Middle East airlines forecast to make $1bn losses in 2020

Middle East airlines forecast to make $1bn losses in 2020

Middle Eastern airlines are set to cut losses to $1 billion next year, down from $1.5 billion in 2019, as they continue a restructuring process, according to the International Air Transport Association (IATA).

IATA said announced schedules point to a substantial slowdown in regional capacity growth for 2020.

“After very weak economic growth in 2019, which limited local traffic, some rebound is expected in 2020.  Restructuring and stronger growth will boost performance,” the aviation authority said in a statement, adding: “But this will take time and a loss is expected  for a third consecutive year.”

Middle East carriers are forecast to make a $4.48 loss per departing passenger compared to the average net profit globally of $6.20.

Globally, IATA forecast that the global airline industry will produce a net profit of $29.3 billion in 2020, improved over a net profit of $25.9 billion expected in 2019.

If achieved, 2020 will mark the industry’s 11th consecutive year in the black.

Net profit margins are forecast at 3.4 percent while overall industry revenues are forecast to reach $872 billion, up 4 percent on $838 billion in 2019.
Passenger numbers are expected to reach 4.72 billion, up 4 percent, while freight tonnes carried are expected to recover to 62.4 million, a 2 percent increase over 61.2 million tonnes carried in 2019, which was the lowest figure in three years.

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

“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.

The regional profit picture is mixed in both 2019 and 2020. Africa, Middle East and Latin America are all expected to lose money in 2019, with carriers in Latin America returning to profit in 2020 as regional economies strengthen.

Airlines in North America continue to lead on financial performance, accounting for 65 percent of industry profits in 2019 and around 56 percent of aggregate earnings in 2020.