It's all very well for airlines to complain about a mediocre economic climate, over-taxation of their business or the environmental threat posed by the " flight shaming" . Nevertheless, they have been making profits for a decade. With a forecast of 29.3 billion in profits by 2020the airline industry is set to record its 11th consecutive profit. According to IATAAs a result, 2020 is already shaping up to be an excellent year for the airlines, while 2019 will have disappointed the expectations of the captains of the industry. The slump in economic growth from 2.7% to 2.5% and the slowdown in trade depressed demand and caused revenue per passenger to fall by 3%.
The 2019 financial year will also have been affected by external events. " Social unrest and continuing uncertainty about the future of the Brexit have combined to create a more difficult trading environment than expected. It seems that 2019 will remain as the low point of the current economic cycle and that forecasts for 2020 show more uncertainty.optimism "comments Alexandre de JuniacDirector General and CEO of IATA.
With stronger economic growth estimated at 2.7% in 2020 and world trade expected to rise by 3.3%, the net profit margin for airlines in 2020, while still lower than in other industries, would nevertheless rise by 0.3 points to 3.4%. Return on investment should reach 6%, compared with 5.7% in 2019. Revenues, meanwhile, are expected to rise by 4% compared with 2019, to reach $872 billion, in line with the growth in passenger numbersalso up 4%, i.e. 4.72 billion passengers. Net profit per departing passenger is expected to rise to 6.20 dollars from 5.70 dollars this year.
Airlines should also benefit from a falling oil prices by almost 8% compared with 2019. This would enable airlines to save six billion dollars on fuel purchases, which would now account for just 22.1% of total expenditure. Improved employee productivity, up 2.9% compared with 2019, should offset persistently low unit passenger revenue, down 1.5%, due to an supply higher than demand.
IATA forecasts that airlines in Africa, the Middle East and Latin America will have lost money in 2019, but the South American market should become profitable again in 2020. North American airlines should continue to post record profits in 2019, with 16.9 billion. However, the economic situation is expected to deteriorate slightly in 2020 with the probable return of Boeing 737MAX immobilised for almost a year and the resumption of deliveries of this aircraft. According to Alexandre de Juniac, this 'comeback' should result in supply outstripping demand.
The European carriers should see their profits rise from 6.2 billion in 2019 to 7.9 billion by 2020. This good economic health comes at a time when the continent's airlines have sharply reduced their rate of expansion, rationalising their offer and the number of destinations. The disappearance of several European carriers has also helped to reduce supply. Net profit per passenger in Europe should reach 6.40$ in 2020.
Airlines in the region Asia/Pacific is expected to recover, with net profit forecast at six billion in 2020, compared with 4.9 billion in 2019. This upturn is due to the expected rebound in trade. However, profit per passenger remains lower than elsewhere in the world, at 3.34$.
At the same time, IATA anticipates losses for carriers in the Middle East for the third year running, even though the association believes that the rationalisation measures adopted in 2018 and 2019 will have a positive impact on the financial results of these carriers. Losses are expected to reach one billion in 2020, after reaching 1.5 billion in 2019. The African companies is also expected to post a loss of 200 million dollars in 2020 due to the fragmentation of supply and high taxes for the use of infrastructure in the region.
Lastly, Latin American companies should once again post profits, estimated at $100 million in 2020. Economic growth should rebound to 1.8%, compared with a mediocre 0.2% in 2019...
