Doha: Middle Eastern carriers are expected to report an $800m net profit in 2019, up from a weaker $600m recorded in 2018. The expected net profit per passenger is $3.33, the International Air transport Association (IATA) noted in its global airline industry forecast yesterday.
The Mideast region has been challenged by the earlier impact of low oil revenues, conflict, competition from other ‘super-connectors’ and setbacks to particular business models, leading to a sharp slowdown in capacity growth, after more than a decade of double-digit growth, passenger capacity growth was halved to 6.7 percent in 2017.
The region reported 4.7 percent capacity growth in 2018 and is expected to slow to 4.1 percent in 2019, which together with restructuring is helping to generate a recovery, the IATA forecast for 2019 noted.
IATA forecasted the global airline industry net profit to be $35.5bn in 2019, slightly ahead of the $32.3bn expected net profit in 2018, revised down from $33.8bn forecast in June.
Globally, the return on invested capital is expected to be 8.6 percent, unchanged from 2018. The margin on net post-tax profits is expected be 4.0 percent, basically unchanged from 3.9 percent in 2018. Overall industry revenues are expected to reach $885bn, up 7.7 percent on $821bn in 2018.
Slower demand growth is forecasted for passenger traffic (+6.0 percent in 2019, +6.5 percent in 2018) and cargo (+3.7 percent in 2019, +4.1 percent in 2018).
Passenger traffic (RPKs) is expected to grow 6 percent in 2019, which will outpace the forecast capacity (ASKs) increase of 5.8 percent, and remains above the 20-year trend growth rate. This in turn will increase load factors and support a 1.4 percent increase in yields, partially clawing back the 0.9 percent fall experienced in 2018. Passenger revenues, excluding ancillaries, are expected to reach $606bn, up from $564bn in 2018.
The 3.7 percent annual increase in cargo tonnage to 65.9 million tonnes is the slowest pace since 2016, reflecting the weak world trade environment impacted by increasing protectionism. Cargo yields are expected to grow by 2.0 percent.
This is well below the exceptional 10 percent yield growth in 2018. It does, however, continue the recent strengthening of the cargo business, since cost increases are lower. Overall cargo revenues are expected to reach $116.1bn, up from $109.8bn in 2018.
Lower oil prices and solid, albeit slower, economic growth (+3.1 percent) 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.
“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,” said Alexandre de Juniac (pictured), IATA’s Director General and CEO.
