The global airline industry has been in something of a purple patch in recent years, and there are few signs that it will slow down in 2018.
The International Air Transport Association (IATA) is predicting that the global airline industry’s net profit will rise from US$34.5 billion this year to US$38.4 billion in 2018.
“Airlines are achieving sustainable levels of profitability. It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labour and infrastructure expenses,” IATA’s chief executive and director general said recently.
Pleasingly for most carriers, the air cargo sector has rebounded from the recent doldrums thanks to a strong cyclical upswing, with shipments up by 9.3%. That has allowed some airlines to start pushing up their shipping rates, and expectations are that cargo yields for carriers will increase by 4% this year. On the flip side, that will likely see pricing continue to rise – albeit off historical lows.
Any increase in rates, however, could be offset by growing capacity. With a number of freighters put into storage in recent years due to the long downturn in the sector, some operators are starting to put those aircraft back into service, or seek additional capacity from ‘wet-lease’ operators – as Cathay Pacific has done by chartering two Boeing 787-8Fs from US carrier Atlas Air.
On the passenger side of the business, demand is expected to remain strong, barring any major geopolitical events. Nonetheless, there are signs that, since 9/11, the airline industry has become more resilient to terrorism-related events. While the weather and volcanoes can still cause major disruptions, there are few events on the horizon that, fundamentally, will stop passengers stepping onboard aircraft.
The year ahead will see some interesting developments, particularly with new ultra-long-haul routes opening up. In March, Qantas will launch nonstop flights from Perth to London, and by the end of the year, Singapore Airlines (SIA) is set to bring back its nonstop flights from Singapore to Los Angeles and New York.
Those flights will carry little – if any – cargo for operational reasons, and the advantage for shippers would be negligible. They are also likely to be highly vulnerable to higher fuel prices, and so any further upward pressure could see Qantas and SIA revert back to one-stop services via intermediate points. If that doesn’t eventuate, and passengers take a shine to 17-hour or longer flights, we could start to see passenger flows start to change – and in turn, the routes that airlines will carry cargo on.
Overall, with strong momentum from 2017, the global airline industry looks set to enjoy another year of strong growth from both passengers and cargo.