Annual Review 2019 - IATA

Annual Review 2019

Contents

Contents

Contents

04 Members' list

06 Chairman's message

08 Director General and CEO's message

10 Industry story

16 Safety

22 Security

24 Regulation and taxation

30 Infrastructure

36 Environment

2

3

40 Cargo

46 Passenger experience

52 Financial services

56 About IATA

IATA Annual Review 2019

IATA Annual Review 2019

Alexandre de Juniac Director General & CEO International Air Transport Association Annual Review 2019 75th Annual General Meeting, Seoul, June 2019

Note: Unless specified otherwise, all dollar ($) figures refer to US dollars (US$).

Members' list

Members' list

A

Asiana Airlines

Corsair International

Atlantic Airways

Croatia Airlines

I

Adria Airways

Atlas Air

Cubana

Aegean Airlines

AtlasGlobal

Cyprus Airways

Iberia

Aer Lingus

Austral

Czech Airlines

Icelandair

Aero Republica

Austrian

Interjet

Aeroflot

Avianca

D

Aerolineas Argentinas

Avianca Brasil

Iran Air Iran Airtour Airline

Aeromexico

Avianca Costa Rica

Delta Air Lines

Iran Aseman Airlines

Africa World Airlines

Avianca Ecuador

DHL Air

Israir

Aigle Azur

Avianca Peru

DHL Aviation

Air Algerie Air Arabia Air Astana

Azerbaijan Airlines

Azores Airlines

E

Azul Brazilian Airlines

J

Japan Airlines

Air Austral

Eastar Jet

Jazeera Airways

Air Baltic

B

Air Botswana

Egyptair El Al

Jeju Air Jet Airways

Air Burkina

Bahamasair

Emirates

Jet Lite India

Air Cairo

Bangkok Airways

Ethiopian Airlines

JetBlue

Air Caledonie

Batik Air

Etihad Airways

Jin Air

Air Canada

Belavia Belarusian Airlines EuroAtlantic Airways

Jordan Aviation

Air Caraibes

BH Air

European Air Transport

Juneyao Airlines

4

Air China

Biman Bangladesh Airlines Eurowings

Air Corsica Air Dolomiti

Binter Canarias

EVA Air

K

Blue Air

Evelop Airlines

Air Europa

Blue Panorama

Kenya Airways

Air France Air India

BoA Boliviana de Aviacion

F

Braathens Regional Aviation

Kish Air KLM

Air Italy

British Airways

FedEx Express

Korean Air

Air Koryo

Brussels Airlines

Fiji Airways

Kunming Airlines

Air Macau

Bulgaria Air

Finnair

Kuwait Airways

Air Madagascar

flybe

Air Malta

C

Air Mauritius

flydubai

L

FlyEgypt

Air Moldova

CAL Cargo Airlines

Freebird Airlines

LAM

Air Namibia

Camair-Co

Fuzhou Airlines

Lao Airlines

Air New Zealand

Cambodia Angkor Air

LATAM Airlines Argentina

Air Niugini Air Nostrum

Capital Airlines

G

Cargojet Airways

LATAM Airlines Brasil LATAM Airlines Colombia

Air Peace

Cargolux

Garuda Indonesia

LATAM Airlines Ecuador

Air Serbia

Caribbean Airlines

Georgian Airways

LATAM Airlines Group

Air Seychelles

Carpatair

Germania Flug AG

LATAM Airlines Paraguay

Air Tahiti

Cathay Dragon

GOL Linhas Aereas

LATAM Airlines Peru

Air Tahiti Nui

Cathay Pacific

Gulf Air

LATAM Cargo Brasil

Air Transat

Cayman Airways

GX Airlines

LATAM Cargo Chile

Air Vanuatu

China Airlines

LIAT Airlines

AirBridgeCargo Airlines

China Cargo Airlines

H

Aircalin

China Eastern

Loong Air LOT Polish Airlines

Airlink

China Express Airlines

Hahn Air

Lucky Air

