GLOBAL airlines yesterday slashed their forecast for industry profits in 2018 on a spike in fuel costs, while warning higher interest rates and a host of geopolitical tensions would add to operating risks.

The International Air Transport Association (IATA), which represents about 280 carriers, said the industry is expected to post a US$33.8 billion profit this year, 12 percent below a previous forecast of US$38.4 billion.

“It’s certainly true to say that 2018 is a tougher year, but airlines are doing a good job,” IATA director general Alexandre de Juniac told reporters at the association’s annual meeting, adding that most of the profit decline was due to higher oil prices.

The IATA expects an average oil price of US$70 a barrel this year, up from US$54.90 last year and its previous prediction of US$60.

The less upbeat earnings outlook is a drop from a record US$38 billion in 2017, but comparisons with that figure are distorted by special accounting items such as one-off tax credits that boosted annual profits, the industry group said.

Airline profits could cover the industry’s high cost of capital for a fourth year, attracting investment for new fleets and infrastructure. But the IATA warned airlines were still operating on a knife-edge compared with many industries.

De Juniac said this year’s forecast profit represented 4.1 percent of sales of US$750 billion.

“Four percent is not a big number. It is still a fragile industry. Our capacity to resist big shocks is limited,” he said.

De Juniac warned that airlines could be hit by the effects of “political forces pushing a protectionist agenda,” without specifying which political forces he was most concerned about. (SD-Agencies)