IATA has today released its forecast for the airline industry in 2020. 2019 has been a particularly tough year for aviation, but 2020 is looking up. Here’s what IATA forecasts for 2020.
IATA predicts a better 2020
The headline figure from IATA predicts a net profit of $29.3bn in 2020, up some $3.4bn from the expected profits being generated in 2019. This year’s profits are estimated to finish the year at $25.9bn, well under the forecast level of $28bn published by IATA in June. Nevertheless, 2019 is expected to be the aviation industry’s 10th year in the black.
In addition to the overall profits showing growth, IATA predicts some other key metrics for 2020, including:
- Net profits per passenger: $6.20, up from $5.70 in 2019
- Passenger numbers: 4.72bn, up 4% from 4.54bn in 2019
- Profit margins (net): 3.4% up from 3.1% in 2019
- Operating expenses: $823bn, up 3.5% from the estimated $796bn in 2019
- Overall revenues: $872bn up 4% from the estimated $838bn in 2019
On the topic of airline bankruptcies, IATA maintains a realistic perspective. Chief Economist Brian Pearce was asked today at the IATA Media Days in Geneva whether IATA expects the same level of bankruptcies as we’ve seen this year. He replied,
“We hope not! He slightly better growth situation in 2020 and relatively low fuel prices may help. However, there’s a long tail of airlines where the situation is pretty fragile, so we can’t rule it out.”
A difficult 2019
The economic performance of airlines in 2019 was weaker than had been predicted previously. Although it’s easy to lay the blame at the foot the 737 MAX grounding, this was actually a factor that influenced less than 1% of the global airline fleet.
What really did have an impact was the ongoing trade wars, particularly between the US and China. Other factors such as political unrest and Brexit contributed to a weaker than anticipated year. Overall, passenger yields fell 3% and cargo fell by 5% compared to 2018’s performance.
However, the mitigating factor here was that operating expenses did not rise as much as anticipated. The predicted 7.4% forecast in expenses in June translated to just 3.8% in realty, largely due to lower than expected fuel costs. This led to a minor reprieve for airlines suffering from the curse of 2019.
IATA Director General and CEO, Alexandre de Juniac commented on the outlook, saying,
“Slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty of Brexit all came together to create a tougher than anticipated business environment for airlines. Yet, the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends.
“It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 will be somewhat brighter. 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.”
Overall, the outlook for 2020 is a positive one. However, the bigger picture points to an overall slowdown in growth of aviation. Whether this is indicative of a long term shift change, or simply a temporary bump in the road remains to be seen.