as on long-haul services to Europe and the United States. To prepare for this and to stay on top, carriers such as Singapore Airlines are taking deliveries of new aircraft, beefing up existing services and exploring new markets.ST PHOTO: LIM YAOHUI

Global carriers are expected to make a collective profit of US$33.8 billion (S$45.2 billion) this year, the International Air Transport Association (Iata) said yesterday.

While this is a "solid performance despite rising costs, primarily from fuel and labour", the latest estimate is lower than the US$38.4 billion that was forecast six months ago, Iata added.

Speaking at the association's annual general meeting in Sydney, Iata chief executive and director general Alexandre de Juniac said: "Our nine-year run on profitability started in 2010. And return on invested capital will exceed the cost of capital for four years in a row. At long last, normal profits are becoming normal."

Carriers in the Asia-Pacific - the fastest growing region in terms of passengers - are expected to rake in total profits of US$8.2 billion, while North American airlines are expected to earn US$15 billion, the highest for any region.

With the exception of Africa, all other regions will remain profitable, Iata said.

The demand for air travel is expected to grow by 7 per cent this year, lower than the 8.1 per cent growth that the industry saw the previous year.

In all, airlines are expected to carry a total of 4.36 billion passengers, up 6.5 per cent from the 4.1 billion figure last year.

  • 7% Expected growth in demand for air travel this year, lower than the 8.1 per cent growth a year ago.

UNDERLYING THREATS FROM TARIFFS

It's bad news for passenger traffic and cargo. As of now, we have not faced any significant decline in the number of passengers and cargo related to trade wars or protectionist barriers. But, if this continues, it could happen.

IATA CHIEF EXECUTIVE AND DIRECTOR-GENERAL ALEXANDRE DE JUNIAC, on renewed tariff threats by the United States against China.

In the Asia-Pacific, carriers can expect strong demand for their services to continue in all the major markets in the region, as well as on long-haul services to Europe and the United States, industry observers said.

To prepare for this, carriers such as Singapore Airlines (SIA) and Australia's Qantas are taking deliveries of new aircraft, beefing up existing services and exploring new markets.

Despite all the growth, the industry continues to face major challenges, Mr de Juniac warned.

High taxes, costly and ill-conceived regulation, infrastructure capacity constraints and protectionist polices are serious issues the industry needs to tackle.

Jet fuel costs are also expected to be up 25 per cent year on year, he said.

"US$7.76 - the average profit per passenger that airlines will make this year - is our only buffer against future shocks," Mr de Juniac said.

And rising costs are putting this under pressure, he warned.

In a wide-ranging speech, Mr de Juniac also touched on growing uncertainty in the global geopolitical landscape which could present risks to the industry's outlook.

These include the advancement of political forces pushing a protectionist agenda, uncertainty following the US withdrawal from the Iran nuclear deal, lack of clarity on the impact of Brexit, numerous ongoing trade discussions and continuing geopolitical conflicts, he said.

Speaking to reporters later in the day, Mr de Juniac said of renewed tariff threats by Washington against China, as well as duties on steel and aluminium that have been imposed on several key US allies: "It's bad news for passenger traffic and cargo.

"As of now, we have not faced any significant decline in the number of passengers and cargo related to trade wars or protectionist barriers. But, if this continues, it could happen."

A version of this article appeared in the print edition of The Straits Times on June 05, 2018, with the headline 'Iata cuts forecast of world airlines' profits to $45b'. Print Edition | Subscribe