Another healthy financial year in prospect for aviation industry
- A Monitor Report
11 Jun, 2018 |
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Sydney: Despite challenges the aviation industry predicts healthy financial year in 2018, it is clear from the industry’s financial position is likely to remain robust for a 4th consecutive year.
At International Air Transport Association (IATA) annual general meeting (AGM) in Sydney, Australia released latest industry financial estimates, incorporating the final outcome for 2017 and revised forecasts for 2018, although the latest forecasts represent a downward revision since the December update.
Looking to 2018, rising costs are expected to again be a challenge for airlines. Industry-wide net post-tax profit is expected to ease moderately this year, moving in line with developments in operating profit and the operating margin. Net profit for 2018 is forecast to be US$33.8bn and the Earnings before Interest and Taxes (EBIT) margin 6.8%, according to IATA Economics.
Industry-wide net profit after tax in 2017 was a little stronger than we anticipated in our December 2017 forecast review, at US$38.0 billion, up from US$34.2bn in 2016.
However, this outcome in part owed to some tax credit and other one-off financial adjustments, even as trading conditions became more challenging for airlines. Indeed, the level of operating profit and the operating margin both eased in 2017 vs 2016 as the growth in unit costs outpaced that of unit revenues.
Unsurprisingly given its share of airline operating costs, the rise in global oil prices was a key – but, importantly, not the only – contributor to the increase in unit costs. The EBIT margin in 2017 was 7.5% in 2017, down from 8.5% in 2016.