Surging aircraft deliveries will keep airfares under pressure in 2020: IATA

With Boeing 737 Max expected to return to service next year, overall aircraft deliveries are likely to increase in 2020 and this will continue to keep airfares under pressure, said a senior official of global airlines body IATA on Wednesday.

During a presentation here, Brian Pearce, Chief Economist, International Air Transport Association (IATA) said, "Even if demand growth picks up in 2020, there is a threat that supply could rise even faster, given that 2100 plus aircraft that are scheduled to be delivered once, as expected, the B737 Max returns to service."

When asked if this increased capacity addition will keep the fares stressed across the globe, Pearce said, "Yes. Globally, we are seeing growth in travel but it is relatively low at 4 per cent. We are expecting to see (aircraft) capacity growth above that. So, this will keep fares under pressure."

Pearce said that the airlines globally added 5.1 per cent of the total fleet in 2019. He said that 7.5 per cent capacity - measured in terms of available seat kilometres (ASKs) - would be added in 2020 by airlines globally.

In 2017 and 2018, Pearce said the capacity increased by 6.7 per cent annually.

Indian carriers have been facing significant losses for last few quarters in the current financial year. For example, budget airline IndiGo's parent InterGlobe Aviation on October reported widening of its net loss to Rs 1,062 crore for the September quarter, hit by higher costs related to operating lease liabilities.

Officials of few Indian airlines have stated recently, on the condition of anonymity, that there is overcapacity in Indian aviation market, causing the airfares to remain low, which is resulting in sizeable losses.

Pearce, however, said that the global airline industry will produce a net profit of USD 29.3 billion in 2020, which will be higher than the net profit of USD 25.9 billion expected in 2019.

If achieved, 2020 will mark the industry's 11th consecutive year in the black, he said during his presentation. However, he added that the profitability will be concentrated with the top 30 airlines and carriers in many regions will report losses or decline in numbers.