Alaska Airlines

China Postal Airlines

Hainan Airlines

Lufthansa

IATA Annual Review 2019

Alitalia

China Southern Airlines

Hawaiian Airlines

Lufthansa Cargo

Allied Air

CityJet

Hebei Airlines

Lufthansa CityLine

AlMasria Universal Airlines Comair

Hi Fly

Luxair

American Airlines

Condor

Hong Kong Air Cargo

ANA

Congo Airways

Hong Kong Airlines

Arik Air

Copa Airlines

Hong Kong Express Airways

Arkia Israeli Airlines

Corendon Airlines

M

S

V

W

Mahan Air

S7 Airlines

Vietjet

Wamos Air

Malaysia Airlines

Safair

Vietnam Airlines

WDL Aviation

Malindo Air

SAS

Virgin Atlantic

WestJet

Mandarin Airlines

SATA Air Acores

Virgin Australia

White Airways

Martinair Cargo

Saudi Arabian Airlines

Vistara

Wideroe

MasAir

SaudiGulf Airlines

Volaris

Mauritania Airlines

SCAT Airlines

Volotea

X

International

SF Airlines

Vueling

MEA

Shandong Airlines

Xiamen Airlines

MIAT Mongolian Airlines

Shanghai Airlines

XL Airways France

Mistral Air

Shenzhen Airlines

MNG Airlines

Sichuan Airlines

Montenegro Airlines

Silk Way West Airlines

Myanmar Airways

SilkAir

International

Singapore Airlines

N

NCA Nippon Cargo Airlines Neos Nesma Airlines

SKY Airline Smartavia Solomon Airlines Somon Air South African Airways South African Express

New Members

IATA's membership continues to grow. Between June 2017 and May 2018, 13 airlines joined IATA's ranks, from all

Nile Air

Airways

parts of the globe and representing a

Nordwind Airlines

SpiceJet

multitude of business models.

Nouvelair

SriLankan Airlines

O

Okay Airways Olympic Air

SunExpress Suparna Airlines Surinam Airways SWISS Syrianair

In Africa, Congo Airways, the flag

carrier of the Democratic Republic

5

of Congo, applied for and gained

membership.

Oman Air Onur Air Overland Airways

T

TAAG Angola Airlines

Asia-Pacific and North Asia boasts seven new members. Fuzhou Airlines, Kunming Airlines and Urumqi Air

P

TACA

are passenger-focused airlines.

TACV Cabo Verde Airlines

Hong Kong Air Cargo, meanwhile,

Pegas Fly Pegasus Airlines PGA Portugalia Airlines Philippine Airlines PIA Pakistan International

Airlines Precision Air

Q

Tame TAP Portugal TAROM Tassili Airlines Thai Airways International Thai Lion Air Thai Smile Tianjin Airlines TUIfly Tunisair

concentrates on the cargo market. Thai Smile, a wholly-owned subsidiary of Thai Airways, flies regional routes out of Bangkok, Spice Jet from India, and Solomon Airlines, the national carrier of the Solomon Islands, make up the remainder of Asia-Pacific's latest IATA members.

Qantas

Turkish Airlines

In Europe there were four new IATA

Qatar Airways

T'way Air

members. Air Dolomiti, part of the

Lufthansa Group, accompanied

R

U

Cyprus Airways, Germania Flug AG,

Ravn Alaska

Ukraine International Airlines

and XL Airways France in joining.

Rossiya Airlines Royal Air Maroc Royal Brunei Royal Jordanian RwandAir

UNI AIR United Airlines UPS Airlines Ural Airlines Urumqi Air

Ravn Alaska, a US-based airline that specializes in serving smaller communities in its home state of Alaska, also became an IATA member.

