Middle East airlines set to see net profits rise to $1.3bn in 2018

Bottom line set to be boosted by an improvement in aero-political relations with the United States, says IATA
Middle East airlines set to see net profits rise to $1.3bn in 2018
By Sam Bridge
Mon 04 Jun 2018 01:59 PM

Middle East airlines are forecast to see net profits grow to $1.3 billion this year, boosted by an improvement in aero-political relations with the United States.

Airlines in the region are generating a recovery, with the rise of oil prices helping revenues and the oil-based economies in the region, the International Air Transport Association (IATA).

It also cited a recently-signed agreement that finally settles a long-running dispute over government aid, which pitted the largest US airlines against rivals in the UAE and Qatar.

IATA said net profits are forecast to rise to $1.3 billion in 2018 up from $1 billion in 2017 with a net margin per passenger of $5.89 ($4.81 in 2017).

Globally, IATA announced its expectation for airlines to achieve a collective net profit of $33.8 billion (4.1 percent net margin) in 2018.

It said this is a solid performance despite rising costs, primarily fuel and labour which are the main driver behind the downward revision from the previous forecast of $38.4 billion in December.

"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. 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," said Alexandre de Juniac, IATA’s director general and CEO.

He added that jet fuel prices are expected to account for 24.2 percent of total operating costs, up from a revised 21.4 percent in 2017.

Passenger air travel is forecast to expand by 7 percent in 2018, slower than the 8.1 percent growth recorded for 2017 but still faster than the 20-year average (of 5.5 percent) for the sixth consecutive year.

Cargo demand is expected to grow by 4 percent, a major drop from the 9.7 percent growth experienced in 2017, but it remains in line with the 20-year trend growth rate.

IATA added that with over 1,900 aircraft expected to be delivered to airlines in 2018, there will be a boost in capital expenditure.

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