Airlines Set for Record Profit in 2018, Fare Rise Forecast

Improving economies and robust travel demand will return global airlines to record profit in 2018, with fares also set to rise, the International Air Transport Association (IATA) said.

Overall profits are expected to rise 11 percent to $38.4 billion in 2018, and the outlook is encouraging, IATA said on Dec. 5 as it raised its 2017 forecast to $34.5 billion, up from an earlier $31.4 billion estimate, but still lower than 2016.

Of the $38.4 billion, $27.9 billion will come from North American and European airlines.

“We are eight years into this air travel cycle, but we see no reason at present to expect that cyclical pattern to repeat itself,” IATA Chief Economist Brian Pearce said, with reference to a trend that would usually indicate a major downturn was due.

After declining for six years in a row, passenger yields, a measure of ticket pricing, are also expected to rise by 3 percent next year, after falling 1.5 percent in 2017.

But not all the forecasts are so positive, with passenger demand measured in revenue passenger kilometers set to rise by only 6 percent, slightly less than 2017’s 7.5 percent increase.

And cargo demand, also a bright spot in 2017 with demand up 9.3 percent after a tough few years, is expected to moderate to 4.5 percent in 2018.

IATA said the forecast increase in passenger fares was in line with expected inflation.

With global profitability now on a more sustainable footing, IATA said airlines’ main focus was on keeping costs under control, with rising fuel prices and labor costs set to weigh.