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IATA forecasts 10th year of profit for airlines in 2019

IATA forecasts 10th year of profit for airlines in 2019

Wednesday, December 12, 2018

GENEVA — IATA is forecasting a decade in the black for airlines by the end of 2019, with the global airline industry achieving a net profit of $35.5 billion next year.

This figure is slightly ahead of the $32.3 billion expected net profit in 2018, thanks to lower oil prices and solid, albeit slower, economic growth.

As such, it’s 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.

“We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections (3.1% in 2019) have provided a buffer,” said Alexandre de Juniac, IATA’s Director General and CEO. “So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year.”

Here are the projected numbers of 2019:

  • The return on invested capital is expected to be 8.6% (unchanged from 2018)
  • The margin on net post-tax profits is expected to be 4.0% (basically unchanged from 3.9% in 2018)
  • Overall industry revenues are expected to reach $885 billion (+7.7% on $821 billion in 2018)
  • Passenger numbers are expected to reach 4.59 billion up from 4.34 billion in 2018)
  • Passenger traffic (RPKs) is expected to grow 6% in 2019, which will outpace the forecast capacity (ASKs) increase of 5.8%, and remains above the 20-year trend growth rate
  • Passenger revenues, excluding ancillaries, are expected to reach $606 billion (up from $564 billion in 2018)
  • Slower demand growth for passenger traffic (+6.0% in 2019, +6.5% in 2018)
  • Average net profit per departing passenger of $7.75 ($7.45 in 2018)
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All regions, except Africa, are expected to report profits in 2018 and 2019. Carriers in North America continue to lead on financial performance, accounting for nearly half of the industry’s total profits.

North American carriers are expected to deliver the strongest financial performance in 2019 with a $16.6 billion net profit (up from $14.7 billion in 2018). This represents a 6.0% net margin and a net profit of $16.77 per passenger, which is a marked improvement from just six years earlier. Net margin is up from 2018 (5.7%).

Global connectivity and airfare prices are better than ever, with the number of unique city pairs served by airlines forecasted to grow to 21,332 in 2018 (up by 1,300 from 20,032 in 2017), and more than double 1998 levels. Meanwhile, the 2019 average return airfare (before surcharges and tax) is expected to be $324 (2018 dollars), which is 61% below 1998 levels after adjusting for inflation.

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“Air travel has never been such a good deal for consumers,” added de Juniac. “Not only are fares staying low, the options for travellers are expanding. Some 1,300 new direct links between cities were opened in 2018. And 250 million more journeys by air occurred in 2018 than in 2017.”

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