Global airlines will experience a 10th consecutive year of profitability in 2019, the longest run in history, as they benefit from a strong economy and lower oil prices, according to forecasts from the International Air Transport Association.
Iata predicted that net profit across the industry would be $35.5bn, up 9.9 per cent on 2018 but down on 2017’s peak of $37.7bn. Revenue would be a record $885bn and there would be 4.6bn passengers, a 5.6 per cent increase on this year.
The forecasts are based on Brent crude falling from an average of $73 a barrel this year to $65 a barrel next, and gross domestic product growth of 3.1 per cent in 2019, slightly below 2018’s 3.2 per cent.
Alexandre de Juniac, Iata’s director-general and chief executive, said: “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.”
The industry’s fuel bill would still rise, from $180bn this year to $200bn next year, because of a more flights, but would remain constant as a share of expenses at about 24 per cent.
However, European airlines would miss some of the benefit of the lower oil price, said Brian Pearce, Iata’s chief economist: “Airlines in Europe have a very high fuel hedging ratio, something like 70-80 per cent of the year ahead, so they’re locked in and they won’t see the benefits of the lower spot oil prices next year.”
US airlines, by contrast, he said, had almost zero hedging.
Mr Pearce said the positive profitability news “sounds a little unusual in the midst of falling equity prices and inverting yield curves but our assessment is that business conditions will remain fairly favourable, certainly for air travel in 2019, perhaps less so for cargo”.
Cargo is particularly exposed if global trade falls back and will be threatened if the US-China trade dispute worsens. While Iata predicted that the cargo market would grow from 63.7m freight tonnes this year to 65.9m tonnes next year, it saw cargo yield falling 8 percentage points to 2 per cent.
Not all regions are healthy, Mr Pearce said, pointing out African airlines, which have low load factors (a measure of fullness) and suffer from a lack of infrastructure and high taxation and regulatory costs. Iata’s figures predicted that African airlines will lose $300m next year, slightly better than losing $400m this year.
He also said that Latin American airlines would improve, going from $400m profit this year to $700m next: “Latin America has been a real challenge in recent years because of the Brazil recession and Venezuela implosion, but that’s been recovering and there are some very good airlines in that region.”
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