IATA Forecasts $29.3bn Profit from Airlines in 2020
The International Air Transport Association (IATA) has predicted that the global airline industry will record a net profit of $29.3 billion in 2020.
This would be an improvement, over a net profit of $25.9 billion expected in 2019 (revised downward from a $28 billion forecast in June). If achieved, 2020 would mark the global industry’s 11th consecutive year in the black.
In 2020 the global body expects return on invested capital to be about six per cent, as against the 5.7 per cent expected in 2019; the net profit margin was forecast at 3.4 per cent, up from 3.1 per cent for 2019; and overall industry revenue were estimated to reach $872 billion this year, up from $838 billion in 2019.
In addition, the industry operating expenses were projected to climb by 3.5 per cent to $823 billion, from $796 billion in 2019.
IATA also expects passenger numbers to reach 4.72 billion, up by four per cent, compared with the 4.54 billion realised in 2019. Freight tonnes carried are expected to recover to 62.4 million, a two per cent increase over the 61.2 million tonnes carried in 2019, which was the lowest figure in three years, stating that stronger economic growth should support passenger traffic (RPKs) growth of 4.1 per cent, similar to 2019.
“These negative developments contributed to softer passenger and cargo demand and corresponding weaker revenue growth, as passenger yields fell three per cent and cargo yields dropped five per cent, compared to 2018,” the body said.
Operating expenses did not rise as much as anticipated (3.8% vs. 7.4% June forecast) largely owing to lower-than-expected fuel costs; but this was not enough to offset the softness in revenue.
“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. Yet 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,” said IATA’s Director General and CEO, Alexandre de Juniac.
In 2020, IATA said it expects GDP to expand by 2.7 per cent (marginally above the 2.5% growth in 2019). Also, world trade growth was expected to rebound to 3.3 per cent, from 0.9 per cent in 2019, as election year pressures in the USA contribute to reduced trade tensions.
Growth would be supported by actions from central banks as well as easing fiscal policy, it stated. In addition, passenger demand was expected to grow by 4.1 per cent in 2020, in line with the 4.2 per cent growth in 2019.