Middle East aviation sector forecast to make $1 billion loss in 2020

Middle East aviation sector forecast to make $1 billion loss in 2020
Published: 12 December 2019 - 7:56 a.m.

The airline industry in the Middle East is expected to make losses of $1 billion in 2020 as international trade wars continue to blight the global aviation market.

The International Air Transport Association’s (IATA) forecast for the region expects “some rebound” next year and the Middle East industry’s losses are forecast to reduce by half-a-billion dollars compared to 2019.

But experts believe the expected better performance in the Middle East resulting from restructuring and stronger growth will take time to have an impact.

IATA’s forecast, published today, stated that Middle East carriers are continuing a restructuring process and announced schedules point to a substantial slowdown in capacity growth for 2020.

It said: “After very weak economic growth in 2019, which limited local traffic, some rebound is expected [in the Middle East] in 2020.”

IATA downgraded its global forecast for 2019 from $28 billion of net profits down to $25.9 billion. It forecast $29.3 billion of net profits in 2020.

In 2020, North American, European and Asia-Pacific carriers are expected to make $16.5 billion, $7.9 billion and $6 billion net profits, respectively. Latin America is also forecast to make a loss.

IATA blamed international trade wars, social unrest and slowing economic growth for a “tougher-than-anticipated” business environment for airlines in 2019.

Speaking at IATA’s Geneva headquarters this morning, Brian Pearce, IATA’s chief economist, said: “The overall picture is one of slowdown, indeed for cargo it’s one of shrinkage by volume in 2019.

“It’s been a pretty miserable year for [the cargo industry] and freight tonne kilometres are on average 3.3% lower this year than in 2018 and that is the worst performance since the global financial crisis.

“It’s pretty clear that that has been driven mostly by tariff wars and trade wars. That has started to damage air travel as well through weakening business confidence and more broadly weakening GDP. So we’ve had to downgrade our expectations for passenger growth [from 5% growth to 4.2%].”

Pearce added that the Middle East’s economy is looking “in much better shape for 2020” and that there will be “quite a rebound” in the region’s airline sector.

“In the Middle East, airlines look particularly closely at their business models, partly because the business environment has deteriorated.

“What previously had been very rapid expansion in capacity has been transformed so there’s been a much more careful approach to new developments, with a different fleet structure, and broader business models have been re-assessed.

“So we do see a much more cautious approach to business in the Gulf.”

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