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            june 25, 2019

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CIBE 2019


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Optimism extends into 2019


THE International Air Transport Association (IATA) forecasts the global airline industry net profit will be US$35.5 billion in 2019, slightly ahead of the $32.3 billion expected in 2018, according to Shipping Gazette.
The return on invested capital is expected to be 8.6 per cent (unchanged from 2018). The margin on net post-tax profits is expected be four per cent, unchanged from 3.9 per cent in 2018.
Overall industry revenues are expected to reach $885 billion (+7.7 per cent on $821 billion in 2018). Passenger numbers are expected to reach 4.59 billion, up from 4.34 billion in 2018.
Cargo tonnes carried are expected to reach 65.9 million, up from 63.7 million in 2018. Slower demand growth for both passenger traffic (+6.0 per cent in 2019, +6.5 per cent in 2018) and cargo (+3.7 per cent in 2019, +4.1 per cent in 2018).
Lower oil prices and solid, albeit slower, economic growth (+3.1 per cent) are extending the run of profits for the global airline industry, after profitability was squeezed by rising costs in 2018.
It is expected that 2019 will be the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry's cost of capital, creating value for its investors.
"We had expected that rising costs would weaken profitability in 2019. But the sharp fall in oil prices and solid GDP growth projections have provided a buffer," said IATA director general and CEO Alexandre de Juniac.
"So we are cautiously optimistic that the run of solid value creation for investors will continue for at least another year. But there are downside risks as the economic and political environments remain volatile," he said.
GDP is forecast to expand by 3.1 per cent in 2019 (marginally below the 3.2 per cent expansion in 2018). This slower but still robust growth is a main driver of continued solid profitability.
Asia-Pacific carriers are expected to report a $10.4 billion net profit in 2019 (up from $9.6 billion in 2018). Cargo revenue growth has slowed from the strong performance of 2017 but remains positive for airlines in the region.
All regions, except Africa, are expected to report profits in 2018 and 2019. Carriers in North America continue to lead on financial performance, accounting for nearly half of the industry's total profits.
Financial performance is expected to improve compared to 2018 in all regions except for Europe, where improvement has been delayed by the high degree of fuel hedging.
North American carriers are expected to deliver the strongest financial performance in 2019 with a $16.6 billion net profit (up from $14.7 billion in 2018).
European carriers are expected to report a $7.4 billion net profit in 2019 (down slightly from $7.5 billion in 2018).
Middle Eastern carriers are expected to report an $800 million net profit in 2019 (up from a weaker $600 million in 2018). The expected net profit per passenger is $3.33 (1.2 per cent net margin).

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