Global Airline Industry To Achieve $28 Billion Profit In 2019: IATA

Global airline industry is likely to gather profit of USD 28 billion this year, much lower than the prior forecast of USD 35.5 billion, IATA told on Sunday, because increasing fuel prices and declining world trade are unfavourably impacting the business environment.

The International Air Transport Association (IATA), an assemblage of approximately 290 airlines, also told that whole costs are likely to grow by 7.4 per cent, outpacing a 6.5 per cent increase in revenues.

Additionally, gain per passenger would come down to USD 6.12 in 2019 from USD 6.85 last year.

Modifying its prediction, the IATA said the global air transport industry is planned to post a profit of USD 28 billion in 2019 compared to USD 35.5 billion estimated in December 2018.

"The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade," the grouping said.

IATA said, the airlines' fuel bill is projected to rise to USD 206 billion, which will represent 25 per cent of average operating costs.

"Jet fuel prices have risen with oil prices and we base our forecast on an average jet price of USD 87.5 per barrel next year, and USD 70 per barrel for the brent crude oil price," it noted.

The previous drop from the peaks of 2018 was driven by more supply of crude oil, partially from shale oil production in the US. But, the reason behind the rise of oil prices back above to USD 70 billion is because of sanctions on Iran's oil exports and limited spare capacity in OPEC.

According to IATA Director General and CEO Alexandre de Juniac, 2019 would be the tenth consecutive year in the black for the airline industry. But margins are being gripped by increasing costs, including those related to labour, fuel and infrastructure NSE -0.65 %.

Taut competition between airlines keeps yields from growing and declining of global trade is expected to continue as the US-China trade war intensifies, he added.

"We expect 1 per cent of the GDP to be spent on air transport in 2019, totalling USD 899 billion," IATA said in a report.

On the other hand, it said that consumers would see a considerable increase in the value they obtain from air transport in 2019.

"The average return fare (before surcharges and tax) of USD 317 in 2019 is forecast to be 61 per cent lower than in 1998, after adjusting for inflation," the report said.

Airlines in Asia-Pacific will demonstrate different types of performances and is the most uncovered region to weakness in world trade and cargo.

"Average profit per passenger this year is forecast at USD 3.51 as weaker cargo and higher than expected fuel costs reduce net profits to USD 6 billion and net margins to 2.3 per cent," IATA said.

Commercial airlines are likely to take delivery of over 1,750 new aircraft, an investment of around USD 80 billion by the industry, which is reliant on the Boeing 737 MAX situation, the report said.