The International Air Transport Association (IATA) has predicted that African countries will experience bleak 2019 in their aviation industry with a record $300 million (an estimated N109.350bn) loss for the continent’s airlines. This is said to be a slight improvement from the $400 million net loss experienced in 2018. The expected net loss per passenger is $3.51 (-2.1% net margin). According to the forecast, all regions, except Africa, are expected to report profits in 2018 and 2019. This makes Africa the weakest region, as it has been over the past four years. Performance is improving, but only slowly. Losses are expected to be cut in 2019 as fuel prices decrease. The region benefits from higher-than-average yields and lower operating costs in some categories. However, few airlines in the region are able to achieve adequate load factors to generate profits.
The International Air Transport Association (IATA) made a forecast of the global airline industry net profit to be $35.5 billion in 2019, slightly ahead of the $32.3 billion expected net profit in 2018 (revised down from $33.8 billion forecast in June).
Highlights of expected 2019 performance include:
- The return on invested capital is expected to be 8.6% (unchanged from 2018)
- The margin on net post-tax profits is expected be 4.0% (basically unchanged from 3.9% in 2018)
- Overall industry revenues are expected to reach $885 billion (+7.7% on $821 billion in 2018)
- Passenger numbers are expected to reach 4.59 billion (up from 4.34 billion in 2018)
- Cargo tonnes carried are expected to reach 65.9 million (up from 63.7 million in 2018)
- Slower demand growth for both passenger traffic (+6.0% in 2019, +6.5% in 2018) and cargo (+3.7% in 2019, +4.1% in 2018)
- Average net profit per departing passenger of $7.75 ($7.45 in 2018)
Lower oil prices and solid, albeit slower, economic growth (+3.1%) are extending the run of profits for the global airline industry, after profitability was squeezed by rising costs in 2018. It is expected that 2019 will be the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital, creating value for its investors.
“We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer. So we 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,” said Alexandre de Juniac, IATA’s Director General and CEO.