UTair

Uzbekistan Airways

IATA Annual Review 2019

Members' list

IATA Annual Review 2019

H.E. Akbar Al Baker, Chair, IATA Board of Governors & CEO Qatar Airways

Future air travel must be effortless and sustainable

H.E. Akbar Al Baker, Chair, IATA Board of Governors & CEO Qatar Airways

What were your top priorities

An effortless travel experience will be It is important to the future of our

as IATA Chairman?

so important going forward. Travelers industry and to the future of our

are becoming tired of overregulation, children and grandchildren that

It was to represent, lead, and serve our the endless processing they must

there is enough investment by

industry with strength and humility.

suffer, and the laborious security

aircraft manufacturers, engine

checks. Let me be clear, I don't blame manufacturers, and other supply

IATA plays a very important part in our the authorities for these thorough

chain partners to produce equipment

industry. As a crucial instrument for

processes when our world is passing that promotes sustainability and

airlines, it is important that members,

through a very difficult time. But the

makes our industry more efficient.

governments, and the general public

industry, through IATA, can speak

perceive IATA in the right way. This is

in one voice and help authorities

not just a rubber stamp organization.

and regulators achieve our shared

But we've started the process to

security goals, while improving the

6

improve the association's activities

passenger experience.

and it was my privilege and duty

during the past year to make sure that What steps should the industry

we kept on developing initiatives while take to earn a better reputation

providing greater accountability and

for sustainability?

enhanced oversight.

The most important thing is

Together with the board of governors, the leadership with CORSIA.

there was a continued effort to

The industry has long been

ensure that these improvements

a leader in environmental

endure in the long term.

efforts and aims to halve

net carbon emissions

Where do you see the most

by 2050 compared

important future innovations

with 2005.

for the airline industry?

IATA has a number of important projects underway. New Distribution Capability, One ID, and Radio Frequency Identification (RFID), for example, are innovations which will make future travel effortless and seamless for passengers. And they will do so while also bringing efficiencies into our industry and letting airlines keep their brand and identity.

There is growing pressure on the environmental performance of aviation and the industry must continue to do all it can. But people who shun aviation or who think aviation should be taxed don't realize what an economic collapse would happen. Aviation supports 65 million jobs and $2.7 trillion in global GDP. Without this unique means of transportation, people will not be able to cross the world to do business, to boost local economies, or to meet their loved ones.

Do governments fully appreciate the contribution of aviation?

Governments are using aviation as a cash cow. For example, they collect taxes for the environment but what do they do with the money? Nobody knows. If governments were really serious about the environment, they would comply with the international agreements that they sign. Instead, they hit aviation with so-called green taxes to meet general budgetary requirements and do nothing for the environment. So they are taking the money from us but doing very little.

Governments must reinvest the money from environmental taxes in the industry to help us achieve further sustainability success.

Any final thoughts on the year?

I'd like to thank all my colleagues on the IATA Board for their active participation throughout the year, and their commitment to building a safer, stronger, and better industry. I must make a particular mention of Mr. Yang Ho Cho, Chairman and CEO of Korean Air, who sadly passed away in April. He will be much missed from the IATA Board, by his airline colleagues, and most of all by his family and friends. His contribution to aviation and to Korea was incalculable.

IATA Board Of Governors 2018?2019

CHAIR OF THE BOARD Mar?a Jos?

ALSO SERVED

Akbar Al Baker

Hidalgo Guti?rrez

(To June 2018)

Chief Executive Officer Chief Executive Officer Safwat Musallam

QATAR AIRWAYS

AIR EUROPA

Chairman and Chief

Executive Officer

MEMBERS

Rupert Hogg

EGYPTAIR

Ahmed Adel

Chief Executive Officer

Chairman and Chief

CATHAY PACIFIC

(To October 2018)

Executive Officer

Franck Terner

EGYPTAIR HOLDING CO Harry Hohmeister

Chief Executive Officer

(representing EGYPTAIR) Chairman

AIR FRANCE

AUSTRIAN AIRLINES

Yuji Akasaka

(To November 2018)

President

Alan Joyce

Tan Wangeng

JAPAN AIRLINES

Chief Executive Officer President and Chief

QANTAS

Executive Officer

Saleh N. Al Jasser

CHINA SOUTHERN

Director General

Liu Shaoyong

AIRLINES

SAUDI ARABIAN

Chairman

AIRLINES

CHINA EASTERN

(To March 2019)

AIRLINES

David Bronczek

Enrique Cueto

President and Chief

Chief Executive Officer Sebastian Mikosz

Operating Officer

LATAM AIRLINES

Group Managing

FEDEX CORPORATION

Director and CEO

German Efromovich

KENYA AIRWAYS

(To March 2019)

