Rising oil prices seen dragging down 2018 profits of Asia Pacific airlines

AP PHOTO

Airlines in the Asia Pacific will likely see lower profits in 2018, joining most other airlines in the world, due to accelerating costs, according to the International Air Transport Association (IATA).

IATA, the trade group of the world’s airlines, cut the 2018 profit outlook for Asia Pacific carriers to $8.2 billion from its previous forecast of $9 billion. Airlines in the region reported a combined profit of $10.1 billion last year, meaning this year’s forecast represented an 18.8 percent decline.

Airlines around the world are feeling the brunt of higher oil costs, a major operational expense. IATA said the price of jet fuel was forecast to hit $84 per barrel this year, up from $66.7 per barrel in 2017 and a 60 percent increase from 2015.

According to IATA, carriers in almost all other areas in the world, except for those in the Middle East and Latin America, will see profitability fall this year.

Overall, the profit outlook for carriers around the world was cut to $33.8 billion down from its $38.4 billion forecast released in December 2017.

IATA said the outlook still signaled “solid profitability” for 2018, noting that income at the operating level was high when compared to past standards.

“Solid profitability is holding up in 2018, despite rising costs. The industry’s financial foundations are strong with a nine-year run in the black that began in 2010,” Alexandre de Juniac, IATA’s director general and CEO, said in a statement.

Local carriers have also been struggling with higher costs.

Philippine Airlines and Cebu Pacific Air have pending petitions before the Civil Aeronautics Board to pass on part of their fuel costs to customers via the imposition of a fuel surcharge for certain domestic and international routes.

IATA said passenger air travel remains poised to grow further by 7 percent in 2018.

“Demand is getting a boost from stronger economic growth and the stimulus from new city-pair direct services,” IATA noted.