IATA: Better days ahead for airlines

GENEVA, 16 December 2019: The International Air Transport Association forecast that the global airline industry will produce a net profit of USD29.3 billion in 2020 bettering the 2019 performance.

It will represent an improvement over an estimated net profit of USD25.9 billion in 2019 that was revised downward from a USD28 billion forecast in June.  If achieved, 2020 will mark the industry’s 11th consecutive year in the black.

Expected 2020 performance highlights

  • The return on invested capital is forecast to be 6% (improved from 5.7% expected in 2019).
  • The net profit margin is forecast at 3.4% (up from 3.1% for 2019).
  • Overall industry revenues are forecast to reach USD872 billion (+4.0% on USD838 billion in 2019).
  • Industry operating expenses are projected to climb 3.5% to USD823 billion from USD796 billion in 2019.
  • Passenger numbers are expected to reach 4.72 billion (up 4.0% from 4.54 billion in 2019).
  • Freight tonnes carried are expected to recover to 62.4 million, a 2.0% increase over 61.2 million tonnes carried in 2019, which was the lowest figure in three years.
  • Stronger economic growth should support passenger traffic (RPKs) growth of 4.1% similar to 2019 (4.2%) but below historical trends.
  • Average net profit per departing passenger of USD6.20 (USD5.70 in 2019)

2019 Performance

Economic performance in 2019 was weaker than had been anticipated at the time of the June forecast. This aligns with weaker global GDP growth of 2.5% (versus 2.7% forecast in June) and world trade growth of just 0.9% (down from 2.5% forecast in June). These negative developments contributed to softer passenger and cargo demand and corresponding weaker revenue growth, as passenger yields fell 3.0% and cargo yields dropped 5.0% compared to 2018.

Operating expenses did not rise as much as anticipated (3.8% vs. 7.4% June forecast) largely owing to lower-than-expected fuel costs, but this was not enough to offset the softness in revenue.

“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. It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter.

The big question for 2020 is how capacity will develop, particularly when, as expected,  the grounded 737 MAX aircraft will return to service and delayed deliveries arrive,” said Alexandre de Juniac, IATA’s Director General and CEO. “

Performance Drivers for 2020

Economic Growth: GDP is forecast to expand by 2.7% in 2020 (marginally above the 2.5% growth in 2019). World trade growth is expected to rebound to 3.3% from 0.9% in 2019, as election-year pressures in the USA contribute to reduced trade tensions. Growth is supported by actions from central banks as well as easing fiscal policy.

Fuel Costs: Slower-than-expected global economic growth in 2019 contributed to lower energy demand, with crude oil prices averaging around $65 per barrel (Brent), compared to $71.60 in 2018. Oil supply is also plentiful, boosting inventories. As a result, oil prices are expected to dip further in 2020 to $63 (Brent). Jet kerosene prices are also expected to dip, averaging $75.60 per barrel versus $77 per barrel in 2019. The expected industry fuel bill of $182 billion will represent 22.1% of expenses, down from $188 billion or 23.7% of expenses in 2019.

Labour: Total employment by airlines is expected to reach 2.95 million in 2020, up 1.6% over 2019. Productivity (ATKs/employee) is expected to rise 2.9% over 2019 as capacity growth picks up. Unit labour cost ($/ATK) is expected to be virtually flat at USD0.12, as better productivity offsets increasing wages.

Passenger: Passenger demand (RPKs) is expected to grow by 4.1% in 2020, in line with 4.2% growth in 2019. In fact, this masks a GDP-growth-driven pick-up since the underlying growth rate fell to less than 4.0% in 2019. However, whereas passenger capacity (ASKs) rose 3.5% in 2019, it is forecast to grow 4.7% in 2020 – as aircraft deliveries rise significantly, causing load factors to slide to 82% from 82.4% in 2019. This will maintain pressure on yields, which are expected to slide 1.5% after falling 3.0% in 2019. Passenger revenues, excluding ancillaries, are expected to reach USD581 billion (up 2.5% from USD567 billion in 2019).

Regional Outlook

The regional profit picture is mixed in both 2019 and 2020. 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. Airlines in North America continue to lead on financial performance, accounting for 65% of industry profits in 2019 and around 56% of aggregate earnings in 2020. Financial performance is expected to improve or remain the same compared to 2019 in all regions except for North America, where expected capacity growth owing to new aircraft deliveries could put pressure on earnings.

North American carriers are expected to post a net profit of USD16.5 billion (down from USD16.9 billion in 2019). That represents a 6.0% net margin and a net profit of $16.00 per passenger. The region managed to improve profitability in 2019, as the still-strong economy and structural improvements in the industry allowed unit revenues to hold up much more than in other regions. But in 2020, unit revenue and profitability are expected to reduce. This will be the result of a slowing economy and a significant increase in aircraft deliveries, particularly with the expected return to service of the 737 MAX fleet.

European carriers are forecast to report a USD7.9 billion net profit in 2020 (up from a forecast of USD6.2 billion for 2019) as airlines in the region benefit from the opposite pattern of the developments expected in North America. Economic growth is forecast to pick up and, as a result of substantial cuts in expansion plans, capacity growth is expected to be moderate, helping to improve the supply-demand balance.  The net profit per passenger is expected to be USD6.40 (3.6% net margin). This relatively good aggregate performance for the region hides a long list of airlines just breaking even or making losses, which is why there were a series of European airline failures in 2019.

Asia-Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a $6.0 billion net profit in 2020 (up from USD4.9 billion in 2019) for a 2.2% net margin. Asia remains the manufacturing centre of the world and revenues from transporting many of those goods are 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. The net profit per passenger is anticipated to be USD3.34. 

Middle Eastern carriers were continuing a restructuring process and announced schedules point to a substantial slowdown in capacity growth for 2020. After very weak economic growth in 2019, which limited local traffic, some rebound is expected in 2020.  Restructuring and stronger growth will boost performance. But this will take time, and a loss is expected for a third consecutive year, estimated at USD1 billion, trimmed from USD1.5 billion in 2019.

Latin American carriers are expected to benefit from improvements to the underlying economies and restructurings and return to the black next year with a small profit of $100 million. Apart from currency weakness in 2019, the region’s economy slowed sharply to just 0.2% due to problems in Mexico, recession in Argentina and a decline by around one-third in the size of the Venezuelan economy. In 2020 airlines will be helped by the rebound to 1.8% growth forecast by the IMF, led by stronger growth in Brazil and Mexico and less severe contractions in Argentina and Venezuela. This represents a USD500 million positive swing compared with an expected loss of USD400 million in 2019.

African carriers continue to suffer structural problems of high costs—in large part owing to government taxes and fees–and low load factors. Economic growth in the region has been relatively good and is expected to rise in 2020, but markets are extremely fragmented and inefficiently served in the absence, so far, of a Single African Air Transport Market.  As a result, they are projected to show a loss of USD200 million, similar to 2019.

Passenger Demand & Capacity Growth by Region


Demand (RPKs)

Capacity (ASKs)











North America










Asia Pacific





Middle East





Latin America










(Source: IATA)