IATA cautiously optimistic for aviation industry performance for 2019

According to the organisation, the global airline industry is forecasted to achieve net profits of $35.5bn in 2019
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According to IATA, Middle East carriers are expected to report $800m net profit for 2019, a significant increase over the $600m reported in 2018.
According to IATA, Middle East carriers are expected to report $800m net profit for 2019, a significant increase over the $600m reported in 2018.

As part of its annual Global Media Day, the International Air Transport Association unveiled its forecasts for upcoming New Year. According to the organisation, the global airline industry is forecasted to achieve net profits of $35.5bn in 2019, which is slightly more than the revised $32.3bn projected profit in 2018.

IATA also noted that overall industry revenues is forecasted to reach $885bn, a 7.7% increase over the $821b projected in 2018, while passenger numbers are expected to reach 4.59 billion, up from 2018’s figure of 4.34 billion. Similarly, cargo tonnes carried will reach 65.9 million, up from 63.7 million in 2018.

Return on invested capital is expected to remain unchanged, sitting at 8.6%, the margin on net post-tax profits is set to experience a meagre increase from 3.9% up to 4.0% in 2019.

Finally, IATA expects that there will be slower demand growth for both passenger traffic, which will reduce by five percent year-on-year to reach 6.0% in 2019, while cargo will reduce from 2018’s 4.1% to 3.7% for the New Year.

A combination of lower oil prices and positive economic growth will extend the run of profits for the global airline industry, who suffered over 2018 over rising costs. The organisation expects that 2019 will serve as the tenth year of profit and the fifth consecutive year in which airlines will deliver a return on capital that exceeds the industry’s cost of capital.

Commenting on these forecasts, 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.”

Other key performers for 2019 as highlighted by IATA include a positive outlook in passenger traffic (RPKs), which is expected to increase to 6% in the New Year. Not only does this outpace the forecast capacity (ASKs) increase of 5.8%, the RPK performance is well above the 20-year trend growth rate.

As a result, load factors will increase and support a 1.4% increase in yields. Passenger revenues, minus ancillaries, are expected to reach $606bn.

The positive outlook also translates to the Middle East region. According to IATA, Middle East carriers are expected to report $800m net profit for 2019, a significant increase over the $600m reported in 2018. The organisation also noted the projected net profit per passenger for the New Year will be $3.33, equating to a 1.2% net margin.

Highlighting the factors that have affected the region over the last year, IATA shared that the impact of low oil revenues and conflict, along with competition from ‘super-connectors’ and setbacks of specific business models, have led to a reduced capacity growth. Following a decade long, double-digit growth, passenger capacity growth was halved to 6.7% in 2017.

The global trade association also noted that the region’s 4.7% capacity growth in 2018, is expected to slightly reduce to 4.1% in 2019. This, in combination with restructuring, is helping to stimulate recovery within the region.

IATA’s Global Media Day was held on 12 December 2018 at the global trade association’s headquarters in Geneva, Switzerland.

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