Tuesday , December 12 2017

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

epa06132693 Planes line up for take off at LaGuardia Airport in East Elmhurst, New York, USA, 08 August 2017. A major renovation of the airport, one of the busiest in the United States, got underway recently.  EPA/JUSTIN LANE

Bloomberg

Global airline earnings this year will top previous forecasts and surge to a record in 2018, spurred by higher fares and burgeoning cargo demand, according to the industry’s main trade group.
Net income for 2017 is likely to total $34.5 billion, $3.1 billion higher than forecast in June, the International Air Transport Association said in a statement. The figure should advance by a further 11 percent next year.
All major regions contributed to the better-than-expected forecast, led by Europe and the US. More cargo is being sent by air as people increasingly buy goods over the internet—giving a particular lift to Asian exports.
While rising passenger traffic will increase fares, airlines will be challenged by rising costs for fuel and labour. One emerging concern is the effect of US President Donald Trump’s travel restrictions on Middle East carriers.
“These are good times for the global air transport industry,” IATA Chief Executive Officer Alexandre de Juniac said in the release. “More people than ever are travelling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability.”
Seat-occupancy will reach 81.4 percent in 2018, while yields, a measure of fares, should advance 3 percent, according to IATA. The price of jet fuel is forecast to jump almost 13 percent, weighing on earnings at carriers with limited hedging, such as those in the US and China.
The upgraded estimate for this year is still slightly below 2016’s $34.8 billion earnings figure, but the 2018 prediction to $38.4 billion would represent a new industry high as passenger numbers top 4.3 billion. Profit per passenger is forecast to reach $8.90, a gain of 45 cents.
While North America will remain by far the biggest contributor to profit next year, according to IATA, its share of the total will fall below half.
Europe will provide the biggest increase in net income at a gain of $1.7 billion as travel continues to rebound from a spate of terrorist attacks and trans-Atlantic demand remains strong. De Juniac has said insolvency filings at carriers including Air Berlin Plc and Alitalia SpA reflect over-capacity rather than market weakness.
Earnings will also increase in the Asia-Pacific region and Latin America. The Middle East should see significant gains, with demand far outstripping capacity growth that’s set to be the lowest since 2002 as companies such as Qatar Airways respond to sluggish oil-industry demand and the impact of travel restrictions.
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.
The air-freight market is buoyant after years in the doldrums, IATA said, with volumes likely to reach 62.5 million metric tons next year. While momentum is easing after a period of restocking, the development of e-commerce should mean that growth rates remain ahead of the pace of expansion in world trade.

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epa05111049 (FILE) A file photo dated 14 July 2005 showing Delta Airlines passenger Akin Metzger, (L), looking at his boarding pass as baggage handler Alford Russell waits to check him in at Hartsfield-Jackson International Airport in Atlanta, Georgia, USA. Delta Air Lines on 19 January 2016 reported a record-breaking 4th quarter, with adjusted pre-tax income of 1.45 billion USD, up 42 per cent from the previous year. Delta said the positive results were in part because of lower prices for jet fuel throughout the full year 2015. The adjusted fuel expenses dropped in 4th quarter by $726 million compared to the same period in 2014.  EPA/JOHN AMIS

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