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IATA sees better airline profits in 2018 despite rising costs

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Global passenger traffic up 7.2pc in Oct: IATA

Middle East carriers recorded a 6.9 percent rise in demand in October year on year, up from 3.9 percent in September, said the International Air Transport Authority (IATA) in its monthly report released Monday.

The industry will see a rise in overall revenues to $824 billion in 2018, up 9.4 per cent from $754 billion in revenues expected this year, as per IATA estimates.

The International Air Transport Association (IATA) has cautioned governments across the world about privatising airports to fund growth, a statement that assumes significance as India plans to upgrade and build airports through private sector participation. "And tight supply conditions in the fourth quarter should see the air cargo industry deliver its strongest operational and financial performance since the post-global financial crisis in 2010", said Alexandre de Juniac, director general and CEO of IATA. "Airlines are achieving sustainable levels of profitability", added de Juniac, while highlighting the challenges of rising fuel costs and well as labour and infrastructure expenses.

To continue to deliver on our full potential, governments need to raise their game-implementing global standards on security, finding a reasonable level of taxation, delivering smarter regulation and building the cost-efficient infrastructure to accommodate growing demand.

The Iata chief said the industry also faces longer-term challenges.

"The benefits of aviation are compelling - 2.7 million direct jobs and critical support for 3.5% of global economic activity".

"Signs pointing to broad-based economic upturn continuing into 2018 is also a good news for air travel demand", he said. The increase in fares was in line with expected inflation. "More people than ever are traveling". A rise in cargo carried to 62.5 million tonnes (up 4.5 per cent on the 59.9 million tonnes in 2017). De Juniac has said insolvency filings at carriers including Air Berlin Plc and Alitalia SpA reflect over-capacity rather than market weakness.

This year's profit forecast for the region's airlines has, however, been revised downwards from the $400 million profit IATA forecast in June, which was a 63.6 per cent drop from the $1.1 billion the airlines made in 2016.

Passenger demand next year is forecast to grow 7.0 per cent, amid the slowest announced capacity expansion seen since 2002 at 4.9 per cent. "However, given increases in airline input costs, and by contrast to the situation in recent years, we are unlikely to see a boost from to demand from lower airfares", Oxley said.

It's the 15th consecutive month that the demand growth outstripped the capacity growth, which is believed to be a positive indicator for load factors, yields, and financial performance.

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