GENEVA, 17 December 2018: The International Air Transport Association in its latest airline 2019 forecast says the Asia-Pacific region will record higher net profits in 2019, based on an anticipated growth in passenger traffic and declines in fuel prices.
IATA forecasts the global airline industry will record a net profit of USD35.5 billion in 2019, up 4% up from USD32.3 billion estimated for 2018.
Airlines in the Asia-Pacific region will report a net income of USD10.4 billion.
“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,” said IATA’s director general and CEO\, Alexandre de Juniac.
However, he cautioned that there were “downside risks as the economic and political environments remain volatile.”
Passenger Demand by Region
Performance Drivers in 2019
Economic Growth
GDP is forecast to expand by 3.1% in 2019 (marginally below the 3.2% expansion in 2018). This slower but still robust growth is a main driver of continued solid profitability. There are significant downside risks to growth from trade wars and political uncertainties such as with BREXIT, but the consensus view is that these factors will not offset the positive impetus from expansionary fiscal policy and growing business investment in major economies.
Fuel Costs
The 2019 industry outlook is based on an anticipated average oil price of USD65/barrel (Brent) which is lower than the USD73/barrel (Brent) experienced in 2018, following the increase in US oil output and rising oil inventories. This is welcome relief for airlines which have seen jet fuel prices fall, albeit at a slower pace owing to the impact of low-sulfur environmental measures undertaken by the marine sector that have increased demand for diesel (which competes with jet fuel for refinery capacity).
Nonetheless, jet fuel prices are expected to average USD81.3/barrel in 2019, lower than the USD87.6/barrel average for 2018). The full impact of this decline will be delayed due to heavy levels of hedging in some regions. Fuel is expected to account for 24.2% of the average airline’s operating costs (an increase from 23.5% forecast for 2018).
Passenger traffic
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. This in turn will increase load factors and support a 1.4% increase in yields (partially clawing back the 0.9% fall experienced in 2018). Passenger revenues, excluding ancillaries, are expected to reach $606 billion (up from USD564 billion in 2018).
He 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.”
However, he warned that economic and political developments, such as the U.S.-China trade war and Britain’s plan to leave the European Union, remain as challenges for the growth of airlines.
(Source: IATA).
