KUALA LUMPUR, Dec 11 — The International Air Transport Association (IATA) has cut its 2019 net profit forecast for the industry to US$25.9 billion from US$28 billion but expects it to improve to US$29.3 billion next year, amid better passenger numbers and freight.
If achieved, 2020 will mark the industry’s 11th consecutive year in the black, it 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, yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends.
“The big question for 2020 is how capacity will develop, particularly when the grounded 737 MAX aircraft returns to service and delayed deliveries arrive,” said IATA’s director general and chief executive officer, Alexandre de Juniac in a statement today.
Elaborating on the performance drivers for 2020, he said global gross domestic product (GDP) is forecast to expand by 2.7 per cent in 2020 versus 2.5 per cent in 2019.
“World trade growth is expected to rebound to 3.3 per cent from 0.9 per cent in 2019, as election-year pressures in the United States contribute to reduce trade tensions. Growth is supported by actions from central banks as well as easing fiscal policy,” he said.
Meanwhile, revenue passenger kilometres (RPKs) are expected to grow by 4.1 per cent in 2020, in line with the 4.2 per cent growth in 2019.
Available seat kilometers (ASKs) are forecast to grow by 4.7 per cent in 2020 as aircraft deliveries rise significantly, causing load factors to slide to 82 per cent from 82.4 per cent in 2019.
This will maintain pressure on yields, which are expected to slide 1.5 per cent after falling 3.0 per cent in 2019, said IATA.
Passenger revenues — excluding ancillaries — are expected to reach US$581 billion, up 2.5 per cent from US$567 billion in 2019, it said.
Cargo traffic is also expected to rebound moderately with a two per cent growth in 2020.
“Yields will continue to slide with a 3.0 per cent decline forecast for 2020 — an improvement from a 5.0 per cent decline in 2019,” it said, adding that cargo revenues are expected to slip with expected revenues totalling US$101.2 billion, down by 1.1 per cent from 2019.
On regional outlook, IATA said Africa, Middle East and Latin America are all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen.
North American airlines continue to lead in financial performance, accounting for 65 per cent of industry profits in 2019 and around 56 per cent of aggregate earnings in 2020, it said.
“Asia-Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a US$6.0 billion net profit in 2020 (up from US$4.9 billion in 2019) for a 2.2 per cent net margin.”
IATA said Asia remains the manufacturing centre of the world and revenues from transporting many of those goods will account for a significant proportion of sales for many of the region’s airlines.
“But the trade war is assumed just to be on hold, trade tariffs are not reversed. Consequently, the rise in trade and cargo volumes is moderate, with net profit per passenger anticipated to be US$3.34,” it added.