The International Air Transport Association (IATA) forecasted that the global airline industry will produce a net profit of USD 29.3 billion in 2020, improved over a net profit of USD 25.9 billion expected in 2019 (revised downward from a USD 28 billion forecasted in the past June). If achieved, 2020 will mark the industry’s 11th consecutive year in the black.
Economic performance in 2019 was weaker than had been anticipated at the time of the June forecast. This aligns with weaker global GDP growth of 2.5% (versus 2.7% forecast in June) and world trade growth of just 0.9% (down from 2.5% forecast in the past June). These negative developments contributed to softer passenger and cargo demand and corresponding weaker revenue growth, as passenger yields fell 3.0% and cargo yields dropped 5.0% compared to 2018.
Operating expenses did not rise as much as anticipated (3.8% vs. 7.4% of the past June’s forecast) largely owing to lower-than-expected fuel costs; but this was not enough to offset the softness in revenue.
Cargo traffic turned negative last year for the first time since 2012. The 3.3% annual decline in demand was the steepest drop since 2009 during the Global Financial Crisis. Freight carriage, meanwhile, slipped to 61.2 million tonnes from 63.3 million tonnes in 2018. Cargo traffic is expected to rebound moderately with 2.0% growth in 2020, with tonnes forecast to reach 62.4 million, which is still below the 2018 result. Yields will continue to slide with a 3.0% decline forecast for 2020, an improvement from a 5.0% decline in 2019. Cargo revenues will slip for a third year in 2020 with revenues expected to total $101.2 billion, down 1.1% from 2019.
“Slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines. Yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends. It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter. The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries arrive,” said Mr. Alexandre de Juniac, IATA’s Director General and CEO.
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