Brighter 2020 on the horizon for global airline industry: IATA

Despite a challenging year for the global airline industry owing to global economic slowdown, trade tensions and social unrest in Hong Kong, the outlook is brighter for next year, said IATA.

The global airline industry is expected to produce a net profit of US$29.3 billion in 2020, up 13% from a revised forecast of US$25.9 billion expected in 2019, IATA predicts.

Global airline industry flies into a brighter 2020: IATA

If achieved, 2020 will mark the industry’s 11th consecutive year in the black, it said.

Overall industry revenues are forecasted to rise 4% to US$872 billion in 2020, from US$838 billion in 2019; while passenger numbers are expected to increase 4% to 4.7 billion, from 4.5 billion in 2019.

Stronger economic growth should support passenger traffic growth of 4.1%, similar to 2019 (4.2%), but below historical trends.

“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,” said Alexandre de Juniac, IATA’s director general and CEO.

“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,” he added.

Jet kerosene prices are also expected to dip in 2020, averaging US$75.60 per barrel versus US$77 per barrel in 2019. The expected industry fuel bill of US$182 billion will represent 22.1% of expenses, down from $188 billion or 23.7% of expenses in 2019.

Passenger demand is expected to grow 4.1% in 2020, in line with 4.2% growth in 2019. However, while passenger capacity rose 3.5% in 2019, it is forecasted to grow 4.7% in 2020, as aircraft deliveries rise significantly, causing load factors to slide to 82% from 82.4% in 2019. Passenger revenues, excluding ancillaries, are expected to rise 2.5% to US$581 billion, from US$567 billion in 2019.

Asia-Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a US$6 billion net profit in 2020 (up from US$4.9 billion in 2019) for a 2.2% net margin, according to IATA.

Asia remains the manufacturing centre of the world and revenues from transporting many of those goods are a significant proportion of sales for many of the region’s airlines. But the trade war is assumed just to be on hold; trade tariffs are not reversed, it said.

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