Air cargo traffic is expected to revert to modest growth in 2020 after going into red in 2019 for the first time in seven years, while passenger traffic is seen to continue posting growth next year, forecasts the International Air Transport Association (IATA).
Weaker economic performance and weaker global GDP growth in 2019 contributed to softer passenger and cargo demand and corresponding weaker revenue growth, it said in a release.
Cargo traffic turned negative this year for the first time since 2012, the 3.3% annual decline in demand the steepest drop since 2009. Freight carriage, meanwhile, slipped to 61.2 million tonnes from 63.3 million tonnes in 2018.
Cargo traffic is expected to rebound moderately with 2.0% growth in 2020, with tonnes forecast to reach 62.4 million. This is a 2.0% increase over 61.2 million tonnes carried in 2019, which was the lowest figure in three years. But 2020 figures are still below the 2018 result.
Cargo yields will continue to slide with a 3.0% decline forecast for 2020, up from a 5.0% decline in 2019. Cargo revenues will slip for a third year in 2020 with revenues expected to total $101.2 billion, down 1.1% from 2019.
On the other hand, passenger demand is expected to grow 4.1% in 2020, in line with 4.2% growth in 2019, on the back of stronger economic growth but below historical trends. Passenger numbers are expected to reach 4.72 billion (up 4.0% from 4.54 billion in 2019).
However, passenger capacity, which rose 3.5% in 2019, is forecast to grow 4.7% in 2020 as aircraft deliveries rise significantly, causing load factors to slide to 82% from 82.4% in 2019.
This will maintain pressure on yields, which are expected to slide 1.5% after falling 3.0% in 2019. Passenger revenues, excluding ancillaries, are expected to reach US$581 billion, up 2.5% from $567 billion in 2019.
Overall profit
In 2020, the global airline industry is expected to produce a net profit of $29.3 billion, improved over a net profit of $25.9 billion expected in 2019 (revised downward from a $28 billion forecast in June). The net profit margin is forecast at 3.4%, up from 3.1% for 2019.
“If achieved, 2020 will mark the industry’s 11th consecutive year in the black,” said IATA.
Overall industry revenues are forecast to reach $872 billion next year (+4.0% on $838 billion in 2019).
Industry operating expenses are projected to climb 3.5% to $823 billion from $796 billion in 2019. Average net profit per departing passenger is $6.20 from $5.70 in 2019.
Operating expenses did not rise as much as anticipated this year largely owing to lower-than-expected fuel costs; but this was not enough to offset the softness in revenue.
“Slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines. Yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends,” said Alexandre de Juniac, IATA’s director general and CEO.
“It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter. The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries arrive,” he said.
Regional profit
“The regional profit picture is mixed in both 2019 and 2020,” said IATA.
Africa, Middle East and Latin America are all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen. Airlines in North America continue to lead on financial performance, accounting for 65% of industry profits in 2019 and around 56% of aggregate earnings in 2020.
Financial performance is expected to improve or remain the same compared to 2019 in all regions except for North America, where expected capacity growth owing to new aircraft deliveries could put pressure on earnings.
Asia-Pacific carriers will be helped by the modest recovery in world trade and air cargo, showing a $6.0 billion net profit in 2020 (up from $4.9 billion in 2019) for a 2.2% net margin.
“Asia remains the manufacturing center of the world and revenues from transporting many of those goods are a significant proportion of sales for many of the region’s airlines. But the trade war is assumed just to be on hold; trade tariffs are not reversed. Consequently, the rise in trade and cargo volumes is moderate,” said IATA.