Contributor - Europe

Cathy Buyck

The International Air Transport Association upheld its outlook that 2019 will mark 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. However, profits will come in lower than initially expected due to rising costs and a weakening of world trade. IATA said on Sunday that net income for 2019 will likely total $28 billion, which is almost a fifth lower on its initial forecast of $35.5 billion released in December.

 


Speaking at the trade body 's annual general meeting in Seoul, IATA director-general and CEO Alexandre de Juniac described the expected profit as “solid under challenging conditions.” Passenger demand is robust but trade wars and protectionist measures are taking their toll on the cargo business, he noted, cautioning that the weakening of global trade is likely to continue as the U.S.-China trade war intensifies. “This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise,” he said, while pointing out that costs are rising across the board—labor, fuel, and infrastructure. &nbsp;

 


Overall expenses are expected to rise 7.4 percent, to $822 billion, while overall revenues are forecast to grow only 6.5 percent, to $865 billion, as yields are under pressure due to stiff competition.

 


IATA today also—again—downgraded its profit forecast for 2018. It now expects the world’s airlines collectively—including non-IATA members like Ryanair, AirAsia,&nbsp;and Southwest—to report a $30 billion net profit for last year. In December it still had expected net income for 2018 to total $32.3 billion. This was already down on a forecast of $33.8 billion in June.

 


If airlines manage to make a $28 billion profit this year, it would mark a $2 billion reduction on the latest 2018 industry net profit and almost $8 billion less than the 2017 net profit. On a passenger basis, likely profit per passenger will decline to $6.12, from $6.85 in 2018 and $9.18 in 2017.

 


The good news, de Juniac said, “is that airlines have broken the boom-and-bust cycle. A downturn in the trading environment no longer plunges the industry into a deep crisis.” Airlines will still create value for investors in 2019 with above cost-of-capital returns, “but only just.” In 2019, the return on invested capital earned from airlines is expected to be 7.4 percent whereas the average cost of capital is estimated at 7.3 percent, according to IATA data.

 


IATA expects all regions except North America and Latin America to report a reduction in profitability this year; regional difference remain significant.

 


North American airlines will, once again, account for the largest chunk of the industry’s net profits. Forecasts call for them to collectively earn $15 billion in 2019, or $14.77 per passenger—up from $14.5 billion, or $14.66 per passenger on average last year. The body’s forecast calls for European operators to earn $8.1 billion jointly and $6.75 per passenger, slightly down from $9.1 billion and $8.20, respectively, last year. It sees Middle East carriers posting a combined loss of $1.1 billion this year while also African carriers are again expected to post a loss in 2019. Latin American carriers are expected to deliver a small net profit of $0.2 billion this year, an improvement from the $0.5 billion loss in 2018. Operators in the Asia-Pacific region will deliver a net profit of $6 billion, down from $7.7 billion last year.

News about commercial airlines, including regulations, aircraft orders, safety, acquisitions, and mergers.

IATA Downgrades Airlines’ Net Profit Outlook for 2019 

The industry association blames rising costs and trade tensions for the likely fall in airline profitability.

2024 Corporate Aviation Leadership Summit

Charles Alcock

News and developments about airplanes, helicopters and unmanned air vehicles used in all varieties of operations, including airlines, military, business, commercial, general aviation and private.

News about environmental issues relating to aircraft operations, including noise issues, emissisions, and regulations. See Fuel for biofuel.

News and issues relating to international air transport and cargo carriers, national airlines and regional airlines, including aircraft, engines, personnel, acquisitions, accidents, safety, security and training.

Agreement between start-ups could lead to orders for up to 15 aircraft

Skyhop Plans Island Routes With Noemi's Electric Seaplane

Howard Hardee

Airline plans to gradually replace its Embraer E-Jet fleet

A220’s Performance Drives BermudAir’s Fleet Growth

Partners say eVTOLs could accelerate response times in crowded Indian cities

Air India Backs SkyDrive Emergency Medical eVTOL Plans

News and issues relating to the aerospace industry that are related to the science, engineering and business of flight in space involving civil, industrial and military applications, and similar topics related to flight in the atmosphere of the Earth that are not covered more directly by other AINonline subject channels. In other words, both astronautical and aeronautical subjects, except for those aeronautical topics that are specifically covered elsewhere on this website.

Rival Boeing arguably claimed bragging rights at the Farnborough International show

Airbus Balances Shareholder Returns and New Aircraft

New developments at airports including regulations and noise issues; legal disputes; openings, acquisitions and mergers.

Connections to London Heathrow and Manchester airports will start first

Virgin Firms Up eVTOL Air Taxi Alliance with Joby

News and developments about everything that goes into the cabin of an aircraft, from floor coverings to headliners, with a special emphasis on in-flight entertainment, communications and other electronics for passengers. If it is in the cabin of an aircraft, it’s covered here.

More In Airlines

Skyhop Plans Island Routes With Noemi's Electric Seaplane

Agreement between start-ups could lead to orders for up to 15 aircraft

A220’s Performance Drives BermudAir’s Fleet Growth

Airline plans to gradually replace its Embraer E-Jet fleet

Air India Backs SkyDrive Emergency Medical eVTOL Plans

Partners say eVTOLs could accelerate response times in crowded Indian cities

Airbus Balances Shareholder Returns and New Aircraft

Rival Boeing arguably claimed bragging rights at the Farnborough International show

Virgin Firms Up eVTOL Air Taxi Alliance with Joby

Connections to London Heathrow and Manchester airports will start first

ATR Chases New Regional Markets for Twin Turboprops

Iran war and wider geopolitical pressure stall buying decisions

Embraer Racks Up E-Jet Orders at Farnborough

30 firm orders led by Abra

Gulf Air May Buy JetZero’s Blended-wing-body Z4

Japan Airlines also expresses interest at Farnborough Airshow

AIN Products

SUBSCRIPTIONS

RESOURCES

ABOUT AIN