The International Air Transport Association (IATA) downgrades its 2019 outlook for the global air transport industry as fuel prices rises and world trade “substantially” weakens. It now expects the industry to generate $28 billion profit ‒ almost $8 billion less compared to December 2018 forecast which stood at $35.5 billion.
In 2019 overall costs are expected to grow by 7.4%, outpacing a 6.5% rise in revenues. As a result, net margins are expected to be squeezed to 3.2% (from 3.7% in 2018). Profit per passenger will similarly decline to $6.12 (from $6.85 in 2018).
“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 labor, 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,” says Alexandre de Juniac, IATA’s Director General and CEO.
Calling downside risks “significant”, IATA outlines political instability and potential for political conflicts as potential risks, highlighting the rising tensions between the U.S. and China. “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 spillover and dampen demand”.
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