Global air travel stays on course for more growth

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Passengers have directly contributed to the growth in profit, as the average net profit per departing passenger is expected to rise to $8.90 (up from $8.45 in 2017). The inventory-to-sales ratio in the USA is looking sideways, thereby indicating that the period when companies look to restock inventories quickly-which often gives air cargo a boost-has ended.

Rising fuel prices have also hit US airlines, but high demand and improving economies in Europe have helped trigger profit in airlines worldwide, an IATA economist told Reuters.

While the momentum may moderate in 2018, e-commerce will likely help underpin global cargo growth.

In the three months to June, Singapore Airlines recorded a profit of S$281 million (US$208 million), up S$88 million (US$65 million) from a year before.

This was contained in IATA's latest analysis of demand for passenger air transport.

"2018 is expected to be the fourth consecutive year of sustainable profits with a return on invested capital (9.4 per cent) exceeding the industry's average cost of capital (7.4 per cent)", IATA said in its "State of the Industry and Global Economic Outlook" report.

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Asia Pacific continued to lead the way with an 8.9 percent increase in capacity, followed by the Middle East on 5.4 percent and North America on 5.3 percent. "We remain on course for another year of above-trend growth".

Global demand rose 7.2 percent in October, measured against the same month previous year, after hurricanes in the Caribbean and southern United States had pegged back demand in September.

In 2017, IATA said airlines hit a new record of over 20,000 city-pair connections, up by 1,351 from 2016. Cargo yields are expected to improve by 4 per cent in 2018, slower than the 5 per cent in 2017. "The airlines based in these markets - SIA, VietJet, Cebu Air - could face greater pressure to discount more to fill up their excess capacity".

Projecting these figures into the future, IATA predicted that China will be the largest aviation market in the world by 2025, with the United States of America in second position and India in third.

Europe added 4.5 percent more capacity in October. "This will outpace an expected 3.5 per cent increase in unit revenues", Pearce said.

The strong 2018 forecast is fueled by IATA's projection that the number of airline passengers will increase 6% next year to 4.3 billion, helping revenue jump 9.4%, to $824 billion. As a result, net margin will edge up from 4.6 per cent in 2017 to 4.7 per cent in 2018 despite operating margins being squeezed by increasing costs.

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