GENEVA: Despite possible slower global economic growth, the airline industry net profit worldwide in 2019 is estimated to reach 35.5 billion U.S. dollars, slightly higher than the expected 32.3 billion dollars in 2018, the International Air Transport Association (IATA) forecast on Wednesday.
Lower oil prices and solid, albeit slower, global economic growth are extending the run of profits for the global airline industry, after its profitability was squeezed by rising costs in 2018, according to IATA.
That means that 2019 would be the 10th year of profit and the fifth consecutive year when airlines deliver a return 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 IATA Director General and CEO Alexandre de Juniac, adding that the run of solid value creation for investors will continue for at least another year.
The 2019 industry outlook is based on an anticipated average oil price of 65 U.S. dollars per barrel, lower than the 73 dollars experienced in 2018, following the increase in U.S. oil output and rising oil inventories.
According to IATA, fuel is expected to account for 24.2 percent of the airline industry’s average operating costs.
The airline industry in all regions, except Africa, are expected to report profits in 2018 and 2019, the IATA said. While carriers in North America continue to lead in financial performance, accounting for nearly half of the industry’s total profits, Asia-Pacific carriers, especially some new low-cost carriers, are seeing strong growth due to a strong regional economic growth.
“But there are downside risks as the economic and political environments remain volatile,” De Juniac said, adding that the aviation industry needs, for instance, more clarity on how Brexit will play out if a solid, steady growth is to be achieved.
Meanwhile, the IATA CEO expressed his deep concern over the impact on the industry by a less inclusive globalization and increasing protectionist policies or trade disputes over the world.
“Prosperity will come with borders that are open to people and trade. That’s a pre-requisite for aviation to deliver its best to global economic and social development,” he said.
Founded in 1945, IATA is a trade association of some 290 airlines from 117 countries and regions, representing about 82 percent of global air traffic. Headquartered in Montreal, Canada, and with offices in Geneva, Switzerland, it supports airline activities and helps formulate industry policy and standards.