IATA Cuts 2019 Airline Profit Forecasts but Sees Improvement in 2020

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IATA Cuts 2019 Airline Profit Forecasts but Sees Improvement in 2020

By Michael B. Baker / December 12, 2019 / Contact ReporterSHARE

Airlines are marking their 10th consecutive year of profitability in 2019, though profits are down significantly from earlier forecasts due to stunted economic growth, according to a forecast from the International Air Transport Association.

IATA projects airlines will net $25.9 billion in profit this year. That is down from a June forecast of $28 billion, which itself was a downgrade from a forecast of $35.5 billion this time last year. While fuel cost increases were not as sharp as IATA had anticipated, global GDP and trade growth also were lower than projections at that time.

“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,” according to IATA director general and CEO Alexandre de Juniac. “Yet, the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends.”

This year will “be the bottom of the current economic cycle” with a 2020 profit forecast of $29.3 billion, de Juniac said.

North American carriers continue to be the most profitable by far, with a net profit of $16.9 billion forecast for this year, according to IATA. However, IATA expects that will decline to $16.5 billion in 2020 due to a slowing economy and an increase in aircraft deliveries, particularly if the Boeing 737 Max fleet returns to service.

In Europe, airline profits will increase from a projected $6.2 billion in 2019 to $7.9 billion in 2020, according to the forecast. Europe’s economy is expected to accelerate next year, and capacity growth among European airlines will be moderate.

Carriers in the Asia/Pacific region also are forecast to increase profits in 2020, up to $6 billion compared with $4.9 billion in 2019, according to IATA. That forecast assumes the trade war to be on hold but not with tariffs reversed.

Latin American carriers, meanwhile, appear to be on a path to profitability by 2020. IATA projects they will lose $400 million this year but will net $100 million by 2020, thanks to economic growth in Brazil and Mexico.

Carriers in both Africa and the Middle East will lose money both this year and next year, according to the forecast. The Middle East will see some rebound in traffic next year but still will lose $1 billion, compared with a $1.5 billion loss in 2019. African carriers are projected to lose $200 million both in 2019 and 2020. While Africa is seeing economic growth, its markets “are extremely fragmented and inefficiently served,” and airlines face high taxes and fees, according to IATA.