IATA anticipates profitable years ahead for aviation sector – cheap fuel etc
IATA (International Air Transport Association) says carriers are ‘cautiously optimistic’ about 2019 as it predicts the global airline industry will net US$35.5 billion throughout the year. This forecast comes before the final result for 2018 is know, but is expected to be $32.3 billion. Overall airline industry revenues in 2019 are expected to reach $885 billion, which is 7.7% higher than in 2018. IATA believes demand growth for passenger traffic will be 6% (about 4.59 billion, compared to 4.34 billion this year) and for growth for air cargo will be 3.7%. Due to lower fuel costs (predicted at $65 per barrel) – due to increased output from the US, the industry expects profits, even if there is slightly slower world economic growth. In Europe profits may drop fractionally in 2019, with net profit expected at $7.4 billion in 2019 compared to $7.5 billion in 2018, due to “intense competition” between airlines. There were profit reductions in 2018 in Europe due to air traffic control strikes, and not enough air traffic controllers. Average fares are expected to be $324 (at current currency rates, before surcharges and tax), which IATA says is 61% below 1998 levels – when adjusted for inflation. IATA’s CEO De Juniac said: “Air travel has never been such a good deal for consumers.” No concerns about the carbon emissions.
IATA: ‘Airlines heading for decade in the black’
By Molly Dyson (Buying Business Travel)
13th Dec 2018
The International Air Transport Association (IATA) says carriers are ‘cautiously optimistic’ about 2019 as it predicts the global airline industry will net US$35.5 billion throughout the year.
IATA’s forecast comes in ahead of the expected $32.3 billion for 2018, though this year’s total is below the $33.8 billion predicted in June.
Overall industry revenues are expected to reach $885 billion, 7.7 per cent more than is expected in 2018.
Although IATA believes demand growth for both passenger traffic (+6 per cent) and cargo (+3.7 per cent) will slow, global passenger numbers could hit 4.59 billion in 2019 (up nearly 6 per cent from this year’s 4.34 billion).
This is all good news for the airline industry, which has been watching the rising oil costs squeeze profitability. IATA says lower oil costs (predicted at $65 per barrel) driven by increased output from the US and solid, but slower, economic growth will ‘extend the run of profits’.
Europe is the only region where profits are expected to drop slightly in 2019, with net profit predicted at $7.4 billion (down from $7.5 billion in 2018). IATA believes “intense competition” is keeping yields low, while regulatory costs are high. The region also lost $2 billion this year due to a 61 per cent increase in delay minutes caused by air traffic control staff shortages and strikes.
IATA also says “high levels of hedging” in Europe will mean the positive impact of lower oil prices will be delayed for airlines operating in the region.
Average fares are expected to be $324 (at current currency rates, before surcharges and tax), which IATA says is 61 per cent below 1998 levels when adjusted for inflation.
Alexandre de Juniac, IATA’s director general and CEO, commented: “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.”
This year has been a difficult one for the industry, with overhead costs spelling the demise of Primera Air one year to the day after the collapse of Monarch. Just two weeks later, Cypriot carrier Cobalt ceased operations after failing to secure further investment.
Icelandic low-cost carrier Wow Air was rumoured to be counting its days after it agreed to cancel an acquisition deal with Icelandair, but investor Indigo Partners swooped in at the last minute to purchase the airline.
De Juniac concluded: “Air travel has never been such a good deal for consumers. Not only are fares staying low, the options for travellers are expanding. Some 1,300 new direct links between cities were opened in 2018. And 250 million more journeys by air occurred in 2018 than 2017.”
Read IATA’s full outlook report here
From Buying Business Travel