Airline industry sees higher profits in 2017
The International Air Transport Association (IATA) has increased its profit forecast for the global airline industry, citing surging demand.
Total profits for the group’s 275 member airlines are now expected to hit $31.4 billion this year, up more than five percent from the previous forecast late last year.
“Airlines are defining a new epoch in industry profitability. For a third year in a row, we expect returns that are above the cost of capital,” said IATA’s director general, Alexandre de Juniac, as the group opened its annual meeting in the Mexican resort city of Cancun on June 5.
But he warned that airlines still face risks, ranging from cost increases to security issues to growing protectionism in some countries, including the United States and Britain.
“With earnings of $7.69 per passenger, there is not much buffer,” he said.
“That’s why airlines must remain vigilant against any cost increases, including from taxes, labor and infrastructure.”
Among the industry’s concerns, he said, was the “surprise” decision in March by the United States and Britain to ban laptop and tablet computers in-cabin on flights from certain airports in the Middle East and Turkey.
The move came after intelligence officials learned of efforts by the Islamic State of Iraq and the Levant (ISIL) to fashion a bomb into consumer electronics.
But airlines are unhappy with the bans, which affect 10 airports in eight countries, in the case of the US ban, and six countries in the case of Britain’s.
De Juniac said US President Donald Trump’s administration only made things worse when it threatened to extend the ban to flights to and from Europe, even though it has since backed off the idea.
In the Middle East, profits and passenger numbers have fallen sharply in recent months, according to IATA.
“There is growing evidence that the ban on large electronic devices in the cabin and the uncertainty created around possible U.S. travel bans is taking a toll on some key routes,” De Juniac said.
Lost productivity caused by passengers’ inability to work on affected flights is costing an estimated $180 million a year, he said.
That would rise to $1.2 billion a year if the ban were extended to flights between the United States and Europe, he said.
De Juniac criticized the way the ban was imposed, saying it showed an erosion of the traditionally close ties between governments and airlines.
“There was no consultation with industry and little time to implement. The action caught everybody by surprise,” he said.
“We must trust that valid intelligence underpinned the UK and US decisions. But the measures themselves test the confidence of the industry and the public.”
He also had veiled criticism for Trump’s attacks on free trade deals and Britain’s vote to exit the European Union.
“In parts of the world, nationalistic political rhetoric points towards a future of more protectionism,” he said. “They are a threat to our industry.”
He called the global airline sector “the industry of freedom.”
The United States led the industry’s financial forecast, with expected profits of $15.4 billion this year.
Asia-Pacific and Europe were each expected to post $7.4 billion in profits - the latter showing signs of bouncing back after seeing business disrupted by terror attacks in 2015 and 2016.
The Middle East was forecast to post $400 million in profits, while Africa faced $100 million in losses.