IATA downgrades 2019 outlook for global air transport

The International Air Transportation Association (IATA) reduced its 2019 outlook for the global air transport industry by 21% to $28 billion in a statement released yesterday. IATA had previously forecast the 2019 outlook at $35.5 billion. Under the new forecast, 2019 industry performance is expected to fall under 2018’s net post-tax profits, which IATA estimates at $30 billion.

Unsurprisingly, the culprits behind the lower forecast include the weakening global trade market from protectionist strategies and increasing tariffs, and rising fuel prices. IATA estimates the fuel costs are up about 27.5% compared to 2017 levels, and will likely account for 25% of carrier operating costs in 2019, compared to 23.5% in 2018. At an estimated 6.5% year-over-year increase to $865 billion for 2019, revenues are not expected to grow at the same pace as costs.

Looking ahead, IATA expects trade tensions to continue to hamper air cargo performance, with carriers in Africa, Latin America and the Middle East expected to struggle more than those in Europe, North America and the Asia-Pacific region.

Regarding the rising fuel costs, as of the end of May, prices stood at US$77.22 per barrel – down 9.5% month-over-month and 14.6% y-o-y, according to IATA’s Jet Fuel Price Monitor from energy information provider Platts. While prices are still well above the lows of 2017, jet fuel prices ended the second quarter of 2019 at roughly the same level last seen in early February of this year, as oil prices have likewise been impacted by increased trade tensions. Whether that trend will continue and potentially provide some price relief to carriers later in 2019 remains to be seen.

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