IATA Trims Airline Industry Profit View, Sees Rebound In 2019
Global airlines will see rising profit growth and record carbon dioxide emissions next year as strong demand offsets cost pressures that trimmed profitability in 2018, according to the International Air Transport Association (IATA).
Industry profits are expected to rise to $35.5 billion in 2019 from $32.3 billion in 2018, IATA said.
"The aviation industry is on a more solid financial footing than at any time in its history," IATA director general and CEO Alexandre de Juniac told reporters at IATA's annual media day in Geneva.
IATA chief economist Brian Pearce said IATA did not expect a recession ahead but there was a lot to worry about, with trade protectionism and uncertainty around Brexit, although even the most chaotic outcome of Britain's exit from the European Union was expected merely to slow, not stop, long-term growth.
“The tariff wars are a worry for us. It’s actually though really just the latter stages of a decade of protectionism, actually since the global financial crisis we’ve seen cross border trade growing at a much slower pace than we saw in the years of globalisation,” Pearce said.
"We’ve seen a lot of governments effectively restricting cross border trade by soft protectionism. We’re now seeing it more explicitly with tariff wars. We would certainly hope that governments would see sense, that it’s a zero-sum game, that it doesn’t benefit anybody to restrict global trade.”
Pressures And Costs
Margins would continue to be under pressure from wage pressures and non-oil costs, although fuel prices had fallen, and airlines around the world had seen dollar-denominated costs rising, he said.
Investors' return on capital was expected to stabilise at 8.6% this year and next. Although that would be the lowest since 2014, it would be above the cost of capital - the returns that investors could earn by putting their money elsewhere.
Competitiveness And CO2 Emissions
Governments needed to do better and support competitiveness and business-friendly policies, de Juniac said. The industry was approaching an infrastructure crisis and recovering from "a European air traffic management mess of epic proportions".
Carbon dioxide emissions, which were consistently below 700 million tonnes until 2013, will hit 895 million tonnes in 2018 and 927 million tonnes in 2018, IATA said. The U says relentless rises in carbon dioxide emissions are the most important factor in causing catastrophic climate change.
IATA originally forecast 2018 profits of more than $38 billion but cut that back to $33.8 billion in June.