The International Air Transport Association (IATA) is forecasting that the global airline industry will recover in 2020 with both cargo and passenger traffic rising next year from 2019 levels.
IATA said specifically, freight tonnes carried are expected to recover to 62.4 million, next year, albeit at a modest pace over the 61.2 million tonnes carried in 2019, which was the lowest figure in three years.
"Cargo traffic is expected to rebound moderately with 2.0% growth in 2020, with tonnes forecast to reach 62.4 million, which is still below the 2018 result," it said in a statement.
The association of the world’s airlines noted that cargo traffic turned negative this year for the first time since 2012 with the 3.3% annual decline in demand, the steepest drop since 2009 during the Global Financial Crisis. 7
Freight carriage, during the period, also slipped to 61.2 million tonnes this year from 63.3 million tonnes in 2018.
IATA said yields will continue to slide with a 3% decline forecast for 2020, an improvement from a 5.0% decline in 2019. Cargo revenues will slip for a third year in 2020 with revenues expected to total $101.2 billion, down 1.1% from 2019.
Drivers of growth in 2020
The anticipation of economic growth and recovery in world trade and tepid oil costs are expected to buoy the growth of the industry next year.
IATA said GDP is forecast to expand by 2.7% in 2020 and similar anticipation that world trade growth will rebound to 3.3% from 0.9% in 2019, despite continued pressure from the election year in the US and ongoing trade tensions.
“Slowing economic growth, trade wars, geopolitical tensions and social unrest, plus continuing uncertainty over Brexit all came together to create a tougher than anticipated business environment for airlines. Yet the industry managed to achieve a decade in the black, as restructuring and cost-cutting continued to pay dividends," said Alexandre de Juniac, IATA’s Director General and CEO.
"It appears that 2019 will be the bottom of the current economic cycle and the forecast for 2020 is somewhat brighter. The big question for 2020 is how capacity will develop, particularly when, as expected, the grounded 737 MAX aircraft return to service and delayed deliveries arrive,” he added.
IATA said that the regional profit picture is mixed in both 2019 and 2020 with Africa, Middle East and Latin America all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen.
Regional outlook
"North American carriers managed to improve profitability in 2019, as the still-strong economy and structural improvements in the industry allowed unit revenues to hold up much more than in other regions. But in 2020, unit revenue and profitability are expected to reduce," IATA said, attributing the risks to a slowing economy and a significant increase in aircraft deliveries particularly with the expected return to service of the 737 MAX fleet.
In Europe, it said airlines are seen to benefit from the opposite pattern of the developments expected in North America as economic growth is forecast to pick up and, as a result of substantial cuts in expansion plans, capacity growth is expected to be moderate, helping to improve the supply-demand balance.
For Asia-Pacific carriers, IATA said it will be helped by the modest recovery in world trade and air cargo.
"Asia remains the manufacturing center of the world and revenues from transporting many of those goods are a significant proportion of sales for many of the region’s airlines. But the trade war is assumed just to be on hold; trade tariffs are not reversed. Consequently, the rise in trade and cargo volumes is moderate," it added.
For Middle East carriers, some rebound is also expected. IATA said as airlines continue to restructure, a substantial slowdown in capacity growth is likely for 2020 although, after a very weak economic growth in 2019, which limited local traffic, "some rebound is expected in 2020."
Latin American carriers are expected to benefit from improvements to the underlying economies and restructurings and return to the black next year. IATA said in 2020 airlines will be helped by the rebound to 1.8% growth forecast by the IMF, led by stronger growth in Brazil and Mexico and less severe contractions in Argentina and Venezuela.
Meanwhile, African carriers will continue to suffer declines next year. IATA said as the region continue to suffer structural problems of high costs — in large part owing to government taxes and fees. and low load factors.
"Economic growth in the region has been relatively good and is expected to rise in 2020, but markets are extremely fragmented and inefficiently served in the absence, so far, of a Single African Air Transport Market. As a result, they are projected to show a loss [in 2020]," IATA said.
In terms of passengers, IATA noted that in general, passenger numbers are expected to reach 4.72 billion next year, up 4% from 4.54 billion in 2019, which will also be driven by anticipation of a better worldwide economy.