Air transport net profits to rise 11pc in 2018: IATA

Air cargo volumes and prices set to rise

Interestingly, the IATA data hinted at a slowdown from the 9.2 percent annual growth recorded in September 2017.

Overall profit is expected to rise 11% to $38.4bn in 2018, and the outlook is encouraging, IATA said on Tuesday as it raised its 2017 forecast to $34.5bn, up from an earlier $31.4bn estimate, but still lower than 2016.

Africa is set to remain the only unprofitable region, IATA predicts, with airlines suffering a collective $100 million loss in 2018, similar to this year.

IATA represents around 275 airlines comprising 83 per cent of global air traffic.

"These are good times for the global air transport industry", IATA director general Alexandre de Juniac told the worldwide media conference on Tuesday at IATA's Geneva office.

"Demand for air freight grew by 5.9 percent in October".

Strong demand, efficiency and reduced interest payments will help airlines improve net profitability in 2018 despite rising costs.

IATA's report was overwhelmingly positive, with only a few caveats.

A slight decline in the operating margin to 8.1%, down from 8.3% in 2017.

This is more than three times the five-year average growth pace of 9.4 per cent.

Latin America: Airlines in Latin America are forecast to generate a $900 million net profit in 2018, up from $700 million in 2017. With the inventory-to-sales ratio moving sideways, companies may not rush to restock inventories.

In particular, the cyclical rise in the cargo markets has been a boon for Asia Pacific carriers, which account for almost 40 per cent of global cargo capacity.

Rising fuel prices have also hit USA airlines, but high demand and improving economies in Europe have helped trigger profit in airlines worldwide, an IATA economist told Reuters.

"The fuel bill is expected to be 20.5 per cent of total costs in 2018 [up from 18.8 per cent in 2017]", IATA's chief economist pointed out.

While the demand in the cargo markets remains strong, several indicators show that it may have passed the growth peak.

With the exception of Singapore Airlines (SIA) - which has hedged 47 per cent of its fuel needs up till FY22-23 - most other South-east Asian carriers have limited or no fuel hedging, she went on to highlight.

Performance for individual markets in South-east Asia will also vary, Ms Png added. For the airline industry, it's an extraordinary achievement. Players that will receive a lift from the more favourable supply environment include AirAsia. "Many of them are in the hands of governments". This is putting downward pressure on yields.

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