Louis Ibah, in Geneva, Switzerland
The International Air Transport Association (IATA), on Wednesday, forecast 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).
Director General and CEO of IATA, Mr. Alexandre de Juniac, who disclosed this at the 2018 Global Media Day held, in Geneva, Switzerland, however, said IATA foresees African carriers recording a net loss of $300 million in 2019.
“All regions in the world, except Africa, are expected to report profits in 2018 and 2019,” Juniac said.
He, however, noted that the $300 million net loss in Africa would be a slight improvement from the $400 million net loss recorded in 2018.
Juniac said IATA was working with African governments like in Nigeria to put in place the right infrastructure and tax incentives that can grow the local airlines and also allow them make profits.
“The expected net loss per passenger in Africa is $3.51 (-2.1 per cent net margin) and 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 in Africa as fuel prices decrease. The region benefits from higher-than-average yields and lower operating costs in some categories.
“However, few airlines in the African region are able to achieve adequate load factors to generate profits,” Juniac added.
The IATA boss told journalists that approximately one per cent of the global GDP – which is about $900billion – will be spent on air travel in 2019.
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“Globally, the return on invested capital is expected to be 8.6 per cent, unchanged from 2018 while the margin on net post-tax profits is expected be 4.0 per cent, basically unchanged from 3.9 per cent in 2018,” said Juniac.
“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 per cent in 2019, +6.5 per cent in 2018) and cargo (+3.7 per cent in 2019, +4.1 per centin 2018)
“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,” added Alexandre de Juniac, the IATA’s Director General and CEO.
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.