IATA forecasts airline industry profit, rebound in 2019

Global airlines will see rising profit growth and record carbon dioxide emissions next year as strong demand offsets cost pressures, the International Air Transport Association (IATA) said on Wednesday.

The cost pressures trimmed profitability in 2018, IATA said.

Industry profits were expected to rise to 35.5 billion dollars in 2019 from 32.3 billion dollars in 2018, it said.

“The aviation industry is on a more solid financial footing than at any time in its history,” IATA director general and CEO Alexandre de Juniac told reporters at IATA’s annual media day in Geneva.

IATA chief economist Brian Pearce said IATA did not expect a recession ahead.

However, there was a lot to worry about, with trade protectionism and uncertainty around Brexit, Pearce said.

Even the most chaotic outcome of Britain’s exit from the European Union was expected merely to slow, not stop, long-term growth.

“The tariff wars are a worry for us.

“It’s actually the latter stages of a decade of protectionism.

”Since the global financial crisis we’ve seen cross border trade growing at a much slower pace than we saw in the years of globalisation.

“We’ve seen a lot of governments effectively restricting cross border trade by soft protectionism.

”We’re now seeing it more explicitly with tariff wars. We would certainly hope that governments will see sense, that it’s a zero-sum game, that it doesn’t benefit anybody to restrict global trade,” Pearce said.

Margins would continue to be under pressure from wage pressures and non-oil costs, although fuel prices had fallen, and airlines around the world had seen dollar-denominated costs rising, he said.

Investors’ return on capital was expected to stabilise at 8.6 per cent this year and next.

Although that will be the lowest since 2014 yet it would be above the cost of capital – the returns that investors can earn by putting their money elsewhere.

Governments needed to do better and support competitiveness and business-friendly policies, de Juniac said.

The industry was approaching an infrastructure crisis and recovering from “a European air traffic management mess of epic proportions’’.

Carbon dioxide emissions, which were consistently below 700 million tonnes until 2013, will hit 895 million tonnes in 2018 and 927 million tonnes in 2018, IATA said.

The U.N. says relentless rises in carbon dioxide emissions are the most important factors in causing catastrophic climate change.

IATA originally forecast 2018 profits of more than 38 billion dollars but cut that back to 33.8 billion dollars in June.