Photo: Pedro Ruiz The Duty
The plunge in oil prices could revitalize the financial performance of carriers, despite the rise in interest rates.
The fall in oil prices comes at a good time for the airlines. It should also allow carriers to post profits in 2019 for a tenth year in a row, a sequence of profitability never before seen in the industry.
The international air transport Association (IATA) has released Thursday, his most recent indicators confirming profit margins under pressure in the third quarter of 2018, under the impulse of rising costs, and free cash flow decline. The income from high value-added derived classes say “premium” showed signs of weakness, making it echo to the economic downturn experienced on a global scale. On a sample of 74 airlines, IATA has measured an operating margin of 11.5 % in the third quarter, compared to 15.1 % a year earlier, and net income decline of US $2.7 billion between the two quarters.
But the plunge in oil prices could revitalize the financial performance of carriers, despite the rise in interest rates. The reference values in New York and London are down 40 and 37 %, respectively, since October. The projections of the IATA for the next year are banking on an average price of Brent crude to US $65 per barrel, compared with a price of $73 US observed in 2018.
In its projections for 2019, the IATA, which represents 290 airlines in the world, claiming 82 % of the air traffic, is planning a return on the capital invested above the cost of capital for a fifth year in a row. The gap will, however, continue to be reduced, increase in the rent of the money requires. The expectations show a net profit of whole of 35.5 billion US $next year, against $ 32.3 billion expected this year, extending to ten years consecutive to the sequence of profitability. The IATA, however, takes care to add that this performance translates into a net profit margin just above 4 %, a “modest” total of US $7.75 per passenger. The stronger results would come from the north american carriers, with a budgeted profit of 16.77 US $per passenger and a margin of 6 %.
“We expected that increased costs will weaken profitability in 2019. But the significant fall in oil prices and robust growth projections of GDP have served as a buffer, ” said Alexandre de Juniac. The director of IATA, moderates, however, his enthusiasm because of rising risks linked to the economic and political environment.
Commercial airlines will take delivery of 1780 new aircraft this year. The strength of the return on capital invested to justify these investments of $ 80 billion, and half of new deliveries is intended to replace existing aircraft in the fleet in an aim to increase energy efficiency. The next year, the global fleet is expected to grow to 1000 devices, with close to 31 000 at the end of 2019, providing a capacity of about 4.8 million seats available. The average passenger load factor might be around 82.3 %.