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Stronger-than-expected profits on the cards for global aviation industry in 2017: Iata

THE International Air Transport Association (Iata) has raised its 2017 profitability projection for the global airline industry from its previous estimation of US$29.8 billion to US$31.4 billion.

However, even with the more bullish outlook, it still marks a decline from 2016's peak of US$34.8 billion in profit.

"Demand for both the cargo and passenger business is stronger than expected," said Iata chief Alexandre de Juniac. But he went on to warn: "While revenues are increasing, earnings are being squeezed by rising fuel, labour and maintenance expenses."

For the third year in a row, airlines are expected to post returns trending above the cost of capital as the world's airlines are slated to earn US$7.69 per passenger, translating to a fairly slim average profit margin of 4.2 per cent. In 2016, the corresponding figure was 4.9 per cent.

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Geographically however, the picture tells a slightly different story with profits varying from region to region.

North American carriers remain the driving force, and are expected to post profits of US$15.4 billion this year, easing slightly from US$16.5 billion last year. In the Asia-Pacific, carriers are now slated to bank an improved US$7.4 billion in collective profits, albeit down from US$8.1 billion previously. The stronger fortunes of the region's carriers is underpinned by the recovery in the global cargo sector, where the Asia-Pacific holds a market share of nearly 40 per cent.

Europe's carriers are also expected to take in US$7.4 billion in profit, thanks to a lift in passenger and cargo demand, although the recent terrorist attacks could impact travel going forward.

Latin American airlines are expected to earn 33 per cent more this year with profit of US$0.8 billion, while the Middle Eastern carriers will post a bottom line of S$0.4 billion, versus US$1.1 billion last year.

Finally, Africa will remain the only region bleeding red ink to the tune of US$100 million, but losses remain on par with 2016.