Mideast carriers may report higher profit of $800mn in 2019: IATA

Globally, IATA has forecast an industry net profit of $35.5bn next year, slightly ahead of the $32.3bn expected net profit in 2018.According to IATA, the expected net profit per passenger will be $3.33 (1.2% of the net margin) in the Middle East next year. In 2018, the Middle East carriers are expected to report a net profit of $600mn.The Middle East has one of the lower breakeven load factors, IATA said.“The region has been challenged by the earlier impact of low oil revenues, conflict, competition from other ‘super connectors’ and setbacks to particular business models, leading to a sharp slowdown in capacity growth (after more than a decade of double-digit growth, passenger capacity growth was halved to 6.7% in 2017).The region, IATA said, reported 4.7% capacity growth in 2018 and is expected to slow to 4.1% in 2019, which together with restructuring is helping to generate a recovery.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.Addressing the ‘Global Media Day’ organised by IATA at its Geneva Centre Wednesday, director general and CEO Alexandre de Juniac said, “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. 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.”Aviation is a very relevant part of the global economy, de Juniac noted, and approximately 1% of global GDP – some $900bn – will be spent on air travel in 2019.On performance drivers in 2019, de Juniac said, the global GDP is forecast to expand by 3.1% in 2019 (marginally below the 3.2% expansion in 2018). This slower but still robust growth is a main driver of continued solid profitability. There are significant downside risks to growth from trade wars and political uncertainties such as Brexit, but the consensus view is that these factors will not offset the positive impetus from expansionary fiscal policy and growing business investment in major economies.Passenger traffic (RPKs) is expected to grow 6% in 2019, which will outpace the forecast capacity (ASKs) increase of 5.8%, and remains above the 20-year trend growth rate. This in turn will increase load factors and support a 1.4% increase in yields (partially clawing back the 0.9% fall experienced in 2018). Passenger revenues, excluding ancillaries, are expected to reach $606bn (up from $564bn in 2018).In terms of cargo, the 3.7% annual increase in cargo tonnage to 65.9mn tonnes is the slowest pace since 2016, reflecting the weak world trade environment impacted by increasing protectionism. Cargo yields are expected to grow by 2.0%. This is well below the exceptional 10% yield growth in 2018. It does, however, continue the recent strengthening of the cargo business, since cost increases are lower. Overall cargo revenues are expected to reach $116.1bn (up from $109.8bn in 2018).