The intensifying US-China trade dispute and rising fuel prices would continue to bog down airline profits this year, the International Air Transport Association (IATA) said yesterday.
The warning came at the annual meeting of global airlines in Seoul, where it was revealed that this year’s collective net profit was forecast to be US$28 billion, down from an outlook of US$35.5 billion released in December last year.
The grim outlook was driven by rising costs across the board, including labor, fuel and infrastructure, IATA said, adding that the worsening trade spat between the two world powers was not helping.
Photo: Bloomberg
“Weakening of global trade is likely to continue as the US-China trade war intensifies,” IATA chief executive officer Alexandre de Juniac said.
“This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise,” he added.
IATA chief economist Brian Pearce forecast “zero growth at best” for air cargo traffic this year, noting the effect of the trade tariffs imposed in the first half of last year.
The Asia-Pacific region, which accounts for about 40 percent of global air cargo traffic, was “clearly under pressure,” he said.
“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 — would lead a “reasonable” 5 percent global growth in the passenger business.
Pearce did not rule out a possible industry recession, but pointed to the rise in air travel demand and said: “At the moment it doesn’t look like we are going to have one in 2019.”
This year’s IATA meeting, which represents about 290 airlines comprising 82 percent of global air traffic, comes after two crashes in October last year and March that left hundreds of people dead.
Both accidents involved Boeing’s 737 MAX 8 jetliners, turning the world’s largest aircraft maker into a liability that put the industry’s “reputation in the spotlight,” De Juniac said.
The 737 MAX 8 was grounded by US authorities in March, following in the footsteps of several other countries.
Pearce played down the economic effect of the US jetliner’s grounding on the industry, saying that the 737 MAX 8 accounted for “less than 2 percent” of the global fleet.
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