Chairman

Naresh Goyal

AVIANCA

Pham Ngoc Minh

Chairman

Chairman

JET AIRWAYS

Pieter Elbers

VIETNAM AIRLINES

President and Chief Executive Officer

Oscar Munoz

(To April 2019) Yang Ho Cho

7

KLM ROYAL DUTCH

Chief Executive Officer Chairman and Chief

AIRLINES

UNITED AIRLINES

Executive Officer

KOREAN AIR

Mohamad El-Hout

Christine

Chairman and Director Ourmi?res-Widener

General

Chief Executive Officer

MIDDLE EAST AIRLINES FLYBE LIMITED

Luis Gallego Mart?n Chief Executive Officer IBERIA

Tewolde GebreMariam Group Chief Executive Officer ETHIOPIAN AIRLINES

Goh Choon Phong Chief Executive Officer SINGAPORE AIRLINES

Rickard Gustafson President and Chief Executive Officer SAS

Robin Hayes President and Chief Executive Officer JETBLUE AIRWAYS

Pedro Heilbron Executive President and Chief Executive Officer COPA AIRLINES

Douglas Parker Chairman and Chief Executive Officer AMERICAN AIRLINES

Calin Rovinescu President and Chief Executive Officer AIR CANADA

Benjamin Smith Chief Executive Officer AIR FRANCE / KLM (representing AIR FRANCE)

Carsten Spohr Chairman and Chief Executive Officer LUFTHANSA

Wang Changshun Chairman CHINA SOUTHERN AIRLINES

IATA Annual Review 2019

H.E. Akbar Al Baker, Chair, IATA Board of Governors & CEO Qatar Airways

IATA Annual Review 2019

Alexandre de Juniac, Director General and CEO

Aviation is an amazing industry. I call it the business of freedom

Alexandre de Juniac, Director General and CEO

In 2018 the world's airlines provided about 4 billion passengers the freedom to travel over a global network of some 22,000 routes.

The threat of trade wars and protectionist activity also looms large. Globalization has made our world more prosperous. And aviation

We can be fully confident that a technical solution will be found to address the issues that have been identified. But there are critical

The average cost of this transport

will play a central role in enabling

questions still to be answered. What

was half that of two decades ago.

a more inclusive globalization that

more can be done to ensure the safe

And since 2010 the carbon footprint

spreads its benefits more evenly.

introduction of new technology?

per passenger has reduced by

But we must be firm in insisting on

How can we reinforce collective

aboout 2.8% per year.

borders that are open to people and

international confidence into state

to trade, or the benefits of aviation

certification systems? And how can

Last year, airlines also enabled the

will be severely curtailed.

authorities and the industry coordinate

freedom to do business globally by

better to maintain public confidence?

8

transporting 64 million tonnes of

Over the next two decades, the

cargo to markets around the world.

demand for air transport is expected

Security

This activity supported a third of

to double. The ability to successfully

Security is an equal partner to

global trade by value, generated 65

meet this demand will require the

safety. Flying is secure. But the level

million jobs and underpinned $2.7

industry to excel in several areas.

of international cooperation and

trillion of GDP.

And, as aviation remains a highly

information sharing by governments

regulated industry, governments will

who have the primary responsibility

In 2018 the world's airlines earned

play a key role. With the 40th ICAO

for security continues to lag behind

a collective net profit of $30 billion.

Assembly scheduled for late in 2019

that of safety. Moreover, many states

Industry revenues topped $812

we have an important opportunity

struggle to implement the baseline

billion and 8% return on invested

to engage government action at the

international security standards in

capital was generated.

global standard-setting level.

Annex 17 of the Chicago Convention.

In each year since 2010 the airline industry earned an aggregate profit. And since 2015 that profit has exceeded the average cost of capital. While some airlines continue to face financial challenges, this nine-year profitability streak at the industry level marks a major shift from the sector's historic boom-bust financial cycle.

The industry's newly found financial resilience enables it to weather shifts in the operating environment without plunging into crisis. Nonetheless, we expect profits to be squeezed in 2019 as a result of oil price volatility, rising costs for labor and infrastructure, ever-increasing taxation, and a tapering of demand.

