The International Air Transport Association (IATA) downgraded the outlook for the global aviation industry’s profit to USD 28 billion from USD 35.5 billion, forecast in December 2018. The revised outlook is also lower than the net profit estimate for 2018, which IATA had pegged at USD 30 billion.
“The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade,” the association of global airlines said in a statement.
Slowing Demand and Rising Costs Squeeze Airline Profits
In 2019, overall costs are expected to grow 7.4%, outpacing a 6.5% rise in revenues. As a result, net margins are expected to be squeezed to 3.2% (from 3.7% in 2018). Profit per passenger will similarly decline to $6.12 (from USD 6.85 in 2018), it said. Noting that 2019 will be the 10th consecutive year of profit for the sector, IATA said margins were declining on the back of rising costs.
“Weakening of global trade is likely to continue”
“Weakening of global trade is likely to continue as the US-China trade war intensifies. This primarily impacts cargo business, but passenger traffic could also be impacted as tensions rise,” said Alexandre de Juniac, director general and CEO, IATA.
IATA, however, said a downturn in the trading environment would not plunge the industry into a deep crisis.