airlines, fuel, oil, costs, profit, 2019, IATA, forecast, predict, revenues, regions, world, Europe, America
Photo: Pexels / Pixabay

Lower oil to boost airline profits in 2019

Airline profits are ready to return to growth on the back of lower oil and expanding economies, IATA predicts.

After a period of high oil prices and uncertainty, airline earnings will return to growth in 2019, aided by lower fuel costs and expanding economies.

At least that is the prediction of the International Air Transport Association, which forecasts overall net income for the industry rising 10% to $35.5 billion.

North America will account for almost half of this total to post a net profit of $16.6 billion, but gains will be delayed in Europe due to fuel-hedging positions, IATA says. All regions except Africa should show positive figures.

The outlook assumes an average oil price of $65 a barrel, down from $73 this year, and 3.1% global economic growth. However, trade wars and Brexit could make the reality a little less rosy.

“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,” opines Alexandre de Juniac, IATA’s chief executive.

“So we are cautiously optimistic that the run of solid value creation for investors will continue.”

IATA’s profit forecasts have to be taken with a pinch of salt. For 2018, it now expects profits of $32.3 billion – more than $6 billion lower than its initial outlook a year ago.

Europe weighed down
For 2019, revenues worldwide will rise 8% to $885 billion as passenger numbers increase by around 250 million to 4.59 billion, the association says.

Earnings will rise healthily in North America, Latin America, Asia-Pacific and the Middle East. In Europe, however, airlines’ net earnings will fall slightly to $7.4 billion as “intense competition” weighs on yields, while growth in demand is slowing. Air traffic control delays in Europe have resulted in airlines giving refunds totalling $2 billion in 2018.

Related stories

Airlines demand “spirit of change” from EU governments

Growth in air traffic demand slows in Europe

Higher profits for airlines in 2018

Leave a Reply