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Stockholm Arlanda Airport (photo: Swedavia)

Airlines cut profit forecasts as costs soar

Rising costs such as fuel, staff, rising interest rates and trade tensions are adding to airlines’ woes in 2018.

Profits at airlines globally will be hit this year by rising costs, such as fuel, staff, rising interest rates and trade tensions, the International Air Transport Association trade body warns.

IATA, which is currently holding its annual meeting, has cut its profit forecast for 2018 by 12% to $33.8 billion. This is some way down both from the record $38 billion earned in 2017 and an initial forecast for 2018.

But despite the gloomy forecast, the association’s director general, Alexandre de Juniac, said: “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.”

Cost of fuel
Fuel costs for airlines are expected to rise by nearly 30% this year as the oil price averages around $70 a barrel, up from $54.90 last year. IATA’s previous forecast for 2018 was based on an average price of $60 a barrel. The announcement echoes a similar warning by SAS last week.

Airlines could be affected by the effects of “political forces pushing a protectionist agenda”, de Juniac warned, though he did not mention any countries, the BBC reports from the meeting in Sydney.

“We haven’t faced any significant decline in numbers of passengers or cargo related to trade wars or protectionist barriers up to now, but if it continues it will happen,” he told a press conference.

Alluding to the growing threat of a trade war, he added: “Generally, we think […] that all these barriers to trade are bad news from an industry standpoint.”

In its forecast of profitability by region, IATA said that North American airlines were expected to record a net profit of $15bn, while European and Asia-Pacific carriers were tipped to report profits of $8.6bn and $10.1bn representatively.

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