US airlines to scoop almost half of global profit in 2018

Key Points
  • Global airline revenue in 2018 is forecast to reach $824 billion
  • IATA says operating margins are feeling some pressure from rising oil prices and labor costs
  • Global cargo volume is said to be at highest level in more than a decade
North America should continue to be most profitable area in 2018: IATA CEO
North America should continue to be most profitable area in 2018: IATA CEO

North American airlines are once again primed to record the highest profits in the industry.

The International Air Transport Association (IATA) made the claim in its latest forecast of the global airline industry, published Tuesday. IATA is a trade body that claims to represent more than 80 percent of air traffic.

In its report, the association said total airline industry net profit in 2018 will rise to $38.4 billion, an increase of around 11 percent on the projected figure for 2017.

The bulk of the profit generated next year will come from North America where, according to IATA, airlines in the region are forecast to record a combined net profit of $16.4 billion.

In its statement, IATA said the U.S. figure, up from a forecast $15.6 billion in 2017, actually represents a slight fall away in market share.

"North American airlines have generated more than half of the industry's profits produced in the past three years, but rising cost pressures have slowed further improvements," the report said.

IATA has estimated 2018 airline capacity growth to be 3.4 percent for North America, just shy of the region's forecast traffic growth of 3.5 percent.

It noted that U.S. airlines have been hit hardest by rising fuel prices due to previously employing a low hedging strategy, in comparison to other parts of the world. Hedging is when airlines fix the future cost of their fuel to take away the risk of price swings.

Workers load a shipment of aid on to a Boeing 747 cargo plane at Schoenefeld Airport on November 13, 2013.
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Other big earning regions include Asia-Pacific and Europe, which are tipped to generate airline profits in 2018 of $9 billion and $11.5 billion respectively.

IATA said European airlines are reported to be benefiting from a strong economic recovery and passenger planes in the region are fuller than anywhere else, with a 2017 year-to-date load factor of more than 84 percent.

The body also hinted at the ongoing upswing in global trade with bullish forecasts for cargo operators. It estimated that 62.5 million tons of freight will be carried in 2018, a rise of 4.5 percent on the 2017 full-year forecast.

Alexandre de Juniac, IATA’s director general and CEO, described that figure as “the strongest level in over a decade.