Airlines to rake in $33.8 billion in 2018-IATA

• Rising costs put carriers under pressure
• Jet fuel prices expected to rise

From Wole Shadare (Sydney, Australia)

The Director General of International Air Transport Association (IATA) Alexandre de Juniac said airlines will rake in $33.8 billion this year, adding that aviation’s financial foundation is stronger than ever.

He made the remark today while giving report on the air transport industry at the on-going World Air Transport Summit in Sydney, Australia.

The IATA boss stated that passenger demand is expected to grow 7.0 per cent and cargo by 4 per cent, just as airlines, he reiterated are creating jobs, paying-down debt and rewarding investors.

Carriers’ nine-year run of profitability began in 2010. Return on invested capital is expected to exceed the cost of capital for four years in a row according to the clearing house for global airline. At long last, normal profits are becoming normal.

According to him, “This is hard won through major changes-to the industry structure and its operations. But success is not only evenly spread. Almost half the industry’s profits are generated in North America, while better financial returns remain elusive for many. The goal is for the entire industry to operate in solid financial health.”

He described aviation as challenging industry in which to operate, noting that high taxes, costly and ill-conceived regulation, infrastructure capacity constraints, market shifts and the demands for labour are the normal repertoire.

Low-cost long haul he further stated is providing great value to consumers, hinting that it is also adding a new dimension to competition. He carpeted protectionism which he said could derail successful international joint ventures.

De Juniac he revealed that jet fuel costs are expected to be up 25 per cent on 2017. He however said that $7.76 “is our only buffer against shock future shocks. That is the average profit per passenger that airlines will make this year-a thin 4.1 per cent net margin.

This coming as inflation pressures are starting to emerge at this late stage of the economic cycle and airlines facing significant pressures from rising fuel and labour costs in particular.

IATA said they expect the full year average cost of Brent Crude to be $70/barrel. This is up frpm $54.9/barrel in 2017 (+27.5 per cent) and its previous 2018 expectation of $60/barrel

Jet fuel prices are expected to rise to $84/barrel (+21.4 per cent) Fuel costs will account for 24.2 per cent of total operating costs (up from a revised 21.4 per cent in 2017).

Overall unit costs are forecast to rise 5.2 per cent this year, after a 1.2 per cent increase in 2017; a significant acceleration.

Rising costs are equally said to be putting this under pressure, with robust profitability needed to reward investors, strengthen balance sheets and fund the growth of aviation jobs and its social benefits.

His words, “Aviation’s new-found financial health is rewarding consumers. With money to invest in new aircraft, the global network has grown to over 58, 000 routes. Airlines have invested to develop options that meet every travel budget, shipping requirement or business need. And as New Distribution Capability (NDC) modernises distribution, we can look forward to a future that caters even more closely to customer needs”.

Speaking on safety, he said, “We are also making progress on safety. In 2017 for the second time in three years, there were no passenger fatalities in accidents on jet operations-some 34.9 million flights.”

“That’s an amazing result. The recent Cubana crash, however, was a human tragedy that sharpens our determination to make our safe industry even safer. Accident investigation is an important tool in that quest. Fully completed investigations drive safety improvement. We insist on these with governments. But with just 45 accidents of any description last year, we must also use other sources to guide us forward.”

Wole Shadare