Rising costs to hit airline profits in 2018: industry report

An airline industry group has slashed its profit forecast for the sector this year amid higher fuel and labour costs and an upturn in the interest rate cycle. 

The International Air Transport Association said the industry will see a $33.8bn profit this year, down from both a prior forecast of $38.4bn and from record industry profits of $38bn in 2017.

Fuel costs are expected to rise nearly 30 per cent – with the full-year average price for Brent crude at $70 a barrel, up from $54.90 a barrel in 2017 – offsetting some of the gains from higher revenues, which are expected to increase 10.7 per cent to $834bn. 

Still, IATA director general Alexandre de Juniac pointed to“solid profitability” and said the “industry’s financial foundations are strong with a nine-year run in the black that began in 2010”. 

He added that return on invested capital will exceed the cost of capital for a fourth consecutive year in 2018 and that airlines would be able to “fund growth, expand employment, strengthen balance sheets and reward our investors”. 

The IATA represents 290 airlines comprising 82 per cent of global air traffic.

Shares in Qantas were 0.3 per cent higher on Monday while Singapore Airlines shares fell by the same amount.