-ks0H--621x414@LiveMint.jpg "IATA expects overall revenues of airlines globally to rise to $834 billion in 2018, up 10.7% from $754 billion in 2017. Photo: Ramesh Pathania/Mint")
Mumbai: The International Air Transport Association (Iata), which represents 290 airlines accounting for 82% of global air traffic, on Monday slashed its forecast for industry profits in calendar year 2018 on rising fuel and labour costs and higher interest rates.
Iata expects global airlines to achieve a collective net profit of $33.8 billion in 2018, a 12% downward revision from the December 2017 forecast of $38.4 billion.
International airlines had in calendar 2017 earned a record $38 billion, a figure that was revised from the previous estimate of $34.5 billion, IATA said.
Profits at the operating level, though still high by past standards, have been trending slowly downwards since early 2016, as a result of accelerating costs, IATA said in a statement.
“Inflation pressures are starting to emerge at this late stage of the economic cycle and airlines are facing significant pressures from rising fuel and labour costs in particular,” it said.
On Monday, Brent crude was trading at around $75.82 a barrel, up nearly 49.75% from a year ago.
However, IATA expects overall revenues of airlines globally to rise to $834 billion in 2018, up 10.7% from $754 billion in 2017.
The total number of passengers travelling by air during 2018 is expected to rise to 4.36 billion, up 6.5% from 4.1 billion in 2017, the IATA statement said.
Airlines are expected to take delivery of more than 1,900 new aircraft in 2018, many of which will replace older and less fuel-efficient aircraft, IATA said.
“This will expand the global commercial fleet by 4.2% to 29,600 aircraft,” it said.
Meanwhile, in India, airlines are looking to raise flight ticket prices, cut non-fuel costs and boost non-aeronautical revenue to offset the impact of rising fuel costs and a weakening rupee.
The profitability of Indian airlines may still come under pressure during financial year 2019 as airlines may not be able to fully pass on costs to passengers if fuel prices rise further, brokerage IndiaNivesh said in a 3 May note.
IATA also cautioned that growing uncertainty in the direction in which global affairs will evolve could present further risks to the aviation industry’s outlook in calendar year 2018.
“These include the advancement of political forces pushing a protectionist agenda, uncertainty following the US withdrawal from the Iran nuclear deal, lack of clarity on the impact of Brexit, numerous ongoing trade discussions and continuing geopolitical conflicts,” it the IATA statement said.