Canadian airline profits will fall in 2018 on higher costs: Conference Board

MONTREAL — The Conference Board of Canada says the growth of the country’s airline industry will slow in 2018 as profits are forecast to decrease from last year’s peak primarily because of higher fuel and labour prices.

It says airline pre-tax profits should drop 27 per cent to $1.32 billion as increasing costs outpace higher revenues that are forecast to approach $32 billion.

Canadian airlines posted their highest revenues and profits last year since the board began collecting data in 1997.

Conference Board economist Sabrina Bond says U.S. and foreign demand was bolstered over the last two years by low fuel costs and a weaker loonie, which will slowly increase over the next five years.

Fuel, which accounts for about a third of airline costs, will rise while employee costs will grow as new or expanded routes will require the hiring of 6,000 more people over the next five years.

Still, it says air travel demand will continue to grow because of strengthening employment in Canada and the United States.

By 2022, the industry is expected to generate about $1.37 billion of pre-tax earnings on nearly $38 billion of revenues.

The conference board says a continued expansion of domestic and international capacity has been a key driver of the improved financial performance for the industry’s largest airlines.