Airline profits forecast to rise in 2019 on lower fuel

December 12, 2018
Photo: Wikicommons

The profitability of the global airline industry is expected to rise to $US35.5 billion in 2019 thanks to a sharp fall in oil prices and solid expectations of global GDP growth.

The latest projection from the International Air Transport Association also delivers good news for investors with a forecast the return on capital will exceed its cost for the fifth consecutive year.

And there are welcome tidings for passengers with IATA predicting the 2019 average return airfare before surcharges and tax will be $US324, compared to a forecast in June for 2018 fares of $US380.

READ: US airlines prepare from Christmas travel bonanza

The latest profit forecast compares to a revised expected net profit in 2018 of $US32.3 billion.

IATA is now expecting an average oil price (Brent) of $US65 per barrel compared to $US73 per barrel in 2018 thanks to rising US output and inventories.

Jet fuel prices are tipped to average $US81.30 per barrel in 2019 compared to $US87.60 for 2018.

“We had expected that rising costs would weaken profitability in 2019,’’ IATA director general Alexandre de Juniac said Wednesday.

“But the sharp fall in oil prices and solid GDP growth projections have provided a buffer.

“Sowe 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.”

The average net profit per departing passenger is expected to be $US7.75 as overall industry  revenues reach $US885 billion, up 7.7 percent on 2018.

The airline group predicts passenger numbers will rise from 4.34 billion in 2018 to 4.59 billion but there will be slower demand growth for both passengers (up 6 percent in 2019) and cargo (up 3.7 percent).

All areas except Africa are expected to be profitable next year with North American carriers again topping the league table with a $US16.6 billion net profit, up from $US14.7 billion in 2018.

Asia-Pacific carriers are forecast to report a $US10.4 billionn et profit, up from $US9.6 billion in 2018, while European carriers will see a slight fall from $US7.5 billion in 2018 to $US7.4 billion 2019 as airlines are hit by competition and high regulatory costs.

Middle Eastern carriers are expected to report a $US800 million 2019 net profit, up from $US600 million, as they continued to grapple with the earlier impact of low oil revenues, conflict, competition from other ‘super-connectors’ and “setbacks to particular business models”.

Latin American carriers are forecast to report a $US700 million profit in 2019, up from $US400 million, as key economies slowly recover,  while Africa was forecast to produce a net loss of $US300 million.