Middle East airlines are generating a recovery, though more muted than in Latin America.
The rise of oil prices is helping revenues and the oil-based economies in the region, aero-political relations with the US have improved, while the Gulf airlines have substantially curbed growth.
Net profits are forecast to rise to $1.3 billion in 2018 (up from $1.0 billion in 2017) or $5.89 per passenger ($4.81 in 2017).
This is according to the latest IATA (International Air Transport Association) figures that announced its expectation for airlines to achieve a collective net profit of $33.8 billion (4.1% net margin) in 2018.
The report also mentions that 1% of worldwide GDP is expected to be spent on air transportation, totalling $871 billion.
This is a solid performance despite rising costs, primarily fuel and labor, but also the upturn in the interest rate cycle.
These rising costs are the main driver behind the downward revision from the previous forecast of $38.4 billion in December 2017.
Even with a healthy improvement in the Middle East airline industry, some airlines aren’t as well-off as others. Following some high-profile investments that didn’t pay off, Etihad Airways has had to pare down on its activities. The company reported a massive $1.9 billion loss in 2016 and has had to decrease the number of planes in service from 121 in 2015 to 115 by the end of 2017. Destinations also dropped from 117 in mid-2016 to around 100 today.
Demand picks up
Passenger air travel is forecast to expand by 7% in 2018. This is slower than the 8.1% growth recorded for 2017 but still faster than the 20-year average (of 5.5%) for the sixth consecutive year.
Demand is getting a boost from stronger economic growth and the stimulus from new city-pair direct services, IATA said.
Cargo demand has benefitted from the largely unexpected acceleration in the growth of the global economy over the past year.
As businesses rushed to respond, they turned to air transport to replenish inventory, producing strong air cargo growth in 2017.
Growing uncertainty in the direction by which global affairs will evolve could present risks to the industry’s outlook.
These include the advancement of political forces pushing a protectionist agenda, uncertainty following the US withdrawal from the Iran nuclear deal, lack of clarity on the impact of Brexit, numerous ongoing trade discussions and continuing geopolitical conflicts.