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Higher oil prices will dent global airline profits in 2017, says Iata

Net profits for the global airline industry are set to fall by more than $5 billion in 2017 as higher oil prices come into effect.

The latest financial forecast from Iata projects a net profit next year of $29.8 billion against $35.6 billion this year – a figure downgraded in June from $39.4 billion.

The 2017 figure represents a 4.1% net profit margin on forecast total revenues of $736 billion.

On average, airlines will retain $7.54 for every passenger carried.

Expected higher oil prices will have the biggest impact on the outlook for 2017.

Oil prices averaged $44.6 a barrel this year but this is forecast to increase to $55 in 2017. This will push jet fuel prices from $52.1 a barrel to $64.9.

Iata expects the demand stimulus from lower oil prices will taper off in 2017, slowing traffic growth to 5.1% from 5.9% in 2016.

Industry capacity expansion is also expected to slow to 5.6% – down from 6.2% in 2016.

Iata director general and chief executive Alexandre de Juniac said: “Even though conditions in 2017 will be more difficult with rising oil prices, we see the industry earning $29.8 billion. That’s a very soft landing and safely in profitable territory.

“These three years are the best performance in the industry’s history – irrespective of the many uncertainties we face.

“Indeed, risks are abundant – political, economic and security among them. And controlling costs is still a constant battle in our hyper-competitive industry.”

He added: “Connectivity continues to set new records. We expect nearly 4 billion travellers and 55.7 million tonnes of cargo in the coming year.

“Governments, however, do not make aviation’s work easy. The global tax bill has ballooned to $123 billion.

“Over 60% of countries put visa barriers in the way of travel. And the total number of ticket taxes exceeds 230. Billions of dollars are wasted in direct costs and lost productivity as a result of inefficient infrastructure.

“These are only some of the hurdles which confront airlines. Our aim is to work in partnership to help governments better understand and fully maximize the social and economic benefits of efficient global air links.”

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