IATA predicts fare rises will top 3 percent

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June 04, 2018
Iata airfare profit downgrade
IATA director general Alexandra de Juniac. Photo: IATA

The International Air Transport Association (IATA) is predicting the average return airfare before charges and taxes will rise about 3 percent in 2018.

The airline umbrella group is forecasting the average pre-taxes and charges return fare will be $US380.

IATA also downgraded its global airline profit forecast to $US33.8 billion as airlines face rising costs such as the price of fuel.

This is down from its previous forecast of $US38.4 billion and last year’s record result of $38 million, although the latter was boosted by one-off items such as tax credits.

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The airline group said operating profits had been trending down since early 2016 as a result of rising costs but profitability was still solid.

“The industry’s financial foundations are strong with a nine-year run that began in 2010,’s IATA director general Alexandre de Juniac said.

A return on invested capital of 8.5 percent will exceed the cost of capital for the fourth consecutive year.

IATA is now expecting he full-year average cost of Brent Crude oil to be $US70 barrel, up from its previous expectation of $US60 per barrel. This compares to an average price of $US54.90 per barrel in 2017 and represents a 27.5 percent increase. Jet fuel prices are expected to rise to $US84 a barrel.

Overall unit costs are forecast to rise 5.2 percent in 2018, compared to 1.2 percent in 2017.

IATA described this as a significant acceleration but said this was offset by a strong revenue environment, with a 10.7  percent growth from 2017 to $US834 billion,  as passenger and freight demand remains good.

Passenger demand is expected to increase by 7 percent in 2018, slower than the 8.1 percent growth in 2017 but still above the 20-year average of 5.5 percent.

Cargo demand growth is tipped to drop from last year’s strong figure of 9.7 percent as businesses restocked but still grow at a respectable 4 percent.

On a regional basis, North American airlines are expected to again post the biggest net profit of $US15 billion, or about $US15.67 per passenger. That represented 44 percent of the global total profit but that was down from $18.4 billion recorded in 2017 due to increasing costs.

European carriers come in second at $US8.6 billion, or $US7.58 per passenger, followed by the Asia-Pacific at $US8.2 billion, or $US5.10 per passenger.

Other forecast regional profits are the Middle East ($US1.3 billion/$5.89 per passenger) and Latin America ($US0.9 billion/$US2.95).

African airlines are expected to continue to run at an overall loss of about $US100 million.