IATA: Demand will slow in 2019 due to weaker world trade environment

posted on 12th December 2018 by Justin Burns
IATA: Demand will slow in 2019 due to weaker world trade environment

Air cargo demand growth is forecasted to slow to 3.7 per cent in 2019 due to weaker world trade, according to the International Air Transport Association (IATA).

In its industry forecast for next year, the association said tonnage will be around 65.9 million tonnes (up from 63.7 million in 2018) is the slowest pace since 2016, reflecting the weak world trade environment impacted by increasing protectionism. In 2018 growth was at about 4.1 per cent.

IATA said cargo yields are expected to grow by two per cent. This is well below the exceptional 10 per cent yield growth in 2018. It does, however, continue the recent strengthening of the cargo business, since cost increases are lower. Overall cargo revenues are expected to reach $116.1 billion (up from $109.8 billion in 2018).

IATA director general and CEO, Alexandre de Juniac said: “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.”

IATA also forecasts the global airline industry net profit to be $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).

The association said lower oil prices and solid, albeit slower, economic growth (+3.1 per cent) 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 tenth 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.