Aviation: IATA's new forecast for global growth revised to $33.8 billion

Aviation industry International Air Transport Association (IATA) on Thursday updated its net profit forecast to $33.8 billion for 2018 as 3.7% capacity increase was reported in the Middle East during May.

IATA in a statement said that compared to May 2017, global passenger traffic demand increased 6.1%, capacity rose 5.9% and load factor rose to 0.1% point to 80.1%.

"The earlier timing of Ramadan this year may have affected the result, but more broadly, the upward trend in traffic has slowed compared to last year. May capacity increased 3.7 per cent, and load factor fell 1.9 percentage points to 67.5 per cent," IATA said. Demand of growth slowed down to 0.8% compared to last year, annual growth was recorded 2.9% in April in the Middle East.

The updated profit forecast of $38.4 billion in 2018 is lower than IATA’s December 2017 forecast.

It also warned about the risk of trade wars, along with geopolitical tensions, storm clouds on the horizon and rising cost inputs.

"May was another solid month in terms of demand growth. As had been expected, we saw some moderation, as rising airline costs are reducing the stimulus from lower airfares. In particular, jet fuel prices are expected to be up nearly 26 per cent this year compared to 2017. Nevertheless, the record load factor for the month signifies that demand for air connectivity is strong," said Alexandre de Juniac, IATA's Director General and CEO.

"Last month, IATA released its mid-year economic report showing expectations of an industry net profit of $33.8 billion. This is a solid performance. But our buffer against shocks is just $7.76. That's the average profit per passenger that airlines will make this year-a narrow 4.1 per cent net margin," added de Juniac.

De Juniac also said that Aviation is the business of freedom, liberating people to lead better lives. Governments that recognize this will take steps to ensure aviation is economically sustainable. And aviation works best when borders are open to trade and people.

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The international passenger traffic demand was 4.6% in April which rose to 5.8% as per reports suggested. The total capacity increased to 5.4% with the load factor of 78.7% (increased by 0.3%).

Growth in China and India rose by 6.6% in May compared to last year. Also, domestic traffic of India rose by 16.6%, in April, it was 25.7% down. In recent months passenger volume in India has gone down.

“After weak start to 2018, demand for global air freight has now resumed a modest trend upwards. However, the rapid growth seen in 2017 is now over, with demand growing at a significantly slower pace in 2018,” said IATA.