The International Air Transport Association (IATA) on Wednesday forecast that the global airline industry will produce a net profit of 29.3 billion dollars in 2020, improved over a net profit of 25.9 billion dollars expected in 2019.
If achieved, 2020 will mark the industry’s 11th consecutive year in the black. The highlights of expected 2020 performance include the return on the invested capital forecast to be 6 per cent as compared to 5.7 per cent expected in 2019.
The net profit margin is forecast at 3.4 per cent, up from 3.1 per cent for 2019, and overall industry revenues are forecast to reach 872 billion dollars (plus 4 per cent on 838 billion dollars in 2019).
Industry operating expenses are projected to climb 3.5 per cent to 823 billion dollars from 796 billion dollars in 2019 while passenger numbers are expected to reach 4.72 billion (up 4 per cent from 4.54 billion in 2019).
Freight tonnes carried are expected to recover to 62.4 million, a 2 per cent increase over 61.2 million tonnes carried in 2019 which was the lowest figure in three years.
Stronger economic growth should support passenger traffic (RPKs) growth of 4.1 per cent similar to 2019 (4.2 per cent) but below historical trends.
The average net profit per departing passenger is likely to be 6.20 dollars compared to 5.7 dollars in 2019.
IATA said Asia Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a 6 billion dollar net profit in 2020 (up from 4.9 billion dollars in 2019) for a 2.2 per cent net margin.
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 and trade tariffs are not reversed. Consequently, the rise in trade and cargo volumes is moderate. The net profit per passenger is anticipated to be 3.34 dollars, said IATA.
In 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, said 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. 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 de Juniac.