Analysis and Studies - Studies
Profitable airlines also in 2019. Iata estimated profits of 35.5 billion dollars
July 26th 2019
Global air transport continues to present an excellent health and to make profits. The IATA, the global carrier association, estimates net global profits of $ 35.5 billion for companies around the world for next year. An amount 10% higher than the 32.3 billion net profits expected for this year, an updated estimate that reduced the 33.8 billion announced on 4 June.
Ten consecutive years of profits
The forecasts were announced in Geneva by IATA general director Alexandre de Juniac, along with chief economist Brian Pearce. "It is expected that 2019 will be the tenth consecutive year of profits and the fifth in a row that companies will return capital over its cost, creating value for investors," said Pearce. The profit record was reached in 2017, with 37.7 billion dollars. The estimate refers to all the world companies, including the low cost ones, which for the most part are not part of the association (such as Ryanair and easyJet, although de Juniac said that with these companies there are contacts and that they would be "more than just welcome").
The Alitalia case
The data is global and there are some exceptions. Few companies are at a loss, in particular Alitalia, for which a loss of between 350 and 380 million euros is estimated unofficially. But the overall picture of profits makes the continuing negative results of the Italian company even less understandable. At the level of large regions, all the global areas earn (especially North America, Asia-Pacific and Europe), the only one in red is Africa. He did not comment on the public aid to Alitalia paid by the State de Juniac, he merely said that "the matter concerns the relations between Alitalia and the European Union, there are some outstanding issues between Alitalia and the Italian government and the EU" . To a question from the Sole 24 Ore on the project being studied by the State Railways for the rescue of Alitalia de Juniac, he replied: "If they were to do the operation, the airline would continue to be part of our association. Obviously the shareholder company would not be part of it ».
Robust passenger increase
"We have cautious optimism for 2019," said de Juniac. "With a net profit margin of 4%, the first point to emphasize is that this is a similar result to 2018. Given the depression in the markets, this may seem a surprise to some. The question is strong. And we have seen a sharp reduction in the price of fuel ". The estimate of positive results is based on a robust demand. Global passengers are expected to increase by 5.8% to 4.59 billion, up from 4.34 billion this year. Passengers per km should increase by 6%, a little less than the 6.5% growth this year. For goods, a growth of 3.7% is expected, compared to 4.1% this year.
Oil prices fall
«In 2018 there was a reduction in profits due to the increase in costs. But the sudden reduction in the price of oil leads to a forecast of earnings growth next year, while despite some uncertainties in the markets we do not expect a recession, world GDP should grow by 3.1%, "said Pearce. The global revenues of the companies this year are expected to rise to 821 billion dollars (+ 8.7% compared to 2017) and the forecast for 2019 is that they will increase by 7.7% to 885 billion. The cost of fuel this year is estimated to grow from 149 to 180 billion, in 2019 it should rise to 200 billion. The average price of oil this year is estimated at 73 dollars a barrel, compared to 54.9 dollars in 2017. For 2019, a reduction is expected to 65 dollars a barrel.
The highest profits in North America
The expected results vary according to geographical areas. The companies that are better are the American ones. For North America, a net profit of $ 14.7 billion is estimated this year (18.7 billion in 2017) and 16.6 billion in 2019. In Europe a net profit of 7.5 billion is estimated this year (8.2 billion in 2017) and 7.4 billion in 2019. In the Asia-Pacific this year a profit of 9.6 billion is forecast (9.9 billion in 2017) and in 2019 10.4 billion. In the Middle East, a profit of 0.6 billion is estimated this year (0.7 billion in 2017) and 0.8 billion in 2019. In Latin America, a profit of 0.4 billion is estimated this year (0.5 billion in 2017) and 0.7 billion in 2019. Africa remains in the red, with an estimated 0.4 billion in net losses this year, worsening by 100 million over 2017, and with a loss forecast of 0 , 3 billion in 2019.
Despite the positive results, the leaders of IATA warn that the profit margin remains thin. "The expected profit for 2019 is $ 7.75 on average for each passenger, compared to $ 7.45 this year. A new one-dollar tax, an increase in rights or a change in the price of oil can eat up this margin, "said de Juniac. IATA general manager added that "there are threats to flight freedom. One is Brexit, the other is trade wars. We are looking for solutions. We do not know how the Brexit affair will end, but we know that the industry needs more clarity ». According to IATA, if there is no agreement between the EU and Great Britain there would be negative consequences on air traffic, possible increases in the code for border security checks and slowdowns in freight transport. "We need some agreement," said de Juniac.
Delays are increasing
Another problem is the limitation of infrastructure capacity. Airports are not enough to keep up with the impetuous increase in demand. "We desperately need more capacity," said de Juniac. And there are chronic problems in airspace management. "Summer 2018 in Europe - added the d.g. della Iata - it was a chaos of epic proportions. Late minutes swelled to 14 million at the end of October, 53% more than 2017: 14 million minutes correspond to 26 years, "said de Juniac. The problems are not limited to Europe. "There is congestion in the Persian Gulf. Delays in China are increasing with demand exceeding capacity growth. And we see similar problems all over the world ».
"The good news is that airlines hire staff. We see a 2.2% increase in the workforce in 2019 to 2.9 million workers. And this after a growth of 3.1% and 3.3% in 2017 ».