Airlines are likely to make a collective net profit of US$33.8 billion (1.08 trillion baht), a net margin of 4.1%, in 2018 down from 2017's $38 billion (1.21 trillion baht), mainly on rising costs of fuel and labour.
The International Air Transport Association released the prediction Monday. It stated profits at the operating level have been trending slowly downwards since early 2016, as a result of accelerating costs.
"Solid profitability is holding up in 2018, despite rising costs. The industry's financial foundations are strong with a nine-year run in the black that began in 2010. And the return on invested capital will exceed the cost of capital for a fourth consecutive year," said Alexandre de Juniac, IATA's Director General and CEO.
"At long last, normal profits are becoming normal for airlines. This enables airlines to fund growth, expand employment, strengthen balance sheets and reward our investors."
In 2018, the return on invested capital is expected to be 8.5% (down from 9% in 2017). This still exceeds the average cost of capital, which has risen to 7.7% on higher bond yields (7.1% in 2017). This is critical for attracting the substantial capital needed by the industry to expand its fleet and services.
Passenger air travel is forecast to expand by 7.0% in 2018. This is slower than the 8.1% growth recorded for 2017 but still faster than the 20-year average (of 5.5%) for the sixth consecutive year.
Demand is getting a boost from stronger economic growth and the stimulus from new city-pair direct services. Total passenger numbers are expected to rise to 4.36 billion (up 6.5% from 4.1 billion in 2017). Passenger yields are expected to grow by 3.2% in 2018 after a 0.8% decline in 2017.
