Middle East airline profits to roar back in 2018

An Emirates Airline Boeing 777 aircraft is seen next to an Airbus A330-300 as it takes off from Abidjan. Global aviation body IATA expects Middle East carriers to boost profits in 2018 after a turbulent year which hit airline earnings across the region. (AFP)
Updated 05 December 2017
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Middle East airline profits to roar back in 2018

LONDON: Middle Eastern airlines are forecast to record a significant improvement in profitability in 2018, according to a report from the International Air Transport Association (IATA).
After a year in which Middle East carriers were hit by the low oil price, US travel restrictions and geopolitical uncertainty, profits next year should double from $300 million to $600 million, said IATA in its outlook for the coming year.
While many problems remain, regional airlines had cut costs and made efficiencies to cope with the tougher trading environment, the report suggested.
IATA said: “Demand in 2018 is expected to grow by 7 percent, outpacing announced capacity expansion of 4.9 percent (the slowest growth since 2002). The region’s carriers face challenges to their business models, (including) competition from the new “super connector” in Istanbul. Despite the challenges, there is “positive momentum heading into 2018,” said the trade body
This year’s profit forecast for the region’s airlines has been revised downwards from the $400 million profit IATA forecast in June, which was a 63.6 percent drop from the $1.1 billion the airlines made in 2016.
IATA’s global summary predicted the airlines industry as a whole was expected to see its net profit rise to $38.4 billion in 2018, marking an improvement from the $34.5 billion expected this year.
The aviation watchdog said the 2017 forecast had been revised up from the $31.4 billion forecast in June.
IATA expects an improvement in net margin to 4.7 percent (up from 4.6 percent in 2017), with global revenues at $824 billion, up 9.4 percent on 2017, a 6 percent rise in passenger numbers to 4.3 billion. It expects cargo volumes to rise to 62.5 million tons, up 4.5 percent on 2017.
Also, record load factors are forecast for 2018 at around 81.4 percent, said the report.
IATA said strong demand, efficiencies and reduced interest payments would help airlines improve profitability, despite rising costs. 2018 was expected to be the fourth consecutive year of sustainable profits with a return on invested capital of 9.4 percent, exceeding the industry’s average cost of capital of 7.4 percent, it said.
Alexandre de Juniac, IATA’s director general and CEO, said: “These are good times for the global air transport industry. More people than ever are traveling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. 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, labor and infrastructure expenses.”
Oil price inflation was a big factor with the black stuff expected to average $60 per barrel for Brent in 2018 against $54.20 per barrel in 2017. Jet fuel prices are expected to rise even more quickly to $73.8 per barrel — a 12.5 percent increase on 2017.
Airlines with low levels of hedging (in the US and China for example) were likely to feel the impact of these increases more immediately than those with higher average hedging ratios (Europe). The fuel bill is expected to be 20.5 percent of total costs in 2018 (up from 18.8 percent in 2017), said IATA.


Cathay Pacific execs grilled over data breach ‘crisis’

Updated 6 min 22 sec ago
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Cathay Pacific execs grilled over data breach ‘crisis’

  • Cathay said late last month that about 9.4 million passengers’ personal data had been accessed without authorization
  • It said an airline restructuring had been completed and it planned to hire 1,800 staff this year

HONG KONG: Cathay Pacific Airways said on Wednesday it is working with 27 regulators in 15 jurisdictions to investigate a data breach that affected millions of passengers, as Hong Kong lawmakers grilled executives over how it handled the incident.
The executives did not answer repeated questions about whether the airline would compensate all affected customers or if it might face a hefty fine under new European Union privacy regulations, saying it was “too early” to comment.
Cathay has come under mounting criticism after it said late last month that about 9.4 million passengers’ personal data had been accessed without authorization, seven months after it became aware of the breach.
It was not immediately clear who was behind the breach or what the information might be used for, but Cathay said there was no evidence so far that personal information had been misused.
“The incident is a crisis,” company Chairman John Slosar told the committee. “It is the most serious one the airline has faced.”
Slosar again apologized for failing to protect customers’ data and said he regretted that the company could not investigate the attack more quickly.
Shares of Cathay, which slid to a nine-year low after news of the data leak last month, were up more than 4 percent on Wednesday, beating a flat broader market.
Cathay said in a document submitted to Hong Kong’s Legislative Council that it first detected suspicious activity on its network in March and that the attack continued in the following months and expanded in scope.
The airline then took until mid-August to conclude which passenger data had been accessed, according to the document, and it completed the identification of the personal data that pertained to each individual passenger on Oct. 24.
Slosar said that in future Cathay would instantly disclose any similar issues to the authorities.
The company denied the data breach was a result of layoffs at its IT department last year.
Cathay said an airline restructuring had been completed and it planned to hire 1,800 staff this year.
It also said it has spent over HK$1 billion ($127.7 million) on IT infrastructure and security over the past three years.