January is a great time to reflect on the year past and plan for the rest of the year – our Growth Frontiers conference in Dublin is a great time to set the agenda for the next 12 months – networking with peers, making new contacts and hearing from some of the foremost experts in the commercial aviation industry on stage at the Shelbourne hotel over three days from January 22.
Cowen & Company’s Helane Becker, one of the expert speakers at Airline Economics in Dublin, recently issued a post about 2018 being the year of the cost, which is in line with what we have been hearing in the market having spent the past four months interviewing industry leaders about the state of the industry. The results and report will be published at our conference on Tuesday Jan. 23, but for airlines, costs are definitely rising. Oil is inching upwards, salaries are steadily rising, while accelerated depreciation and maintenance expenses also begin to bite harder for some airlines. Despite the costs, Becker and IATA believe that airline revenues will remain healthy so long as the economic environment continues to grow, which IATA expects to continue for this year at least, having raised its revenue and profit forecasts for this year in December (see latest IATA results for November below). The impact of a strong dollar on non-US carriers will also ease this year since the dollar value is down compared to past years. Yields have been under considerable pressure for most airlines as competition rises in almost every market, but some good news is that fuel costs are being offset as airline begin to add on surcharges once more – at least in the US for domestic routes – while airlines are committed to managing capacity in the wake of any slowdown in demand. 2018 may be another year of “as good as it gets” so long as there are few macroeconomic shocks going forward.