IATA forecasts net earnings of $ 35.5 billion for airlines in 2019

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IATA forecasts net earnings of $ 35.5 billion for airlines in 2019
Tue December 18, 2018

The figure slightly exceeds the 32,300 million dollars of forecast net profit for 2018

The International Air Transport Association (IATA) forecasts net earnings of $ 35,500 million for the global airline industry in 2019, slightly above the $ 32,300 million forecast for net profit for 2018 (revised down from $ 33,800 million of dollars of the June forecast).

Here are the highlights of the expected performance for 2019:
-The return on capital invested is expected to be 8.6% (without changes compared to 2018).
-The net profit margin after taxes remains at 4.0% (practically unchanged from 3.9% in 2018).
-The global income of the industry reaches 885,000 million dollars (up 7.7% compared to 821,000 million dollars in 2018).
-The number of passengers grows to 4,590 million in 2019, compared to 4,340 million in 2018.
-The growth slows down with respect to 2018, both in the passenger sector (+ 6.0% in 2019, compared with + 6.5% in 2018) and in the air cargo sector (+ 3.7% in 2019, against + 4.1% in 2018).
-The net benefit per passenger is estimated at $ 7.75, compared to $ 7.45 in 2018. The fall in oil prices and solid economic growth -although slower (+ 3.1%) - improve the forecast of the global airline industry, which is recovering after the fall in profitability in 2018 due to the increase in costs.

According to the latest forecast, 2019 closes a decade of profits and a five-year period in which the return on capital invested exceeds the cost of capital of the industry and creates value for its investors. "We expected that the increase in costs would weaken profitability in 2019. But the sharp drop in the price of oil and the solid projections of GDP growth dampen the results. Therefore, although with cautious optimism, we believe that the industry will continue to generate solid value for investors for at least another year. The volatility of the economic and political environment continues to threaten the airline industry, "said Alexandre de Juniac, CEO of IATA.

Main factors of the forecast in 2019 Economic growth: GDP is projected to grow by 3.1% in 2019 (slightly below the 3.2% estimate for 2018). This growth - slower, but still robust - is the main factor that maintains a solid profitability. The industry faces some important challenges, such as trade wars or political uncertainty (such as Brexit), but it will benefit from the positive stimulus of expansive fiscal policy and the growing business investment in the main economies.

Fuel costs: The industry's forecast for 2019 is based on an average oil price of $ 65 / barrel (Brent), below $ 73 / barrel (Brent) in 2018, following the increase in production and prices. US oil stocks UU Although this is good news for airlines, the increase in demand for diesel (which competes with jet fuel for refining capacity) slows down the price of oil. However, an average fuel price for aircraft of 81.3 dollars / barrel in 2019 is expected, lower than 87.6 dollars / barrel in 2018. The overall impact of this drop will be delayed due to the high coverage in some regions . The fuel is expected to represent 24.2% of the airlines' average operating costs (above the 23.5% expected for 2018).

Employment: Total employment is expected to reach 2.9 million in 2019, 2.2% more than in 2018. Wages are also rising, reflecting the tensions in the labor markets, and unit labor costs are expected increase by 2.1% in 2019 after a long period without changes. It also increases labor productivity in 2019: 2.9%, up to 535,000 tons available kilometers, per employee.

Passenger demand (RPK) grows by 6% in 2019, above the 5.8% increase in capacity (ASK) and the 20-year growth rate. This will increase occupancy factors and raise yields by 1.4% (partially recovering the fall of 0.9% in 2018). It is expected that the income of passengers (excluding additional income) will reach 606,000 million dollars (compared with 564,000 million dollars in 2018).

In Latin America a net profit of 700 million dollars is expected in 2019 (higher than 400 million dollars in 2018), 2.14 dollars of net profit per passenger and 1.6% of net margin. Local economies recover slowly: Brazil leaves the recession, while Argentina faces new difficulties. The strength of the dollar has led to an increase in dollar-denominated costs, such as oil and aviation, but restructuring and alliances are improving performance.


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