Middle Eastern carriers are expected to report $800 million net profits in 2019, up from an expected weaker $600 million in 2018, predicts the International Air Transport Association (IATA). 

The global airline industry’s net profit will hit $35.5 billion in 2019, slightly ahead of the $32.3 billion expected net profit in 2018 (revised down from $33.8 billion forecast in June), IATA said. 

Highlights of expected 2019 performance include:

• The return on invested capital is expected to be 8.6% (unchanged from 2018)
• The margin on net post-tax profits is expected be 4.0% (basically unchanged from 3.9% in 2018)
• Overall industry revenues are expected to reach $885 billion (+7.7% 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% in 2019, +6.5% in 2018) and cargo (+3.7% in 2019, +4.1% in 2018)
• Average net profit per departing passenger of $7.75 ($7.45 in 2018)

Lower oil prices and solid, albeit slower, economic growth (+3.1%) 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 10th 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. 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,” said Alexandre de Juniac, IATA’s Director General and CEO.

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.

Middle Eastern carriers’ net profit per passenger is $3.33 (1.2% net margin). 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 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.