Safety

Air transport is the safest form of long-distance travel. And all involved with aviation are committed to making it ever safer. That was confirmed again in 2018 when the industry's safety performance showed marked improvement on the ten year average. But two tragic crashes with the newly introduced Boeing 737 Max have knocked the industry's heretofore impressive reputation.

The industry strongly supports the development of the Global Aviation Security Plan through ICAO as a means of taking a major forward.

Sustainability

The October 2018 publication of a UN assessment of the world's progress towards containing climate change to the Paris Agreement's aims raised alarm bells. Aviation, along with all industries, is coming under even greater environmental scrutiny. In Europe, the pressure is particularly intense.

We must not forget that aviation was among the first industries, if not the first, to outline a plan to achieve carbon neutral growth (CNG). And we are committed to achieve it from 2020.

Preparations for CNG took a giant step The industry agenda is broad.

IATA is proud to lead, represent

in January 2019 with airlines beginning Travelers will appreciate the

and serve the airline industry as

their emissions monitoring for the

technology driven innovations such

we address these and other issues

Carbon Offsetting and Reduction

as the One ID program to smoothly

with governments and industry

Scheme for International Aviation

move travelers through the airport

stakeholders. Our vision is to work

(CORSIA). Agreed by the International

with a single biometric token, and

together with our almost 300 member

Civil Aviation Organization (ICAO) in

plans to enhance baggage tracking.

airlines to shape the future growth

2016, CORSIA was approved with the

Parallel efforts to modernize slot

of a safe, secure and sustainable air

full support--indeed with the urging--

allocation rules, reform airspace

transport industry that connects and

of the aviation industry.

management and find better means

enriches our world.

to fund infrastructure development

CORSIA is just one pillar of the

will deliver less visible but equally

industry's commitment to stabilize

important gains.

net carbon emissions from 2020, and

to cut its net carbon footprint to half

People

the 2005 level by 2050. And science

People are the key resource to

tells us that fulfilling this will be

take aviation forward. Our industry

consistent with the 1.5-degree-goal

provides high quality jobs that

of the Paris Agreement.

add value to economies in which

they are located. Aviation careers

Alexandre de Juniac

But there is urgent need to more

are attractive, but there is growing

Director General and CEO

concretely demonstrate the ambition concern about how the industry

of our commitments. And we must be will find sufficient technically skilled

relentless in our efforts to insist that

employees quickly enough to keep

CORSIA is effectively implemented,

pace with demand.

that strategic investments are made

to commercialize sustainable aviation There are no easy answers, but

fuels and that the bottlenecks in

it is clear that increasing female

9

air traffic management are sorted.

participation in the industry is

Together with continued investment

a tremendous opportunity.

in greener technologies, these will

Finding ways to balance gender

deliver a significant reduction in

diversity in all job categories

aviation's carbon footprint.

will provide huge potential to

strengthen our business and

Infrastructure

ensure the people we need to

Meeting the demand for connectivity sustain the industry.

depends on availability of

infrastructure. In many parts of the

Your association

world we already struggle with the

The industry counts on IATA.

physical limitations of available

Global standards developed

airports and airspace. As demand

by our members through

grows that will only get more acute.

IATA underpin day-to-day

operations worldwide. Our

Reminding governments to work

efficient settlement systems now

with the industry to build sufficient

settle over $460 billion annually.

infrastructure at affordable cost

And IATA's products and services

will continue to be a long-term top

are tailored to help the success of

priority. And in the short term there is our members while funding industry

enormous potential to deliver greater activities. As your trade association,

efficiency and a better customer

IATA's global workforce is fully

experience with the infrastructure

focused on adding value to the

we currently have.

businesses of our members.

