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.


Workplace messaging startup Slack to list on Wall Street

Updated 57 min 52 sec ago
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Workplace messaging startup Slack to list on Wall Street

  • The direct listing will raise no cash for the California-based firm but will enable employees and early investors to sell their shares in the fast-growing tech firm
  • Slack, which has become a popular application for businesses looking to move away from email to real-time messaging, said it had some 10 million users at the end of January

WASHINGTON: The workplace messaging startup Slack filed documents Friday to list its shares on the New York Stock Exchange, the latest of a group of richly valued tech enterprises to look to Wall Street.
The “direct listing” will raise no cash for the California-based firm but will enable employees and early investors to sell their shares in the fast-growing tech firm.
Slack, which has become a popular application for businesses looking to move away from email to real-time messaging, said it had some 10 million users at the end of January.
That included 88,000 paying customers and 65 of the Fortune 100 firms.
“Our vision is to make people’s working lives simpler, more pleasant and more productive,” Slack said in its filing with the Securities & Exchange Commission.
“Slack is a new layer of the business technology stack that brings together people, applications, and data — a single place where people can effectively work together, access hundreds of thousands of critical applications and services, and find important information to do their best work.”
Slack, which has users in 150 countries, has raised more than $1 billion from investors with the latest round valuing the company at $7.1 billion, making it one of the most richly valued “unicorns” — startups with private funding worth at least $1 billion.
In its first release of financial data, Slack said it lost $141 million in the 12 months to January 31 on revenue of $400 million.
Created in 2013, Slack has been a leader in the new segment but faces competition from the likes of Microsoft, Facebook and others offering workplace collaboration tools.
Analysts say Slack has found a niche, especially among small- and medium-sized businesses.
Its clients include software giant Oracle, the French luxury goods maker LVMH, Liberty Mutual insurance and the NASA Jet Propulsion Laboratory.
It is available in eight languages and gets about one-third of its revenue from outside the United States.
Slack’s chief executive and founder Stewart Butterfield was part of the team that started the photo-sharing service Flickr.
The direct listing, which was also used by the streaming music giant Spotify, does not add fresh capital to the firm but enables free trading of shares while avoiding the underwriting costs of a public offering.
Slack will trade under the symbol “SK.”