IATA Predicts 13.13% Rise In Airlines’ Profits
The International Air Transport Association says the global airline industry will have a 13.13 per cent increase in net profit this year.
The association forecast that the industry would produce a net profit of $29.3bn in 2020, improved over a net profit of $25.9bn expected in 2019.
IATA stated that the forecast for 2019 was revised downward from a $28bn forecast in June, adding that if achieved, this would mark the industry’s 11th consecutive year in the black.
According to the association and umbrella body for over 290 airlines in the world, economic performance in 2019 was weaker than it had been anticipated as of the time of the June forecast.
It stated that this aligned with weaker global GDP growth of 2.5 per cent (versus 2.7 per cent forecast in June) and world trade growth of just 0.9 per cent (down from 2.5 per cent forecast in June).
“These negative developments contributed to softer passenger and cargo demand and corresponding weaker revenue growth, as passenger yields fell 3.0 per cent and cargo yields dropped 5.0 per cent compared to 2018.”
“Operating expenses did not rise as much as anticipated (3.8 per cent vs. 7.4 per cent June forecast) largely owing to lower-than-expected fuel costs; but this was not enough to offset the softness in revenue,” it added.
The IATA’s Director General and Chief Executive Officer, Alexandre de Juniac, said slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines.
He said the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends.
“It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter. The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries arrive,” he said.
IATA said performance drivers for 2020 would be economic growth, fuel costs, labour, passenger and cargo.
The association said the regional profit picture would be mixed in both 2019 and 2020.
It said Africa, Middle East and Latin America were all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen.
IATA said, “African carriers continue to suffer structural problems of high costs, in large part owing to government taxes and fees and low load factors.
“Economic growth in the region has been relatively good and is expected to rise in 2020, but markets are extremely fragmented and inefficiently served in the absence, so far, of a Single African Air Transport Market.”
The association stated that African airlines had been projected to show a loss of $200m, similar to 2019.