IATA Annual Review 2019

Alexandre de Juniac, Director General and CEO

Industry story

Industry story

01Industry story

Empowering industry profitability despite challenges

10

11

IATA Annual Review 2019

IATA Annual Review 2019

IATA Annual Review 2019

Industry story

Air transport connected more cities at lowered cost

Passenger demand was again robust

The US O-D passenger market remained the world's largest

In 2018, airlines continued to increase Demand for air passenger services

Although China's domestic market

the number of city-pair routes

remained strong in 2018, with

added the most passenger journeys

globally. Almost 22,000 city pairs are industry-wide revenue passenger

in 2018, the US domestic market--

now regularly serviced by airlines.

kilometers (RPK) increasing 7.4%.

where almost 590 million passenger

This is an increase of 1,300 over the

This represented a slowdown from

journeys were undertaken in 2018--

number of city-pair connections

the decade-high pace recorded in

continues to be the world's largest

in 2017. Strong improvements in

2017, of about 8%, but still exceeded single O-D market. China comes

connectivity and in costs over the

the long-run industry average

second, with 515 million, followed

past two decades--the real, inflation- growth rate by around 2 percentage

by India some distance back, at 116

adjusted cost of air transport has

points. Air passenger demand was

million. Unsurprisingly, domestic

halved in the past 20 years and

underpinned by a generally solid

markets dominated the rankings.

declined further in 2018--help to

global economic backdrop, especially The top 12 markets accounted for

ensure that aviation, the "business

earlier in the year, which, in turn,

almost half of the total number of O-D

of freedom," continues to distribute

supports jobs, incomes, and business passenger journeys in 2018.

its array of benefits to consumers,

activity, and by fierce competition in

Chart 6

suppliers, and economies globally.

Chart 1

Air transport supported economic growth and prosperity through tourism and trade

the industry, which helps to ensure airfares remain affordable to travelers.

Chart 4

China added the most passenger journeys

Air freight demand growth eased

Air freight grew slightly in 2018 compared with 2017. Buoyed by the global inventory restocking cycle, industry-wide freight tonne

Air transport is central to world

There were close to 4 billion origin-

kilometers (FTK) increased 9.7% in

tourism and trade. Tourists traveling

destination (O-D) passenger journeys 2017. In 2018, FTK likewise grew,

internationally by air are estimated

worldwide in 2018. Among them,

but a mere 3.4%. This was in line

12

to have spent about $850 billion in

domestic routes within China again

with global trade volumes, which

2018, an increase of more than 10%

provided the largest incremental

trended broadly sideways in the

over 2017. The additional number of

increase in passenger trips, adding

first part of 2018 and contracted in

city-pair connections and the lower

just under 50 million journeys. The

the year's fourth quarter. The lesser

cost of air transport also boosts trade domestic markets of the United

increase for air freight also reflected

in goods and services and heightens States and India once more ranked

the typical slowdown following an

foreign direct investment and other

second and third, with around 30

inventory rebuild.

important economic flows. Air

million and 18 million more passenger

transport accounts for only a small,

journeys, respectively. Of the main

The second half of the year also

less than 1%, proportion of world

markets that IATA regularly tracks,

saw the industry face a number of

trade by volume but for a much larger India's domestic market showed the

headwinds. There was a moderation

share by value, of about 33%. In 2018, fastest growth in passenger numbers, in world trade--a result in part of the

the value of goods carried by air is

which increased 18.5% in 2018. That heightened trade tensions between

estimated to have been $6.7 trillion.

India recorded its 50th consecutive

the United States and China--and

Chart 2

month of double-digit, year-on-year

a deterioration in some leading

Air travel was more accessible for more people

growth in RPK in October highlights the consistently strong performance of its market

indicators, such as the new export orders component of the global Purchasing Managers Index. Having

Worldwide air passenger numbers

Chart 5

said that, not all air freight sectors

continued to rise, exceeding 4.3

were equally affected. E-commerce

billion journeys in 2018. Connecting

and pharmaceuticals continued to

cities directly cuts the cost of air

perform strongly.

transport by saving time for shippers

Chart 7

and travelers. Combined with

cheaper fares, this enables more

people to fly more often. In 2000, the

average citizen flew just once every

44 months. In 2018, the time between

trips had halved, to just 21 months.

