Airlines' profits expected to reach $31.4b in 2017

Asia Pacific will contribute $7.4b to the industry total.

The International Air Transport Association (IATA) expects airlines to report a $31.4 billion profit (up from the previously forecast $29.8 billion) on revenues of $743 billion (up from the previously forecast $736 billion).

"This will be another solid year of performance for the airline industry. Demand for both the cargo and passenger business is stronger than expected. Whilst revenues are increasing, earnings are being squeezed by rising fuel, labor and maintenance expenses. Airlines are still well in the black and delivering earnings above their cost of capital. But, compared to last year, there is a dip in profitability," said Alexandre de Juniac, IATA’s Director General and CEO.

In 2017 airlines are expected to retain a net profit of $7.69 per passenger. That is down from $9.13 in 2016 and $10.08 in 2015. The average net profit margin stands at 4.2% (down from 4.9% in 2016).

"Airlines are defining a new epoch in industry profitability. For a third year in a row we expect returns that are above the cost of capital. But, with earnings of $7.69 per passenger, there is not much buffer. That’s why airlines must remain vigilant against any cost increases, including from taxes, labor and infrastructure," said de Juniac.

Here’s more from IATA:

Whilst overall industry performance is strong, major regional variations remain. About half the industry profits are being generated in North America ($15.4 billion). Carriers in Europe and Asia-Pacific will each add a $7.4 billion profit to the industry total. Latin America and Middle East carriers are expected to earn $800 million and $400 million respectively. Airlines in Africa are expected to post a $100 million loss.

Asia-Pacific: Airlines in this region are expected to post a $7.4 billion net profit (down from $8.1 billion in 2016) which is equal to $4.96/passenger. Passenger demand is expected to grow by 10.4%, slightly ahead of expected capacity growth of 8.8%.

Cargo is playing a large role in the strength of the region’s carriers, which collectively account for about 40% of air cargo shipments. Cargo revenues are rising for the first time in several years and this trend should be boosted by the restocking of retailers and industry in the initial stages of the economic upturn.

China continues to reorient its economy away from exports and toward domestic demand. The wider Asia region is still the key source of manufactured components and finished goods which is showing strong demand at the start of the cyclical economic upturn seen in recent quarters.