Investors set for a fifth year of returns on investment as carriers are on course for a decade in the black.

Airline profits rise

The International Air Transport Association (IATA) forecasts the global airline industry net profit to be $35.5 billion in 2019.

Lower oil prices and solid, albeit slower, economic growth (+3.1%) are extending the run of profits for the global airline industry, after profitability was squeezed by rising costs in 2018. 

The forecasted figures are slightly ahead of the $32.3 billion expected net profit in 2018, which was revised down from $33.8 billion forecast in June.

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

2019 is expected to be the tenth year of profit and the fifth consecutive year where airlines on the whole deliver a return on capital that exceeds the industry’s cost of capital, creating value for its investors. 

“We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer,” said Alexandre de Juniac, IATA’s Director General and CEO. 

“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.”

Highlights of the forecast for 2019 include the return on invested capital coming in unchanged at 8.6%, and overall revenues for the sector up 7.7% to $885 billion.

Additionally, passenger numbers and cargo tonnes are expected to rise, reaching 4.59 billion and 65.9 million, respectively.

All regions, except Africa, are expected to report profits in 2018 and 2019. Carriers in North America continue to lead on financial performance, accounting for nearly half of the industry’s total profits. 

Financial performance is expected to improve compared to 2018 in all regions except for Europe, where improvement has been delayed by the high degree of fuel hedging.

Breakdown, by region:

  • North American carriers are expected to deliver the strongest financial performance in 2019 with a $16.6 billion net profit (up from $14.7 billion in 2018).
  • European carriers are expected to report a $7.4 billion net profit in 2019 (down slightly from $7.5 billion in 2018).
  • Asia-Pacific carriers are expected to report a $10.4 billion net profit in 2019 (up from $9.6 billion in 2018). 
  • Middle Eastern carriers are expected to report an $800 million net profit in 2019 (up from a weaker $600 million in 2018).
  • Latin American carriers are expected to report a $700 million net profit in 2019 (up from $400 million in 2018). 
  • African carriers are expected to report a $300 million net loss in 2019 (slightly improved from the $400 million net loss in 2018), making Africa the weakest region, as it has been over the past four years. 
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