IATA predicts airline profits to take off in 2020 after challenging year
By Abigail Townsend
Date: Wednesday 11 Dec 2019
(Sharecast News) - The airline industry has trimmed its expectations for 2019 profits, dragged lower by weak economic growth and the US-China trade war, but is predicting a stronger 2020.
In its latest global forecasts, the International Air Transport Association said the industry would make a combined net profit of $25.9bn in 2019, revised down from an earlier forecast in June for $28.0bn.
The IATA said the current year's performance was "weaker than had been anticipated". It continued: "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%."
But the Geneva-based IATA expects net profits to improve to $29.3bn in 2020, and for the net profit margin to strengthen to 3.4% compared to 3.1% in 2019. Passenger numbers are forecast to reach 4.54bn in the current year before climbing to 4.72bn in 2020.
Alexandre de Juniac, director general and chief executive, said: "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."
On a regional basis, European carriers are forecast to report $7.9bn net profit in 2020, compared to $6.2bn in 2019. But North American airlines are predicted to generated net profits of $16.5bn, down on there $16.9bn in the current year. IATA attributed the weaker performance to a slow economy and a "significant" increase in aircraft deliveries.
"The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries return," added de Juniac.
The IATA represents 290 airlines compromising 82% of global air traffic.
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