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Airline profitability down by nearly half so far in 2019: IATA

written by australianaviation.com.au | July 25, 2019
Airline profitability has fallen in 2019 amid a troubled outlook. (Rob Finlayson)
Airline profitability has fallen in 2019 amid a troubled outlook. (Rob Finlayson)

Final figures confirm the profitability of the world’s airlines in the first quarter of 2019 was down by nearly a half compared with a year earlier, while early numbers for the second quarter hold out only tentative hopes for improvement.

The latest Airlines Financial Monitor released by the International Air Transport Association (IATA) showed a key measure of profitability, the earnings before interest and tax (EBIT) margin, fell to 2.9 per cent in the first quarter, compared with 4.6 per cent in the first quarter of 2018.

The estimate of quarterly net post-tax profit for the 81 airlines surveyed fell to US$1.918 billion, from US$4.694 billion.

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The lead weight dragging the overall total down was Europe. The EBIT margin for the 14 European airlines surveyed dropped to negative 5.3 per cent, from 1.8 per cent in the prior corresponding period, with a net post-tax loss of US$1.919 billion after a slim US$158 million net post-tax profit a year before.

On the positive side, the latest report indicated a pickup in global average passenger yield in April, a month-on-month increase of 1.3 per cent, the largest such rise since February 2018.

However this was within an overall downward trend in passenger yields which are down by 30 per cent since 2011 and by 4.3 per cent from April 2018.

IATA said demand, measured by revenue passenger kilometres (RPKs), continued to climb steadily in May, but with a slower underlying trend.

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“The latest SA (seasonally adjusted) data is consistent with an annualized RPK growth rate of 4.0-5.0 per cent, compared with a pace of around 7.0 per cent in the early 2018,” IATA said.

Against the background of a troubled global economy, IATA was guarded about the prospects of significant further improvement for the time being.

“As global economic growth prospects are being revised down, industry-wide passenger yields could be expected to remain under pressure,” IATA said in the report.

At the same time, airfreight volumes continued to recover from a sharp downturn from mid-2018 to early 2019, with a “modest” rise in May making it three increases in a row.

As with passenger numbers, IATA was cautious about the prospects. The report acknowledged that the recovery might be seen as a sign that the low point for the current cycle has been passed.

“However, the recovery remains fragile, partly due to the ongoing US-China trade dispute. Hence, it is early to conclude that the modest increases in the recent months represent a shift from the downward trend,” IATA said in the report.

In June, IATA revised downwards its profit forecasts for the global airline industry amid trade tensions, rising fuel prices and a slumping cargo markets.

The industry body expected airlines to post US$28 billion in net profit for calendar 2019, below a recorded US$30 billion in calendar 2018 and down from its previous forecast of US$35.5 billion outlined in December 2018.

 

Airline Profitability in Q1 2019 – Final Data
    Q1 2018 Q1 2019
Airlines in survey Regions EBIT Margin 1 Net Post-Tax Profit 2 EBIT Margin 1 Net Post-Tax Profit 2
30 North America 6.4% 3,158 6.5% 2,853
25 Asia-Pacific 3.9% 964 5.1% 1,081
8 Europe 1.8% 158 -5.3% -1,919
4 Latin America 7.9% 247 4.1% -132
4 Others 3.1% 167 1.1% 35
81 Sample total 4.6% 4,694 2.9% 1,918
1. % of revenues
2. US$ million
Source: IATA

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