Global airline profits forecasts downgraded by 21%

Global airline profit forecasts have been downgraded by 21% this year to $28 billion in the face of US president Donald Trump’s trade war with China and soaring fuel costs.

Iata warned that the business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade.

“Downside risks are significant,” the airline trade body added.

“Political instability and the potential for conflict never bodes well for air travel.

“Even more critical is the proliferation of protectionist measures and the escalation of trade wars.

“As the US-China trade war intensifies, the immediate risks to an already beleaguered air cargo industry increase.

“And, while passenger traffic demand is holding up, the impact of worsening trade relations could spill over and dampen demand.”

However, the global spend on tourism enabled by air transport is expected to grow by 7.8% in 2019 to $909 billion.

The projection came despite overall costs expected to increase by 7.4%, outpacing a 6.5% rise in revenues over last year.

Net margins are expected to be squeezed to 3.2% from 3.7% in 2018 as a result.

Profit per passenger will decline to $6.12 from $6.85 last year.

Iata director general and chief executive Alexandre de Juniac said: “This year will be the tenth consecutive year in the black for the airline industry.

“But margins are being squeezed by rising costs right across the board – including labour, fuel, and infrastructure.

“Stiff competition among airlines keeps yields from rising. Weakening of global trade is likely to continue as the US-China trade war intensifies.

“This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise. Airlines will still turn a profit this year, but there is no easy money to be made.”

The airline trade body identified a major gap in profitability between the performance of airlines in North America, Europe and Asia-Pacific and those in Africa, Latin America and the Middle East.

“The good news is that airlines have broken the boom-and-bust cycle. A downturn in the trading environment no longer plunges the industry into a deep crisis,” said de Juniac.

“But under current circumstances, the great achievement of the industry – creating value for investors with normal levels of profitability – is at risk. Airlines will still create value for investors in 2019 with above cost-of-capital returns, but only just

“Aviation needs borders that are open to people and to trade. Nobody wins from trade wars, protectionist policies or isolationist agendas. But everybody benefits from growing connectivity. A more inclusive globalisation must be the way forward.”

Meanwhile, Lufthansa group chief executive Carsten Spohr was named Iata chairman for a year at the association’s75th annual general meeting in Seoul withJetBlue Airways president and CEO Robin Hayes following him from June 2020.

Next year’s Iata AGM is to be held in Amsterdam on June 22-23, hosted by KLM.

Outgoing Flybe chief executive Christine Ourmières-Widener was named as inspirational role model in Iata’s first diversity and inclusion awards.


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