The profits of airlines in the Asia Pacific region are expected to fall by US$700 million in 2017, despite a double-digit increase in passenger demand.
According to IATA’s latest industry profit forecast, the region’s carriers will generate a combined total of US$7.4 billion in net profits this year, down from US$81.bn in 2016. This equates to Asia’s airlines earning just US$4.96 per passenger.
Passenger demand is expected to grow by 10.4%, slightly ahead of an 8.8% increase in capacity. But IATA warned that this increased demand will be offset by rising fuel costs and other expenses.
On a global level, the world’s airlines are forecast to earn accumulative net profits of US$31.4bn in 2017, or US$7.69 per passenger. This is down from US$9.13 in 2016 and US$10.08 in 2015.
The highest profit per passenger will be achieved by North American carriers (US$16.32) while Middle Eastern airlines will earn just US$1.78 per passenger. Africa is the only region whose airlines are expected to make a loss in 2017.
“This will be another solid year of performance for the airline industry,” said Alexandre de Juniac, IATA’s director general & CEO. “Demand for both the cargo and passenger business is stronger than expected. While revenues are increasing, earnings are being squeezed by rising fuel, labour and maintenance expenses. Airlines are still well in the black and delivering earnings above their cost of capital. But, compared to last year, there is a dip in profitability.”
Global passenger demand is expected to grow 7.4% in 2017 – the same rate as in 2016. This would translate into an additional 275m passengers compared to last year, taking the full-year total to 4.1bn. If achieved, this would be the largest year-on-year growth in absolute passenger numbers ever recorded.
Industry revenues are expected to increase by US$38bn to US$743bn, but expenses – driven by fuel costs – are predicted to jump by US$44bn to US$687bn.