IATA: Asia-Pacific carriers to fly into US$10.4b profit next year
GENEVA: Asia-Pacific carriers are expected to record a staggering US$10.4 billion (RM43.47 billion) net profit next year, which is 8.3 per cent higher than the US$9.6 billion projected for this year.
The International Air Transport Association (IATA) chief economist Brian Pearce said the region was expected to record a net profit of US$6.15 per passenger, or 3.8 per cent net margin.
He said the projection was derived from the region’s diverse markets with strong growth from new low-cost carriers and outbound cargo from key manufacturing centres.
“Cargo revenue growth has slowed from last year but remains positive for airlines in the region. Lower fuel cost, lower levels of fuel hedging and strong regional economic growth will also support profitability next year,” said Pearce at a briefing during the Global Media Day 2018, here, last week.
He said the global airline industry was expected to post US$35.5 billion net profit next year, slightly more than the US$32.3 billion projected for this year.
“Passengers numbers are expected to reach 4.59 billion, up from 4.34 billion this year. Cargo tonnes carried are expected to reach 65.9 million next year from 63.7 million forecast this year,” said Pearce, adding that the projection was based on cautious optimism.
Despite the market volatility, he said industry observers continued to expect growth next year and the projection would still be supportive of the industry.
“Jobs are being created at a healthy rate, business investment is still rising, government fiscal policies are supporting growth and monetary policies are not yet holding growth back.”
Pearce said air travel showed a lot of momentum, driven by Asian domestic markets in the first 10 months of the year.
“Large markets such as Europe and Asia Pacific’s international revenue passengers kilometres (RPKs) have contributed almost half of the growth so far this year.
“This is considerable momentum to travel growth as we go into next year,” he said, adding that the growth was expected to slow, but a six per cent growth in RPK was expected next year, which was above the 20-year average.
Pearce said fuel price had fallen sharply over the past month, a major short-term positive contributor for the airline sector.
“The fall was driven by a reassessment of the impact of Iran sanctions. But fundamentally, the oil market is oversupplied with higher output from the United States.
“The Organisation of the Petroleum Exporting Countries cuts are also not expected to stop a build-up of oil inventories.”
He said IATA’s assumption for oil prices would be around US$65 a barrel next year, lower than US$73 a barrel this year.
“However, the full benefit of lower oil prices will not be felt by airlines next year due to high levels of hedging in some regions, particularly in Europe. The fuel bill will rise to US$200 billion next year, representing 24.2 per cent of operating costs on average,” said Pearce.