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Growth and robust global travel demand lifts airlines

Growth and robust global travel demand lifts airlines

Overall profit is expected to rise 11% to $38.4bn in 2018, and the outlook is encouraging, IATA said on Tuesday as it raised its 2017 forecast to $34.5bn, up from an earlier $31.4bn estimate, but still lower than 2016. A strong upcycle in the cargo markets will also support the expected profit improvement next year, it added. Labour costs are also rising to become a larger expense than fuel, at 30.9 per cent, according to the organisation. Despite the challenges, the aviation body said there is positive momentum heading into 2018.

Latin America: Airlines in Latin America are forecast to generate a $900 million net profit in 2018, up from $700 million in 2017.

IATA said the global air passenger performance in October was helped by a lack of weather-related impacts.

Middle East airlines, meanwhile, will see net profits doubling to $600 million in 2018, up from the $300 million they will make this year, IATA said.

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Asia Pacific continued to lead the way with an 8.9 percent increase in capacity, followed by the Middle East on 5.4 percent and North America on 5.3 percent.

The forecast growth rates are slower than the 7.5% y-o-y seen in 2017 for passengers and the 9.3% cargo volume growth expected this year. Capacity climbed 9.1%, and load factor slipped 0.3 percentage points to 82.6%. Cargo volume is expected to grow 4.5% y-o-y to 62.5 million tonnes. This was down from $1.1bn in 2016. Worldwide traffic for North American carriers grew 3.7% during the month (compared to 3% in September) as global capacity in the region grew 5.2%, causing the region's global load factor to slide 1.1 points YOY to 79.2%.

Passenger demand growth will likely continue in 2018, based on the global economic upturn of recent months, Oxley said.

This is especially impressive considering that October was the 38th consecutive month of double-digit passenger percentage growth for India. "Next year, we are expecting Brent crude to be around US$60 and jet fuel to be around US$74 a barrel". As a result, operating margins will decline from 8.3% this year to 8.1%, according to the forecast. "This will outpace an expected 3.5 per cent increase in unit revenues", Pearce said. Passenger traffic (revenue passenger kilometers or RPKs) is expected to rise 6 per cent (slightly down on the 7.5 per cent growth of 2017 but still ahead of the average of the past 10 to 20 years of 5.5 per cent), which will exceed a capacity expansion of 5.7 per cent.