The profit outlook for the global airline industry for the entire year of 2019 was slashed by the International Air Transport Association (IATA) because of the ongoing trade tensions and spats throughout the world and the rising tendency of protectionism in many markets of the world including the United States and some markets of Europe.

Cargo business of airlines has been particularly bad hit because of the disruptions to international trade, said IATA Director General and CEO Alexandre de Juniac on the sidelines of the annual general meeting of the trade group.

“It has significantly impacted our outlook, and it’s clear that this stop in the evolution in international trade comes directly from trade wars and protectionist measures,” de Juniac said.

According to the forecast of the IATA, the profits of the global airline industry could be at about $28 billion in 2019 which would be lower than the profits made by the industry in 2018 of $30 billion.

There has been a drop in cargo demand right across the industry because of the escalation of the trade war between the two largest economies of the world – the United States and China and the IATA expects that the downslide in the cargo demand to continue.  The industry body forecasts that the growth of this business segment of the global airline industry would be flat for 2019 following a growth of 3.4 per cent in 2018 and 9.7 per cent for the year before that.

About 40 per cent of the total air cargo traffic was accounted for by clients in Asia but the IATA predicts that this region is particularly exposed to the global trade wars. However, the trade headwinds for cargo demand in this region could be offset by the potential strong demand for air passenger, said de Juniac. “Asia is also very enormous growth demand. China, five years from now, will become the [biggest] market in the world, India in the next 8-10 will become the third [biggest] market in the world, ” he said. “So we think that the passenger demand will not overcome, but perhaps compensate the consequence of the cargo of the protectionist measures and trade wars.”

2019 would mark the tenth straight year that the global airline industry would be ramping home profits but any intensification of the trade disputes in various parts of the world would severely impact the profitability of the industry which is very dependent on trade and consumer demands.

The global airline industry has however become more resilient because of the efforts that have been put-in in the past decade to bring down costs and enhance competitiveness, de Juniac said.

“I think this industry is significantly more resilient than it was before, and significantly less exposed to the consequences of an economic downturn,” he said. “However, if there is an economic downturn, this industry will suffer — but probably less than the case of 15 to 20 years ago.”

290 airlines, or 82% of total air traffic is represented by the IARA and the trade body has its headquarters in Montreal.

(Adapted from CNBC.com)

Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability, Uncategorized