IATA expects trade tensions to hit airline profit outlook

Airline body cut its 2019 profit forecast to $35.5bn in December

Alexandre de Juniac, director general of Iata, said global trade tensions have weakened passenger demand for air travel compared to last year. Mona Al Marzooqi / The National

Global airlines body IATA expects increasing trade tensions and higher costs will mean a cut in 2019 industry profit forecasts.

The International Air Transport Association trimmed its 2019 global airline industry profit forecast to $35.5 billion in December, from $38bn, after it hit $32.3bn in 2018.

Alexandre de Juniac, IATA director general, gave a strong steer on Friday that the industry group would trim its widely watched forecast again when it meets in Seoul next month.

“We are a bit pessimistic,” he told a meeting of aerospace industry officials in Paris.

“I think we should be more cautious,” he added, referring to probable changes to the forecasts published in December. He declined to give specifics ahead of the June 2 publication.

“The figures will be in the black but will be more difficult,” he told a meeting of Usaire, an association of US and European aerospace companies.

Trade tensions are already hurting cargo demand, and passenger demand is sure to be affected too, he said.

Air cargo - a bellwether for the wider economy - transports over $6 trillion worth of goods, accounting for 35 per cent of world trade by value, according to IATA.

Air freight traffic fell 2 per cent in the first quarter of 2019. Although earlier rounds of tariffs affected items like steel that are hauled by sea, airlines are worried that future tariffs could include smart phones and computers that go by air.

This points to a “very tough year” for air freight, but reasonable though slower GDP growth should keep passenger traffic growing only a little below trend, IATA said on Friday.

“Among the reasons why cargo is declining and we see some slowdown in passenger traffic are probably the consequences of trade disputes and protectionist measures in various parts of the world,” Mr de Juniac said.

As well as escalating trade tensions, notably between the United States and China, airlines are also beginning to acknowledge concerns that the industry has reached the top of its business cycle after a longer than usual expansion.

“I am a bit worried and I am sorry to tell you that I think we are at a turning point,” Mr de Juniac said.

However, the long-term outlook remains robust, he added.

Mr De Juniac noted concerns about airport capacity and other infrastructure problems across the world, but defended the industry’s record in curbing emissions as a debate heats up in Europe around the impact of air travel on the environment.