GENEVA: The global airline industry is likely to deliver an improved profit of $29.3 billion next year despite a ‘miserable year’ this year for many airlines, according to the International Air Transport Association (IATA).
The combination of a moderate pick-up in global growth, a fall in fuel costs and some increase in capacity growth, should help bring some stability to airlines’ financial performance in 2020, said Brian Pearce, IATA chief economist.
Slightly stronger economic growth in 2020, together with stable fuel prices is expected to help maintain Revenue Passenger Kilometres (RPKs) growth close to 4.1% this year, he said.
Furthermore, the IATA chief said that since oil supplies, particularly from non-Opec members, are plentiful and demands are weak due to the global economic slowdown, fuel prices are set to remain relatively low over the next 12 months.
"As such, we expect airlines' fuel bills to for to about US$182 billion (5.5 trillion baht), equivalent to an average of 22.1% of an airline's operating expenses in 2020," he said. "This year, fuel costs account for about 23.7% of an airline's expenses."
Looking back, said IATA's director-general and CEO Alexandre de Juniac, slowing economic growth, trade wars, geopolitical tensions, social unrests, as well as lingering uncertainties surrounding Brexit has made 2019 a tougher-than-anticipated year for airlines.
"That said, the aviation industry somehow managed to close this decade in the black, as ongoing efforts to cut costs and restructure inefficient bureaucracies continue to pay dividends," he said.
"It appears that we've reached the bottom of the current economic cycle, and the forecast for next year is somewhat brighter."
According to IATA, RPKs are set to expand by 4.1% next year — up from 1.6% in 2019. The number of available seat per kilometre (ASK) is also expected to rise to 4.7%, up from 3.5% this year. As airlines continue to take up deliveries from aircraft manufacturers, load factors — which reflects how efficiently an airline fills up seats on its flights — is expected to dip to 82% in 2020, down from 82.4% this year.
Asia-Pacific carriers will be helped by a modest recovery in world trade and thus air cargo volumes, with net profits estimated to reach $6 billion next year, up from $4.9 billion this year, forecast IATA.
As Asia remains the world's top manufacturing hub, transporting goods to and from the region makes up a significant proportion of sales for many of the region's airliner, it said.
While the global outlook may seem bright, the situation looks slightly grimmer closer to home, where tourism is being counted on to provide a lifeline for Thai AirAsia and struggling national carrier, Thai Airways International (THAI).
Thai AirAsia's Chief Executive Officer Santisuk Klongchaiya said that improving tourist numbers will help the airline see stronger growth next year.
Mr Santisuk told the Bangkok Post that fuel prices — a major component of an airline's operating costs — are likely to stabilise next year, thus enhancing an airline's ability to serve more passengers.
"State-backed policies designed to draw in more visitors from nearby countries — such as the Visa on Arrival fee waiver for Chinese and Indian tourists — will also help buoy the industry," he said.
"However, we have to remain watchful of the bullish baht."
Mr Santisuk said that while the competition within Thailand's aviation industry is heating up, the nature of the race has changed.
"It is no longer a matter of pricing — rather, it is about effective management, not just in terms of capital management, but also other operational factors, which include on-time departures and arrivals, improved safety, increased number of destinations and service frequencies."
As Thailand continues to struggle with capacity bottlenecks across its main international gateways, Mr Santisuk said that he expects some Thai airlines to add wide-body jets to their fleets to help overcome the issue, especially during peak periods.
"We will continue to review our flight schedules to match public demands," said Mr Santisuk.
"That said, we are also actively looking for new opportunities and revenue streams from our ancillary services, so that we can better prepare when tourist numbers rebound."
Meanwhile, loss-ridden THAI is depending on tourism in a more direct way — the flag carrier is working on a joint marketing campaign with the Tourism Authority of Thailand to push up inbound tourist numbers, which it hopes will help bring more cash to end its streak of losses.
The joint campaign is one of the "transformative" actions THAI is implementing to turn itself around out of the red.
Other actions include adopting a more compatible cost structure, improving the efficiency of operations, human resources, revenue creation channels, and working out a new experience for passengers onboard, said THAI president Sumeth Damrongchaitham.
THAI, which suffered a 10.91-billion-baht net loss in the first nine months of this year, will also cut costs by postponing unnecessary investments and reducing employee benefits.
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