Annual Air Transport Report and Forecast by the World Bank

Annual Air Transport Report and Forecast by the World Bank
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Download the complete 15th Air Transport Annual Report 2019 of the World Bank Group (WBG) complete with the outlook for 2020 considering COVID 2019 from this article. It is a fascinating work due to the drastic changes in the aviation market due to COVID-19 and the changed outlook for 2020.

The Air Transportation has become the global transport infrastructure, which plays a key role in
economic development in all markets. Never before has the economy at large benefitted from a
global network on multi-modal supply chains, which allows many developing and emerging
countries to benefit by participating in manufacturing, trade or tourism. Markets have opened up,
and liberalization in trade and services has supported the expansion of the global airline industry.
As such, air transportation experienced a decadelong period of high growth, especially in
emerging markets where many travelers boarded an aircraft for the first time.

However, growth in passenger traffic has started to slow. In 2019, global airline passenger demand
grew 4.2%, which was below a long-term growth rate of around 5.5%. It was the weakest
figure for revenue passenger-kilometer (RPK) growth since 2009, and a decline from 7.3% in
2018. Nonetheless, it significantly outpaced the growth of global GDP, which is remarkable as air
transportation typically follows the growth of the global economy. Airline passenger capacity has
increased by 3.4% in 2019, which resulted in a rise of load factor by 0.7% to a new record high
of 82.6%. Regionally, the strongest growth rates were seen in Africa and Asia-Pacific at 4.9%
and 4.8% respectively, while Europe and Latin America both had growth rates of 4.2% and
North America’s was 4.1%. The Middle East saw growth of only 2.4%.

Click here to download the 90 page World Bank report as a PDF

Annual Air Transport Report and Forecast by the World Bank

Click here to download the 90 page World Bank report as a PDF 

The strongest region, in terms of the financial performance of its airlines, was North America, where
net post-tax profits were the highest at USD16.5 billion. This represents a net profit of USD16.0
per passenger, which is near twice the level of six years earlier. Net margins were forecasted
at 6.0% for 2020, representing a slight decline from 2019 levels stemming from the decline in
yields with rising capacity. In Europe, breakeven load factors remain quite high at 70.4%. This
was caused by low yields due to the highly competitive open aviation market and high regulatory
costs. Nevertheless, given lower fuel cost and canceled expansion strategies of some leading
carriers, net profits were forecasted to be USD7.9 billion in 2020, representing USD 6.4 per
passenger and a margin of 3.6%.

Airlines in Asia-Pacific suffered due to the weakness in world trade and cargo. Some modest recovery in world trade was expected for 2020, which would have improved profits in the region.
The average profit per passenger was expected to increase to USD3.3 and net profits to increase
to USD6.0 billion with a net margin of 2.2%. Middle Eastern airlines were in the process of restructuring, which resulted in a slowdown in capacity growth. The Middle Eastern airlines
losses in 2019 amounted to USD1.5 billion, but a reduction to USD 1 billion was expected for
2020. Latin American airlines were on a path of recovery, but still losing USD 400 million in
2019. Nevertheless, improvements were implemented, and airlines in Latin America were expecting
a small profit of USD100 million in 2020. Africa, finally, remained as in the past 5 years the
weakest region in terms of airline profitability. After losing USD400 million in 2018, the performance of African carriers improved only slightly. On average, African carriers continued to suffer from a very low load factor in 2019, which was expected to improve slightly to 58.8% in 2020.

The industry forecast for 2020, which was issued in late 2019, expected an overall improvement
in global economic growth during 2020 and stable fuel prices. This should have resulted in a
4.1% growth of RPK globally, and a slight improvement of the airlines’ financial performance to
net profits of USD29.3 billion with an operating margin of 5.5%.

However, the unexpected grounding of most of the world’s airlines in early 2020 due to the outbreak
of the COVID-19 pandemic, which will have a severe impact on the global economy, completely
changed the outlook. At the time of preparing this report, the global GDP was expected to contract by 5.0% in 2020, as COVID will have a significant impact on international trade (13% decline). It is estimated that global revenues of the airline industry will therefore shrink by 50.4%
in 2020, which will result in the worst year in history for airlines with a net financial loss of USD84.3 billion

The 15th edition of the World Bank Group (WBG) Air Transport Annual Report, which is published with a three-month delay due to COVID-19, summarizes the support that is given to emerging and developing countries for the development of air transportation. However, while many current or planned projects continue to be implemented, numerous WBG client countries are facing unprecedented challenges in the new economic reality. In many markets where air transportation
played a pivotal role for trade and tourism, the sustainable restoration of air services became a new national priority. The WBG is responding with support to client countries by adhering to the past principles of facilitating the development of safe, sustainable, and affordable air transportation services. For this, the so-called “Cascade Approach” continues to be applied, which aims at countries
maximizing the development resources by drawing on private financing and sustainable private sector solutions. As such, the WBG only provides financing for those areas where private sector engagement is not optimal or not available

This Air Transport Annual Report summarizes the current portfolio of the air transport practice at the WBG and highlights some of the projects in more detail. Given that no new major infrastructure projects have been initiated, the overall portfolio continued, as anticipated, to decrease by about 5% to USD 928 million. However, given that several new projects are in preparation in the Caribbean and in the Pacific, and given the strong demand for technical assistance, the
portfolio is expected to increase again in the coming years.

In these, especially for the air transport sector, challenging times, the World Bank Group remains actively engaged around the world in supporting its development by addressing policy and regulation, safety, infrastructure rehabilitation, institutional strengthening, and capacity building in client countries.

We look forward to continuing to address the new challenges and opportunities of the sector in 2020 with the aim of helping to achieve safe, affordable, and sustainable air transportation for all.

Click here to download the 90 page World Bank report as a PDF

About the author

Avatar of Juergen T Steinmetz

Juergen T Steinmetz

Juergen Thomas Steinmetz has continuously worked in the travel and tourism industry since he was a teenager in Germany (1977).
He founded eTurboNews in 1999 as the first online newsletter for the global travel tourism industry.

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