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Sat 10 Jun 2017 12:43 AM

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MidEast airlines set to see profits slump to $400m in 2017

International Air Transport Association says laptop ban has impacted bottom line after posting $1.1bn profit in 2016

MidEast airlines set to see profits slump to $400m in 2017

Middle East airlines are expected to post a $400 million profit this year, well down on the $1.1 billion seen in 2016, according to the International Air Transport Association (IATA).

The profit level, which is equal to $1.78 per passenger, is expected as passenger demand grows by 7 percent, slightly ahead expected capacity growth of 6.9 percent.

IATA said trading conditions for the Middle Eastern carriers have sharply declined over the last six months. Profitability and load factors are down significantly, as traffic and some business models have come under pressure.

It added that there is growing evidence that the ban on large electronic devices in the cabin and the uncertainty created around possible US travel bans is taking a toll on some key routes.

Meanwhile the region is also struggling with increased infrastructure taxes/charges and air traffic congestion, IATA said.

Globally, IATA revised its 2017 industry profitability outlook upwards. Airlines are expected to report a $31.4 billion profit, up from the previously forecast $29.8 billion, on revenues of $743 billion.

"This will be another solid year of performance for the airline industry. Demand for both the cargo and passenger business is stronger than expected. While revenues are increasing, earnings are being squeezed by rising fuel, labour and maintenance expenses. Airlines are still well in the black and delivering earnings above their cost of capital. But, compared to last year, there is a dip in profitability," said Alexandre de Juniac, IATA’s director general and CEO.

In 2017 airlines are expected to retain a net profit of $7.69,

The average net profit margin stands at 4.2 percent - down from 4.9 percent in 2016, IATA said.

It added that while overall industry performance is strong, major regional variations remain. About half the industry profits are being generated in North America ($15.4 billion).

Carriers in Europe and Asia-Pacific will each add a $7.4 billion profit to the industry total. Latin America and Middle East carriers are expected to earn $800 million and $400 million respectively. Airlines in Africa are expected to post a $100 million loss.

Cargo demand is expected to grow by 7.5 percent in 2017, more than double the 3.6 percent growth realized in 2016 and 4 percent above the previous forecast for this year.

Total cargo carried is expected to reach 58.2 million tonnes, up 3.9 million tonnes over 2016 levels.

Overall industry expenses are expected to rise to $687 billion, a $44 billion increase on 2016, while industry revenues are expected to increase to $743 billion, $38 billion more than 2016.

IATA said cheaper fuel was responsible for most of the 8 percent fall in airlines’ unit costs in 2016, but that impact is coming to an end due to the influence of fuel hedges and rising spot prices.

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