Profit forecast cut for airlines: Asian carriers to earn average of just $4.80 per passenger in 2019

Speaking at the opening of the association's 75th Annual General Meeting, Iata chief executive and director-general Alexandre de Juniac said that the current challenges have led to a cut in profit forecast.
Speaking at the opening of the association's 75th Annual General Meeting, Iata chief executive and director-general Alexandre de Juniac said that the current challenges have led to a cut in profit forecast.PHOTO: EPA-EFE

SEOUL - For every passenger flown, Asian carriers including Singapore Airlines (SIA) are expected to earn an average of just US$3.51 (S$4.82), as the region continues to take the brunt of rising fuel prices and a substantial weakening of world trade.

Collectively, airlines in Asia are expected to deliver a net profit of US$6.0 billion in 2019, down from US$7.7 billion in 2018.

Accounting for about 40 per cent of global air cargo traffic, the region is the most exposed to weakness in world trade, said the International Air Transport Association (Iata), which unveiled its latest industry forecast on Sunday (June 2).

Speaking at the opening of the association's 75th Annual General Meeting, Iata chief executive and director-general Alexandre de Juniac said that the current challenges have led to a cut in profit forecast.

Instead of a global collective profit of US$35.5 billion (forecast in December), airlines are now expected to make US$28 billion in 2019.

In 2018, estimated profit was US$30 billion.

Mr de Juniac said: "This year will be the 10th consecutive year in the black for the airline industry. But margins are being squeezed by rising costs right across the board - including labour, fuel, and infrastructure.

 
 
 

"Stiff competition among airlines keeps yields from rising. Weakening of global trade is likely to continue as the US-China trade war intensifies."

While this primarily impacts the cargo business, passenger traffic could also be impacted as tensions rise, he warned.

"Airlines will still turn a profit this year, but there is no easy money to be made," he stressed.

Turning to the other regions, Iata warned that carriers in the Middle East like Emirates and Etihad Airways can expect to have an even worse year than their Asian counterparts.

Together, they are forecast to lose US$1.1 billion in 2019.

"The region has faced substantial challenges in recent years, both to the business environment and to business models," Iata said.

Airlines there are going through a process of adjustment, and announced schedules point to a substantial slowdown in capacity growth next year.

Mr de Juniac said: "Aviation needs borders that are open to people and to trade. Nobody wins from trade wars, protectionist policies or isolationist agendas. But everybody benefits from growing connectivity."

He stressed: "A more inclusive globalisation must be the way forward."

Addressing more than 1,000 airline and airport heads, as well as other industry partners, Mr de Juniac said at the AGM held at the COEX Convention Centre that the industry is also dealing with many other issues.

These include challenges around infrastructure, the environment and safety.

Critically congested airports are spread the world over, he said. Sao Paolo, New York, London, Amsterdam, Mumbai, Bangkok and Sydney are all examples of airport bottlenecks due to capacity constraints.

On safety, Mr de Juniac acknowledged that while overall numbers show clearly that flying is safe, the facts give no comfort to those who have lost family or friends in aviation tragedies.

The two recent Boeing 737 Max crashes - in Ethiopia and Indonesia - have put the industry’s reputation in the spotlight.

Turning to the environment, Mr de Juniac stressed that the way forward is not to reduce flights.

“That would have grave consequences for people, jobs, and economies the world over. It would be a step backward to an isolated society that is smaller, poorer and constrained. And the overall impact on global emissions would be small,” he said.

With new aircraft technology, the recent launch of a global carbon offsetting and reduction scheme for airlines, the development of sustainable fuels, and close partnership with airports and air traffic controllers to better manage flights, Iata is confident the industry can meet its goals.

From 2020, airlines are looking at carbon-neutral growth and by 2050, the aim is to cut net emissions to half 2005 levels — irrespective of growth.

Next year, airlines are expected to take delivery of more than 1,770 new aircraft, many of which will replace older and less fuel-efficient aircraft.