IATA now expects airlines to achieve a collective net profit of $33.8bn (4.1% net margin) in 2018 — which it describes as a solid performance despite rising costs, primarily fuel and labor, and an upturn in the interest rate cycle.

Rising costs are said to be the the main driver behind the downward revision from the previous forecast of $38.4bn in December 2017.

Overall revenues are expected to rise to $834bn (up 10.7% from $754bn in 2017).

In 2017 airlines earned a record $38.0bn, though this figure was distorted by special accounting items such as one-off tax credits which boosted 2017 profits. IATA member airlines have been collectively profitable every year since 2010.

The association notes that profits at the operating level, though still high by past standards, have been trending slowly downwards since early 2016, as a result of accelerating costs.

In 2018, the return on invested capital is expected to be 8.5% (down from 9% in 2017). This still exceeds the average cost of capital, which has risen to 7.7% on higher bond yields (7.1% in 2017).

IATA has revised upwards its predicted full-year average cost of Brent Crude to $70/barrel. This is up from $54.9/barrel in 2017 (+27.5%) and the previous 2018 expectation of $60/barrel. Jet fuel prices are expected to rise to $84/barrel (+25.9%). Fuel costs are expected to account for 24.2% of total operating costs (up from a revised 21.4% in 2017).

Overall unit costs are forecast to rise 5.2% this year, after a 1.2% increase in 2017; a significant acceleration.

At a regional level, North American airlines are expected to lead the way with a net profit of $15.0bn (down from $18.4bn in 2017) accounting for 44% of global profits (down from a peak share of 60% in 2015).

European airlines are forecast to generate net post-tax profits of $8.6bn in 2018 (+6%), overtaking the Asia-Pacific carriers which are expected to see profits slip 18.9%, to $8.2bn.