IATA: Cautious optimism extends into 2019, airlines heading for a decade in the black

posted on 12th December 2018 by Justin Burns

The International Air Transport Association (IATA) forecasts the global airline industry net profit to be $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.

The asssociation said overall industry revenues are expected to reach $885 billion (+7.7 per cent on $821 billion in 2018), passenger numbers are expected to reach 4.59 billion (up from 4.34 billion in 2018) and cargo tonnes carried are expected to reach 65.9 million (up from 63.7 million in 2018).

IATA forecasts slower demand growth for both passenger traffic (+ six per cent in 2019, +6.5 per cent in 2018) and cargo (+3.7 per cent in 2019, +4.1 per cent in 2018). Average net profit per departing passenger of $7.75 ($7.45 in 2018)

Lower oil prices and solid, albeit slower, economic growth (+3.1 per cent) 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.

IATA director general and chief executive officer, Alexandre de Juniac

IATA’s director General and CEO, Alexandre de Juniac 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.”

The association said GDP is forecast to expand by 3.1 per cent in 2019 (marginally below the 3.2 per cent expansion in 2018) and this slower but still robust growth is a main driver of continued solid profitability.

IATA said there are significant downside risks to growth from trade wars and political uncertainties such as with BREXIT, but the consensus view is that these factors will not offset the positive impetus from expansionary fiscal policy and growing business investment in major economies.

Passenger traffic (RPKs) is expected to grow six per cent in 2019, which will outpace the forecast capacity (ASKs) increase of 5.8 per cent, and remains above the 20-year trend growth rate. This in turn will increase load factors and support a 1.4 per cent increase in yields (partially clawing back the 0.9 per cent fall experienced in 2018). Passenger revenues, excluding ancillaries, are expected to reach $606 billion (up from $564 billion in 2018).