Published: Wed, June 07, 2017
Worldwide | By Sean Reid

IATA revises 2017 airline profit forecast

IATA revises 2017 airline profit forecast

An expanded United States ban on laptops in plane cabins could cost airlines and passengers US$3.3 billion a year, industry veterans have estimated, and they are fighting back with bomb-detection technology, anti-tampering detection for devices, sniffer dogs and an array of other security screening options. "But, compared with past year, there is a dip in profitability".

"We believe having a series of national or regional measures overlapping and contradicting each other increases costs, administration, complexity", said Michael Gill, executive director of the Air Transport Action Group. Governments of the UAE, Saudi Arabia, Bahrain, Egypt, Yemen and Libya had stopped their airlines from flying to Qatar and banned Qatar Airways from flying across their air space, a disruptive development that will have a major impact on further hitting the profitability of the Middle Eastern airlines.

The airline industry executives are also seeking alternatives to the U.S. and British bans on in-cabin laptops and tablets on certain flights, which they say is hurting business. "Demand for both cargo and passenger business is stronger than expected".

The profit margin for world airlines has tapered off in the first months of 2017, squeezed by rising fuel, labor and maintenance costs. Airlines are still well in the black and delivering earnings above their cost of capital.

Passenger and cargo demand has been "stronger than expected" this year, Alexandre de Juniac, IATA's chief executive officer, told airline leaders at the body's annual meeting in Cancun, Mexico.

The $US15.4 billion predicted net profit from this region is down slightly from 2016's $US16.5 billion but still represents $US16.32 per passengers. That will contribute to pushing down airlines' per passenger profit to $7.69, down 15.8% from $9.13 in 2016 and 23.7% from $10.08 in 2015.

He stressed to the IATA airline CEOs that "The definition of this threat context is especially relevant today, given that new System-wide Information Management (SWIM) provisions will begin to come into force as of 2018, making us more connected and integrated as a global network than ever before".

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Last year, productivity gains offset wage increases, but for 2017 IATA expects labour costs to rise by nearly 3 percent, continuing what has already been evident in the first quarter.

"We believe there are alternative ways to address the situation", said Nick Careen, IATA's senior vice-president for airport, passenger, cargo and security.

But carrying 200 laptops in the bellyhold of an aircraft "is risky and against all safety regulations", de Juniac said quoting a top executive of an airline who pointed this out at a panel discussion during the three-day World Air Transport Summit going on here. Carriers in Europe and Asia-Pacific will each add a $7.4 billion profit to the industry total. Latin American and Mideast carriers are expected to earn $800 million and $400 million respectively, while those in Africa may lose $100 million, all improvements on prior projections.

The IATA expects airlines to grow capacity at 7%.

Passenger demand for air travel is expected to grow 7.4%. Passenger yields are nevertheless expected to fall by 2% in 2017, whereas the IATA previously saw them stable throughout the year. Total cargo carried is expected to reach 58.2 million tonnes. While that's up from $44.6 in 2016, the price trend won't yet translate into a higher fuel for all carriers, with hedging positions meaning that the industry-wide bill will be $4 billion lower than in 2016 at $129 billion.

Airlines are expected to take delivery of some 1,850 new aircraft in 2017, around half of which will replace older and less fuel-efficient aircraft.

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