News
The International Air Transport Association (IATA) has announced a downgrade of its 2019 outlook for the global air transport industry to a $28 billion profit (from $35.5 billion forecast in December 2018). That is also a decline on 2018 net post-tax profits which IATA estimates at $30 billion.
Overall expenses are expected to rise 7.4% to $822 billion but overall revenues are not keeping pace with the rise in costs, IATA said. For 2019, total revenues of $865 billion are expected, up 6.5% on 2018.
The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade. In 2019 overall costs are expected to grow by 7.4%, outpacing a 6.5% rise in revenues. As a result, net margins are expected to be squeezed to 3.2%, from 3.7% in 2018.
Profit per passenger will similarly decline to $6.12 from $6.85 in 2018.
In 2019, the return on invested capital earned from airlines is expected to be 7.4%, down from 7.9% in 2018. While this still exceeds the average cost of capital estimated at 7.3%, the buffer is extremely thin.
According to IATA, cargo demand growth slowed to 3.4% in 2018 after an exceptional growth of 9.7% in 2017. It is anticipated to be flat in 2019 with cargo volumes of 63.1 million tons (63.3 million tons in 2018) because of the impact of higher tariffs on trade. Cargo yields are expected to be flat in 2019 after a 12.3% improvement in 2018, as cargo load factors fall further, and supply-demand conditions weaken.
