Industry body forecasts $35.5 billion net profit for airlines

Dubai: Airlines around the world will see net profits rebound as strong demand, coupled with low oil prices, will dampen rising costs that hit 2018 profits, according to the International Air Transport Association (IATA).

The industry body has forecasted a net profit of $35.5 billion (Dh130 billion) for the global airline industry in 2019, slightly ahead of the $32.3 billion expected net profit in 2018.

This figure was revised down from $33.8 billion earlier this year.

The industry body estimates that overall industry revenues are expected to reach $885 billion in 2019, up by 7.7 per cent on 2018.

Passenger numbers are expected to reach 4.59 billion, up from 4.34 billion in 2018. Meanwhile, cargo carried is set to reach 65.9 million tonnes, according to IATA.

However, demand growth for passenger traffic will slow from 6.5 per cent in 2018 to 6 per cent in 2019, the group said. The same is true for cargo traffic demand, which is set to drop from a growth of 4.1 per cent in 2018 to 3.7 per cent next year.

Lower oil prices and strong but slowing economic growth, IATA say, are extending the run of profits for the global airline industry, after profitability was squeezed by rising costs in 2018.

“We had expected that rising costs would weaken profitability in 2019,” said Alexandre de Juniac, IATA’s director general and chief executive, “but the sharp fall in oil prices and solid gross domestic product (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,” said Alexandre de Juniac, Iata’s Director General and CEO.
Next year is expected to be 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, creating value for its investors, according to IATA.