Major airlines will see their profits affected by rising fuel and labour costs, said the International Air Transport Association (IATA).
IATA is a trade association representing 278 airlines, primarily major carriers, across 117 countries.
IATA reduced its profit forecast for this year by 12% to $33.8 billion.
Last year, airlines earned a record $38 billion.
However, as noted by the IATA, this figure was distorted by special accounting items such as one-off tax credits which boosted 2017 profits.
The return on invested capital is expected to be 8.5% in 2018, down from 9% in 2017. This is figure is still above the average cost of capital, which has increased to 7.7% on higher bond yields.
Overall revenues for airlines are forecast to increase to $834 billion (up 10.7% from $754 billion in 2017).
Airlines are expected to take delivery of over 1,900 new aircraft this year, “many of which will replace older and less fuel-efficient aircraft,” IATA said.
Alexandre de Juniac, IATA’s Director General and CEO, commented:
“Solid profitability is holding up in 2018, despite rising costs. The industry’s financial foundations are strong with a nine-year run in the black that began in 2010.
And the return on invested capital will exceed the cost of capital for a fourth consecutive year.
At long last, normal profits are becoming normal for airlines. This enables airlines to fund growth, expand employment, strengthen balance sheets and reward our investors,”