Cargo revenues will slip for a third year in 2020: IATA forecast

Dec 13, 2019: In its global airline industry forecast, the International Air Transport Association (IATA) has said that 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.

The airlines organisation has also 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 (revised downward from a $28 billion forecast in June. If achieved, 2020 will mark the industry’s 11th consecutive year in the black.

Cargo traffic turned negative last year for the first time since 2012. The 3.3 percent annual decline in demand was the steepest drop since 2009 during the Global Financial Crisis. Yields will continue to slide with a 3 percent decline forecast for 2020, an improvement from a 5 percent decline in 2019. Cargo revenues will slip for a third year in 2020 with revenues expected to total $101.2 billion, down 1.1 percent from 2019.

Cargo has been included among the performance drivers for 2020. The others are: economic growth, fuel costs, labour, and passenger.

GDP is forecast to expand by 2.7 percent in 2020 (marginally above the 2.5 percent growth in 2019). World trade growth is expected to rebound to 3.3 percent from 0.9 percent in 2019, as election year pressures in the USA contribute to reduced trade tensions. Growth is supported by actions from central banks as well as easing fiscal policy. The expected industry fuel bill of $182 billion will represent 22.1 percent of expenses, down from $188 billion or 23.7 percent of expenses in 2019.

Operating expenses did not rise as much as anticipated (3.8 percent vs. 7.4 percent June forecast) largely owing to lower-than-expected fuel costs; but this was not enough to offset the softness in revenue.

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