All regions are expecting a reduction in profitability with the exception of North America and Latin America. Regional differences are significant.
North American carriers will deliver the strongest financial performance with a $15 billion post tax profit (up from $14.5 billion in 2018). That represents a net profit of $14.77 per passenger, which is a marked improvement from just 7 years earlier ($2.3 in 2012). Net margins, forecast at 5.5%, are down from 2018 levels owing to higher than expected fuel costs and slowing growth. The limited downside in this region has been underpinned by consolidation, helping to sustain load factors (passenger + cargo) above 65%, and ancillaries, which limit the impact of higher fuel costs, keeping breakeven load factors to 59.5%.
European airlines will deliver a net profit of $8.1 billion (down from $9.4 billion in 2018). That represents a net profit per passenger of $6.75 and a net margin of 3.7%–both are the second strongest industry results, but below what North American carriers earn. Breakeven load factors are the highest at 70.2%, caused by low yields due to the highly competitive open aviation area, high regulatory costs, and inefficient infrastructure. In 2019, for example, en-route air traffic management delays doubled to 19.1 million minutes. Europe also is one of the more exposed regions to weak international trade and this has damaged prospects this year.
Asia-Pacific airlines will deliver a net profit of $6.0 billion (down from $7.7 billion in 2018). That represents a net profit per passenger of $3.51 and a net margin of 2.3%. The region is showing very diverse performance. Accounting for about 40% of global air cargo traffic makes the region the most exposed to weakness in world trade, and that, combined with higher fuel costs, is squeezing the regions’ profits.
Middle Eastern airlines will deliver a combined net loss of $1.1 billion (slightly worse than the $1.0 billion loss in 2018). That equates to a $5.01 loss per passenger and a negative net margin (-1.9%). The region has faced substantial challenges in recent years, both to the business environment and to business models. Airlines there are going through a process of adjustment and announced schedules point to a substantial slowdown in capacity growth in 2019. Performance is now improving but the worsening in the business environment is expected to prolong losses in 2019.
Latin American airlines will deliver a net profit of $0.2 billion. This reflects a moderate improvement from the $0.5 billion loss in 2018, as the recovery of the Brazilian economy is offsetting higher oil prices. With a $0.50 profit per passenger, the region’s net margin is expected to be a thin 0.4%.
African airlines will deliver a $0.1 billion loss (unchanged from 2018), continuing a weak trend into its fourth year. Each passenger carried is expected to cost the carriers $1.54, leading to a -1.0% net margin. Breakeven load factors are relatively low, as yields are a little higher than average and costs are lower. However, few airlines in the region are able to achieve adequate load factors, which averaged the lowest globally at 60.7% in 2018. Overall, industry performance is improving, but only slowly.