POST TIME: 14 December, 2018 00:00 00 AM
Airline profits set to soar in 2019 amid shrinking oil prices: IATA
AFP, Geneva

Airline profits set to soar in 2019 amid shrinking oil prices: IATA

Shrinking oil prices and solid economic growth should boost global aviation industry profits by nearly 10 percent next year, sector federation IATA forecast on Wednesday.

The International Air Transport Association said in a statement that it expected combined net profits in the industry to hit $35.5 billion (31.3 billion euros), up from $32.3 billion this year.

The anticipated hike of 9.91 percent would mark the 10th consecutive year of profits for the industry, said IATA, which represents 290 airlines -- responsible for four-fifths of all airline traffic.

The organisation was forced to significantly cut its 2018 forecasts from an anticipated $38.4 billion after oil prices surged earlier this year. But IATA chief Alexandre de Juniac said the federation had been bracing for the negative trend to continue.

"We had expected that rising costs would weaken profitability in 2019," he said in the statement.

"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."

He stressed though that "there are downside risks as the economic and political environments remain volatile," pointing for instance to the turmoil around Brexit.

IATA's projections for next year are based on an expected average oil price of $65 per barrel of Brent, down from the 2018 average of $73 per barrel.

The drop is due to increased US oil output and rising oil inventories, it said, describing the subsequent drop in jet fuel prices as "welcome relief" for airlines.

Jet fuel prices are expected to average $81.3 per barrel in 2019, down from $87.6 per barrel this year, IATA said.

Next year, all regions besides Africa are expected to register a profit, with carriers in North America continuing to lead on financial performance, IATA said, adding that it anticipated North American airlines to see their joint profits jump 12.9 percent to $16.6 billion.