Chart 3

1. Unique city pairs and real transport costs

22,000

1.6

Number of unique city pairs

Real cost of air transport ($/RTK, in 2014 prices)

1.5

20,000

1.4

18,000

1.3

16,000

1.2

1.1

14,000

1.0

12,000

0.9

0.8 10,000

0.7

8,000

0.6

2000200120022003200420052006200720082009201020112012201320142015201620172018

3. Accessibility of air travel

5.0

50

Scheduled air pax (billion)

4.5

Number of months before next trip

45

40 4.0

35

3.5

30

3.0

25

2.5

20

15 2.0

10 1.5

5

1.0

0

2000200120022003200420052006200720082009201020112012201320142015201620172018

5. Top 10 increasing O-D markets

China domestic US domestic

India domestic Indonesia domestic

Russia domestic Mexico domestic

Spain domestic Japan domestic Brazil domestic

Iran domestic

% year-on-year growth rates

10.5 5.7 18.5 9.3 13.3 12.0 13.3 3.7 4.5 32.8

0 5 10 15 20 25 30 35 40 45 50 Additional pax in 2018 (million)

7. Air freight versus global goods trade growth

Industry FTK (% year on year)

25

World goods trade (% year on year)

25

20

20

15

15

10

10

5

5

0

0

-5

-5

-10

-10

-15

-15

2000200120022003200420052006200720082009201020112012201320142015201620172018

Industry story

2. Air tourist spending and value of trade carried by air

950 Air tourist spending ($ billion) Value of trade by air ($ billion)

850

8,000 7,000

750

6,000

650

5,000

550

4,000

450

3,000

350

2,000

250 2000200120022003200420052006200720082009201020112012201320142015201620172018

1,000

4. RPK versus world GDP growth

16

RPK (% year on year)

9

14

World GDP (% year on year)

12

7

10

5

8

6

3

4 1

2

0

-1

-2

-4

-3

2000200120022003200420052006200720082009201020112012201320142015201620172018

13 6. Largest O-D air passenger markets

600

60%

500

50%

400

40%

300

30%

Market size (million pax)

200

Cumulative share of total pax

20%

100

10%

0

0%

US doCmhina domIndiIanddoonmesia doJmapan doBmraziAl duosmtralia dRoumssia dMoemxico domSpain-TUuKrkey doSmpain dom

IATA Annual Review 2019

IATA Annual Review 2019

Industry story

Regional outcomes for passenger and freight demand were mixed

December. The price of jet fuel has subsequently begun to rise in the early months of 2019. But the sharp and

Regional financial performance was again mixed

Regionally, the industry's financial

Regions saw varied performance in

unanticipated nature of the decline

performance remained considerably

passenger and freight demand in 2018. at year-end means that many airlines

varied. The financial performance

Airlines from Asia-Pacific led the way

that hedge their fuel exposure are

of the North American airlines

in passenger growth, which increased

unlikely to have seen much benefit

continued to lead the way, delivering

9.5% in that region, followed by airlines from the price adjustment so far.

an operating (EBIT) margin of 9.1% in

in Europe and in Latin America. For

Chart 10

2018. Airlines in Europe, Asia-Pacific,

freight, it was the Latin American carriers that outperformed, followed by carriers in North America. Freight volumes for African airlines were

Airlines raised their achieved load factor and maintained a gap above the breakeven level

and Latin America also yielded solid profitability, while carriers in the Middle East and in Africa faced especially challenging operating

broadly stable in 2018, but this should

With oil prices, interest rates, and

environments.

be viewed in the context of their robust such other key costs as labor rising

Chart 13

24% growth in volume in 2017.

further in 2018, the estimate for the

Chart 8

industry-wide breakeven load factor

On a per passenger basis, the airline

Passenger load factor achieved a record as demand growth exceeded capacity

increased to 65.9%. Aided, however, by the record PLF cited previously, the combined achieved load factor also rose, enabling airlines to maintain

industry is a high-volume, low-margin industry. Considering net profits on a per passenger basis highlights this and presents an alternative

