Driven by a combination of cheaper oil and fuller planes, the airline industry is expected to have its most lucrative year in history with global profits of almost $40bn (£30bn), .

It was now a “normal business” for listed airline companies of providing decent returns to investors after years of being propped up by wealthy backers and governments, said the International Air Transport Association (Iata), the trade body for airlines, adding that it forecasts a fifth consecutive year of improving profits.

According to the forecast, the industry is slated to make profits of up to $39.4bn (£27.3bn) which is a 12% rise from last year and more than half of the total profits ($22.9bn) made in north America. However with demand dampened by terror attacks, European airlines’ profits are expected to stay almost static at $7.5bn.

Lower oil prices were helping, although tempered by hedging and exchange rates, said the Iata director general, Tony Tyler while speaking at Iata’s annual meeting in Dublin.

“We are probably nearing the peak of the positive stimulus from lower prices,” he however warned.

But “the hard work of airlines” as boosting performance, he said.

“Load factors are at record levels. New value streams are increasing ancillary revenues. And joint ventures and other forms of cooperation are improving efficiency and increasing consumer choice while fostering robust competition. Consumers are getting a great deal and investors are finally beginning to see the rewards they deserve,” Tyler said.

“It sounds a big number but it’s shared around hundreds of airlines and the industry has struggled with profitability. It means airlines should be taken seriously as business, but there are still challenges.” He however said sounding a note of caution about the profits.

Tyler said that things were now looking up after years of precarious finances, exacerbated by the 2008 financial crash even though many airlines would still need years of profits to pay down debt and fix balance sheets.

“Simply put, we are beginning to be a normal business,” he said.

Mirroring the fall predicted in Europe’s short-hail, law cost sector by Ryanair last week, Iata said global airfares were due to fall by 7% this year.

“Consumers are getting a great deal and investors are finally beginning to see the rewards they deserve,” Tyler said.

However, due to with demand pinned to lower average fares, or yields, made possible by cheap oil, some in the industry have voiced concern about the sustainability of the current boom.

Even in the face of sluggish global trade, which it normally mirrors, the airline industry has managed to make profits, says the Iata analysis. Recent indicators were worrying, said Brian Pearce, the chief economist for Iata.

“Air travel appears to be defying economic gravity,” he said.

“Demand is strong and the profit margins are there, but we know when the [cost of] fuel goes back up we won’t be able to put [ticket prices back up], so we have to prepare for that,” said Bernard Gustin, the chief executive officer of Brussels Airlines.

The growing number of services could look irrational if the trend continued, admitted Jayne Hrdlicka, the chief executive of the Jetstar group of Australian and Asian low-cost airlines.

(Adapted from Reuters)