Top News IATA ‘cautiously optimistic’ on airlines’ profitability in 2019 By TTG Asia / Posted on 14 December, 2018 9:54 Airlines With lower fuel prices and strong economic growth, the global airline industry net profit is expected to hit US$35.5 billion in 2019, slightly ahead of the US$32.3 billion expected net profit in 2018 which saw profitability squeezed by rising costs, according to IATA forecasts. It is expected that 2019 will be the 10th year of profit and the fifth consecutive year for airlines to deliver a return on capital to 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. 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,” said Alexandre de Juniac, IATA’s director general and CEO. The 2019 industry outlook is based on an anticipated average oil price of US$65 per barrel, lower than the US$73 recorded in 2018, following the increase in US oil output and rising oil inventories. Fuel is expected to account for 24.2% of the average airline’s operating costs, an increase from 23.5% forecast for 2018. Meanwhile, passenger traffic (RPKs) is expected to grow 6% in 2019, outpacing the forecast capacity (ASKs) increase of 5.8%, and remains above the 20-year trend growth rate. This in turn will increase load factors and support a 1.4% increase in yields. Passenger revenues, excluding ancillaries, are expected to reach US$606 billion (up from US$564 billion in 2018). Asia-Pacific carriers are expected to report a US$10.4 billion net profit in 2019, up from US$9.6 billion in 2018, with net profit per passenger projected to be US$6.15 (3.8% net margin). Lower fuel costs, low levels of fuel hedging and strong regional economic growth are supporting profitability in 2019 in this region, according to IATA.