
The International Air Transport Association (IATA) said it believes 2020 will be a better for the global airline industry coming off a “challenging” 2019, but at the same time lowered its profit forecast for 2019 to US$25.9 billion from its June estimate of US$28 billion. The association’s director general, Alexandre de Juniac said the global airline industry will produce a net profit of US$29.3 billion in 2020 and if that is achieved it will mark the industry’s 11th consecutive year in the black. De Juniac told reporters in Geneva that the forecast is tied to a “truce” in global trade disputes like those between the United States and China as well as Europe. He also said the profit outlook would be hurt by slower growth in the industry, Brexit, social unrest such as that in Hong Kong where the aviation industry has been caught up in anti-government protests.
The association also cut its 2019 full-year revenue forecast to US$838 billion from the US$899 billion in June and said it estimates an improvement in revenues to US$872 billion in 2020. Net profit per passenger fell to US$5.70 in 2019 from US$6.22, but should hit US$6.20 in 2020. IATA said the net profit margin is expected to fall to 3.1 percent this year but should hit 3.4 percent in 2020. Cargo has been hit hard this past year, but IATA forecasts that it should rise by 2 percent to 62.4 million tonnes in 2020 from the 61.2 million tonnes carrier in 2019, which IATA said was the lowest level in three years.

“It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter,” de Juniac said. “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.” IATA said it believes that world trade growth is expected to “rebound” to 3.3 percent in 2020 from 0.9 percent in 2019 “as election-year pressures in the USA contribute to reduced trade tensions”. The association also said fuel costs could come down slightly, which will benefit airlines and said “the expected industry fuel bill of US$182 billion will represent 22.1 percent of expenses, down from US$188 billion or 23.7 percent of expenses in 2019”.
Passenger demand (RPKs) is expected to grow 4.1 percent in 2020, in line with 4.2 percent growth in 2019. Yields will remain under pressure, IATA said, and passenger revenues, excluding ancillaries, are expected to reach US$581 billion, up 2.5 percent from US$567 billion in 2019. The regional profit picture is mixed in both 2019 and 2020. Africa, Middle East and Latin America are all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen. Airlines in North America continue to lead on financial performance, accounting for 65 percent of industry profits in 2019 and around 56 percent of aggregate earnings in 2020. Financial performance is expected to improve or remain the same compared to 2019 in all regions except for North America, where expected capacity growth owing to new aircraft deliveries could put pressure on earnings, IATA said in its forecast.

Regional Outlook
Asia-Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a US$6 billion net profit in 2020, up from US$4.9 billion in 2019, for a 2.2 percent 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; trade tariffs are not reversed. Consequently, the rise in trade and cargo volumes is moderate. The net profit per passenger is anticipated to be US$3.34.
North American carriers are expected to post a net profit of US$16.5 billion, down from US$16.9 billion in 2019. That represents a 6 percent net margin and a net profit of US$16 per passenger. The region managed to improve profitability in 2019, as the still strong economy and structural improvements in the industry allowed unit revenues to hold up much more than in other regions. But in 2020, unit revenue and profitability are expected to reduce. This will be the result of a slowing economy and a significant increase in aircraft deliveries particularly with the expected return to service of the 737 MAX fleet.
European carriers are forecast to report a US$7.9 billion net profit in 2020, up from US$6.2 billion forecast for 2019, as airlines in the region benefit from the opposite pattern of the developments expected in North America. Economic growth is forecast to pick up and, as a result of substantial cuts in expansion plans, capacity growth is expected to be moderate, helping to improve the supply-demand balance. The net profit per passenger is expected to be US$6.40, resulting in a 3.6 percent net margin. This relatively good aggregate performance for the region hides a long list of airlines just breaking even or making losses, which is why there were a series of European airline failures in 2019.
Middle Eastern carriers are continuing a restructuring process and announced schedules point to a substantial slowdown in capacity growth for 2020. After very weak economic growth in 2019, which limited local traffic, some rebound is expected in 2020. Restructuring and stronger growth will boost performance. But this will take time and a loss is expected for a third consecutive year, estimated at US$1 billion, trimmed from US$1.5 billion in 2019.
Latin American carriers are expected to benefit from improvements to the underlying economies and restructurings and return to the black next year with a small profit of US$100 million. Apart from currency weakness in 2019, the region’s economy slowed sharply to just 0.2 percent due to problems in Mexico, recession in Argentina and a decline by around one-third in the size of the Venezuelan economy. In 2020 airlines will be helped by the rebound to 1.8 percent growth forecast by the IMF, led by stronger growth in Brazil and Mexico and less severe contractions in Argentina and Venezuela. This represents a US$500 million positive swing compared with an expected loss of US$400 million in 2019.
African carriers continue to suffer structural problems of high costs—in large part owing to government taxes and fees–and low load factors. Economic growth in the region has been relatively good and is expected to rise in 2020, but markets are extremely fragmented and inefficiently served in the absence, so far, of a Single African Air Transport Market. As a result, they are projected to show a loss of US$200 million, similar to 2019.