IATA forecast for aviation cuts profit by US$2.5 billion due to trade tension

IATA forecast for aviation cuts profit by US$2.5 billion due to trade tension
Published: 20 May 2019 - 7:32 a.m.
By: Logistics Middle East Staff

Global airlines body IATA expects increasing trade tensions and higher costs to impact 2019 industry profits, with forecasts redrawn from US $38-billion to US $35.5 billion.

That figure is likely to be reduced further when the industry group meets in Seoul next month, according to Alexandre de Juniac, IATA director general.

“We are a bit pessimistic,” he told a meeting of aerospace industry officials in Paris. “I think we should be more cautious

“The figures will be in the black but will be more difficult,” he added.

Juniac said trade tensions are already hurting cargo demand, and passenger demand is expected to be affected too.

The air cargo sector transports more than US $6 trillion worth of goods annually, accounting for 35% of world trade by value, according to the IATA.

Volumes for this sector fell 2 per cent in the first quarter of 2019 and will fall further if future tariffs on smart phones and computers are implemented.

Earlier rounds of tariffs affected items like steel that are shipped by sea.

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,” 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,” de Juniac said.

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