It is clear that the demand for air travel is growing very fast – IATA expects it to double in the next 20 years – but it will come after a lot of struggle by airlines. The recent IATA AGM in Seoul, resounded with a warning about the trade war waged by the USA. A close look at the takeaways.
IATA downgrades 2019 financial outlook
As fuel prices rise and world trade “substantially” weakens, the International Air Transport Association (IATA) downgraded its 2019 outlook for the global air transport industry by 21 percent at it's 75th Annual General Meeting (AGM) in Seoul. It now expects the industry to generate $28 billion profit: almost $8 billion less compared to December 2018 forecast which stood at $35.5 billion.
In 2019 overall costs are expected to grow by 7.4 percent, outpacing a 6.5 percent rise in revenues. As a result, net margins are expected to be squeezed to 3.2 percent (from 3.7 percent in 2018). Profit per passenger will similarly decline to $6.12 (from $6.85 in 2018). Passenger capacity growth, which reached 6.9 percent in 2019, is forecast to slow to 4.7 percent this year, with average fares flat following a 2.1 percent decline in 2018.
“This year will be the tenth consecutive year in the black for the airline industry. But margins are being squeezed by rising costs right across the board—including labor, fuel, and infrastructure. Stiff competition among airlines keeps yields from rising. The weakening of global trade is likely to continue as the US-China trade war intensifies. This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise. Airlines will still turn a profit this year, but there is no easy money to be made,” said Alexandre de Juniac, IATA’s Director General and CEO.
Calling downside risks “significant”, IATA outlined political instability and potential for political conflicts as potential risks.
Air Connectivity: Solid, not exceptional rising demand
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Denne historien er fra July 2019-utgaven av Cruising Heights.
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