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Global airlines making profits despite high fuel cost: IATA

Sydney: The global airline industry is expected to achieve a collective net profit of almost USD 34 billion in 2018 despite rising fuel and other costs, though the profit level is a bit lower than what was achieved last year, according to IATA.

The International Air Transport Association (IATA) expects the airlines to achieve a collective net profit of USD 33.8 billion, at a net margin of 4.1 per cent, in 2018 compared to a record USD 38 billion last year.

The estimates were announced at IATA’s annual general meeting here, with its Director General and CEO Alexandre de Juniac saying “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.”

“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,” de Juniac said.

He said this was “a solid performance despite rising costs, primarily fuel and labour, but also the upturn in the interest rate cycle. These rising costs are the main driver behind the downward revision from the previous forecast of USD 38.4 billion in December 2017.”

However, the operating profits, though still high by past standards, have been trending slowly downwards since early 2016 as a result of accelerating costs, he said.

According to IATA’s Chief Economist Brian Pearce, this year the return on invested capital is expected to be 8.5 per cent, down from 9 per cent in 2017.