Airline profitability falls in first quarter of 2019: IATA

written by australianaviation.com.au | June 20, 2019
A file image international carriers at Sydney Airport. (Seth Jaworski)
IATA says the global airline industry’s profitability fell in the first quarter of 2019. (Seth Jaworski)

Profitability in the world’s airline industry was down by nearly half in the first quarter of 2019 thanks to a weak performance by Europe, figures from the International Air Transport Association (IATA) show.

Net post-tax profit recorded by 59 airlines covered by IATA’s latest report totalled $US1.111 billion, down from $US2.658 billion in the first quarter of 2018.

Meanwhile, earnings before interest and tax (EBIT) fell to 2.3 per cent of revenue, a sharp decline from the EBIT margin of 4.2 per cent in the prior corresponding period, the IATA Airlines Financial Monitor for May published on Wednesday (European time) showed.

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The aggregate figure masked trends which diverged wildly between regions and was weighed down by the 14 European airlines, which swung from a narrow net post-tax profit of $US158 million to a loss of US$1.919 billion.

In June, IATA downgraded its profit forecast for the whole airline industry to US$28 billion for calendar 2019. This was below a recorded US$30 billion in calendar 2018 and down from IATA’s previous forecast of US$35.5 billion outlined in December 2018.

On a more positive note, the latest monthly update contained some seeds of hope for an easing in costs pressures.

“Brent crude oil and jet fuel prices lost their strong upward momentum at the end of May driven by worries over slowing global oil demand reinforced by an escalated China-US trade war,” the IATA report said.

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The latest reading on IATA’s Jet Fuel Price Monitor showed a world average price of $US75.49/barrel on June 14. That was below the average of $US80.50/barrel so far in 2019, which itself would be enough to reduce the annual fuel bill by $US7.7billion.

Even so, the industry still faced challenges.

The IATA report said annual growth in industry-wide revenue passenger kilometres (RPKs) – a measure of demand – remained positive at 4.3 per cent over the year to April.

“Nevertheless, in seasonally adjusted terms, the level of passenger volumes has flattened in recent months indicating a slow-down in the underlying trend,” IATA said.

IATA said that while global base fare passenger yields continued to head lower, premium cabin yields edged higher, although it warned expectations of slower economic growth would hamper further improvement.

The news on freight was even gloomier.

Despite upticks in industry-wide freight tonne kilometres (FTKs) – a measure of capacity – for both March and April, in seasonally adjusted terms, FTKs were still down in April by 2.5 per cent from 12 months earlier, thanks to a downtrend emerging from late 2018.

“Hence, taking into an account ongoing US-China trade dispute, it is early to infer from this month’s modest uptick that it represents a change in the recent downward trend,” IATA said.

The headwinds faced by the sector have played a role in a relatively poor share price performance.

By the end of May, world airline share prices were down an average of 3.5 per cent from the beginning of 2019, compared with a 7.9 per cent gain for the wider share market.

“The performance of the airline index has been diverging from global equity markets since the beginning of this year due to the concerns regarding airline profitability stemming from rising risks such as Brexit and US-China trade war,” IATA said.

Airline Profitability in Q1 2019
Q1 2018 Q1 2019
Airlines in survey Region EBIT Margin 1 Net Post-Tax Profit 2 EBIT Margin 1 Net Post-Tax Profit 2
14 North America 6.4% 1,381 6.5% 2,090
22 Asia-Pacific 3.4% 879 5.7% 1,113
14 Europe 1.8% 158 -5.2% -1,919
6 Latin America 4.9% 66 0.7% -210
3 Others 3.2% 174 1.1% 37
59 Sample total 4.2% 2,658 2.3% 1,111
1. % of revenues
2. US$ million
Source: IATA


VIDEO: IATA presented its economic outlook at its annual general meeting in Seoul on June 2. This video is from the association’s YouTube channel.

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