IATA lowers 2018 profit forecast 12% as fuel costs rise

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IATA downgraded its 2018 profit forecast for the global airline industry, projecting airlines will collectively earn $33.8 billion this year, down 12% from the $38.4 billion predicted in December 2017.

Fuel costs are much higher than IATA expected when it made its previous forecast six months ago, with Brent Crude oil prices averaging more than $76 per barrel as of June 4. Fuel costs are “quite a big challenge and that’s the principal reason we’re forecasting a squeeze on profitability in 2018,” IATA chief economist Brian Pearce told reporters during a briefing at the IATA AGM.

IATA’s latest forecast assumes Brent Crude per barrel oil prices to average $70 for the full-year 2018, which would mark a 27.5% increase over 2017. Fuel costs will account for 24.2% of airlines’ costs in 2018, up from 21.4% in 2017, according to IATA.

IATA foresees a slight slowdown in air travel demand growth, with passenger traffic expected to rise 7% year-over-year (YOY) in 2018, down from 8.1% YOY growth in 2017, but still well above the 20-year average of 5.5% annual passenger traffic growth.

Collected and summarized from the source below by GiangTan