U.S.-China trade war to slash global airline profits by $7.5bln: IATA
The effects of the U.S.-China trade war and high fuel prices will wipe 7.5 billion U.S. dollars off expected airline profits during 2019, the industry body has said.
Global airlines slashed a widely watched industry profit forecast by 21 percent on Sunday. The industry is expected to post a 28-billion-U.S.-dollar profit in 2019, down from a December forecast of 35.5 billion U.S. dollars, said the International Air Transport Association (IATA), which represents about 290 carriers or more than 80 percent of global air traffic.
"Airlines will still turn a profit this year, but there is no easy money to be made," IATA Director General Alexandre de Juniac said at the group's annual meeting in Seoul.
Air cargo market weakened
Airlines had reported 30 billion U.S. dollars in annual profits in 2018, but conditions in the air cargo market – an extra source of revenue for carriers – have weakened substantially.
Brian Pearce, chief economist at the IATA, forecast "zero growth at best" for air cargo traffic this year, noting the impact of the trade tariffs imposed in the first half of 2018.
The Asia-Pacific region, which accounts for around 40 percent of global air cargo traffic, was "clearly under pressure," he added.
"Cargo is such an important feature that the weakness in trade and the risk surrounding trade will mean profitability will be weaker in this region," Pearce said.
He painted a "mixed picture" for the region, noting that Asian countries – notably India and China – will lead a "reasonable" five-percent global growth in the passenger business.
Trade tensions spillover
IATA voiced concerns that trade tensions, which have forced several carriers in Asia to ground or delay taking delivery of air freighters, could spill into the passenger market.
Passenger capacity growth, which reached 6.9 percent in 2019, is forecast to slow to 4.7 percent this year, with average fares flat following a 2.1 percent decline in 2018.
The dip is potentially significant because airline profits track consumer confidence and global trade, economists say.