IATA revises down 2019 airline profits, sees stability in 2020

By: |
Geneva | Updated: December 11, 2019 6:26:01 PM

Cutting its full-year net profit forecast to $25.9 billion, a 5.1% decline from 2018, the International Air Transport Association said an improvement in 2020 was contingent on a "truce" in global trade disputes.

IATA, IATA profit, IATA airline profits, airlines revenue, iata revenue 2019, iata revenue 2020The starkest deterioration is being felt in airlines’ cargo businesses – where a 3.3% drop in freight demand marked the sharpest decline since the 2009 financial crisis, with revenue down 8% year-on-year. (Reuters)

Airline profits are on course to fall faster than expected in 2019 as trade wars hit global commerce and broader confidence, the industry’s main global body said on Wednesday, while predicting a modest recovery next year. Cutting its full-year net profit forecast to $25.9 billion, a 5.1% decline from 2018, the International Air Transport Association said an improvement in 2020 was contingent on a “truce” in global trade disputes. In June it had forecast $28 billion in profit this year. “Trade wars produce no winners,” IATA Director General Alexandre de Juniac told an annual media briefing.

De Juniac also cited slower growth, Brexit and social unrest among factors that “all came together to create a tougher than anticipated business environment for airlines” in 2019. IATA slashed its full-year global revenue forecast to $838 billion from the $899 billion predicted in June and said it expected an improvement to $872 billion for 2020. “We’ve downgraded our forecasts for 2019 pretty much across the board,” chief economist Brian Pearce said. “It’s pretty clear that this has been driven mostly by the impact of trade wars.”

ALSO READ | FSSAI asks industry to reduce level of unsafe food to less than 1 per cent over next 4 years

Reflecting downward pressure on fares, net profit per passenger fell to $5.70 this year from $6.22, with the industry’s net profit margin expected to decline to 3.1% this year from 3.4% in 2018. But the sharpest deterioration is being felt in airlines’ cargo businesses – where a 3.3% drop in freight demand marked the steepest decline since the 2009 financial crisis, with revenue down 8% year-on-year. Growth in world trade has all but evaporated to an expected 0.9% this year, sharply down from the 2.5% forecast in June and the 4.1% expansion predicted a year ago, IATA said.

Underpinning the partial recovery predicted next year, IATA forecast more robust trade growth of 3.3% as “election-year pressures in the U.S. contribute to reduced trade tensions”. The nine-month-old grounding of the Boeing 737 MAX has had a significant impact on some airlines, though less than 0.5% of the global fleet is directly affected.

Pearce said the expected return of a backlog of hundreds of stranded MAX jets to the market in 2020 could produce a surge in capacity that would be “hard to swallow” for aircraft markets – offset partly by the retirement of older jets. While a handful of carriers led by U.S. majors dominate the industry’s overall profits, the past year has also seen a slew of airline failures mainly in Europe. Pearce said he saw scope for further consolidation because of the high proportion of airlines that had failed to perform in an industry that remains highly fragmented because of regulations making cross-border tie-ups difficult to carry out.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1No turnaround at SBI: NPA divergences lead to net loss of Rs 6,968 crore in FY19
2Express IT Awards Jury meet: The jury is in, countdown begins
3Capital hunt! Yes Bank weighs Citax; no call on Braich yet