Global airlines on Monday lowered their forecast for industry profits in 2018 by 12 per cent due to the rising cost of fuel, labour and an upturn in the interest rate cycle.
The International Air Transport Association (IATA), which represents about 280 carriers, said the airline industry is expected to post a 33.8 billion dollars profit this year, down from a previous forecast of 38.4 billion dollars.
Passenger yields, a proxy for airfares, are expected to rise by 3.2 per cent this year, in the first annual gain since 2011.
It was driven by growth in demand helped by a stronger economy but overshadowed by growing risks of protectionism, IATA said.
Airlines earned a record $38 billion in 2017, but comparisons to that figure are distorted by special accounting items such as one-off tax credits that boosted annual profits, the industry group said.
“Solid profitability is holding up in 2018 despite rising costs.
“The industry’s financial foundations are strong with a nine-year run in the black that began in 2010,’’ IATA Director General, Alexandre de Juniac, said.
Airline profits will be enough to cover the industry’s high cost of capital for a fourth year, helping to attract investment for new fleets and infrastructure.
But IATA warned that airlines were still operating on a knife-edge compared to many industries.
De Juniac said this year’s profit forecast of 33.8 billion dollars represented 4.1 per cent of sales of about 750 billion dollars.
“Four per cent is not a big number; it is still a fragile industry.
“Our capacity to resist big shocks is limited,’’ he told the Media.