Available seat kilometers (ASK)

a solid gap above the level required

perspective on regional airline

increased 6.9% globally in 2018

for financial breakeven. The gap

profitability. By this measure, the

compared with 2017, slightly lower

between the breakeven and achieved industry generated a modest $6.85

than the 7.4% RPK increase in

load factors is driving profitability

per passenger in 2018. Regionally,

passenger demand. As a result, the

and returns and was again a critical

the North American carriers were

passenger load factor (PLF) ticked up contributor to the industry's financial the best performers, earning $14.66

14

slightly to a record 81.9%. The PLF

performance in 2018.

per passenger. At the other end of

has risen more than 10 percentage

Chart 11

the spectrum were airlines in Africa

points over the past 15 years. And this increase is behind the improved industry financial performance of recent years. Available freight tonne kilometers (AFTK), meanwhile, grew

Another solid financial performance generated an above cost of capital return for the fourth consecutive year

and Latin America. In aggregate, they averaged a loss of $1.09 and $1.65, respectively, for every passenger they carried.

Chart 14

4.5% year on year, easily outpacing

The global airline industry

the 3.4% growth in FTK. The freight

experienced another year of robust

load factor, therefore, fell about 1

financial outcomes in 2018. IATA

percentage point in 2018, partly

estimates that airlines generated a

unwinding 2017's gain.

net posttax profit of $30 billion on

Chart 9

an operating (EBIT) margin of 5.8%.

These outcomes are modestly lower

Oil prices had a bumpy ride

than for 2017 and, as such, reflect 2018's more challenging business

The jet fuel price opened the year

environment and particularly its rising

under review about $80 a barrel and

cost pressures.

was initially stable. At the end of

the year's first quarter, though, the

Despite a moderation in industry-

fuel price began to track upward,

wide returns, to 8.0%, the air

increasing more than 20%, to peak

transport's return on capital

at $96 per barrel in October 2018. In

exceeded its average cost of capital,

November and December, however,

which increased to 7.3%, for the

market sentiment turned sharply down fourth consecutive year. Creating

amid signs of a deteriorating global

value for investors on a more

economy and strong supply from US

sustainable basis than the industry

tight oil producers. The price quickly

has managed to do historically will

tumbled, falling more than 25% to

be an increasingly crucial element in

end the year averaging about $72 in

attracting the capital necessary to

fund fleet renewal and replacement in

the years ahead.

Chart 12

Net post-tax profit per passenger ($)

$/barrel (monthly average data)

Industry story

8. Regional passenger and freight demand outcomes

10% RPK FTK

8%

10% 8%

6%

6%

4%

4%

2%

2%

0%

Africa Asia-Pacific

Europe Latin America

Middle

East North

America

Industry

0%

9. Industry passenger and freight load factors

85

56

83

54

81 52

79

77

50

75

48

73

46

71

44

69

67

Passenger load factor (% of available capacity)

42

Freight load factor (% of available capacity)

65

40

2000200120022003200420052006200720082009201020112012201320142015201620172018

10. World oil and jet fuel prices

11. Breakeven and achieved load factors

100

100

70

70

90

90

68

68

80

80

66

66

70

70

64

64

60

60

Brent crude oil

50

Jet fuel

50

40

40

Jan-18Feb-18Mar-18Apr-18May-18Jun-18 Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19

62

62

60

Achieved load factor (% of ATK)

60

Breakeven load factor (% of ATK)

58

58

2000200120022003200420052006200720082009201020112012201320142015201620172018

15

12. Industry return on investment and the cost of capital

12

Cost of capital (WACC) % of invested capital

12

11

Return on capital (ROIC) % of invested capital

11

10

10

9

9

8

8

7

7

6

6

5

5

4

4

3

3

2

2

1

1

0

0

2000200120022003200420052006200720082009201020112012201320142015201620172018

14. Airline profitability per passenger

16

14.66

14

12

10 8 6.85 6 4 2

8.20

4.74

2.77

0

-2

IndustryNorth America

Europe Asia-Pacific Middle East

-1.09 -1.65 Africa Latin America

Operating margin (% of revenue)

13. Regional profit performance

10

9.1

8 5.8

6 4

6.2 4.5

2

0

2.7 1.5

-2

-2.0

IndustryNorth America

Europe

Asia-Pacific

Middle

East Latin

America

Africa

IATA Annual Review 2019

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