International Air Transport Association sees airliners in good shape for new year
The International Air Transport Association (IATA) has forecast the global airline industry net profit to be US$35.5 billion in 2019, slightly ahead of the $32.3 billion expected net profit in 2018 (revised down from $33.8 billion forecast in June).
Highlights of expected 2019 performance include:
Lower oil prices and solid, albeit slower, economic growth (+3.1%) are extending the run of profits for the global airline industry, after profitability was squeezed by rising costs in 2018.
It is expected that 2019 will be the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital, creating value for its investors.
Alexandre de Juniac, IATA’s Director General and CEO, said: “We had expected that rising costs would weaken profitability in 2019.
“But the sharp fall in oil prices and solid GDP growth projections have provided a buffer.
“So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year. But there are downside risks as the economic and political environments remain volatile.”
Middle Eastern carriers are expected to report an $800 million net profit in 2019 (up from a weaker $600 million in 2018).
The region has been challenged by the earlier impact of low oil revenues, conflict, competition from other ‘super-connectors’ and setbacks to particular business models, leading to a sharp slowdown in capacity growth (after more than a decade of double-digit growth, passenger capacity growth was halved to 6.7% in 2017).
The region reported 4.7% capacity growth in 2018 and is expected to slow to 4.1% in 2019, which together with restructuring is helping to generate a recovery.
All regions, except Africa, are expected to report profits in 2018 and 2019.
Financial performance is expected to improve compared to 2018 in all regions except for Europe, where improvement has been delayed by the high degree of fuel hedging.