GENEVA: Airline profits are on course to fall faster than expected in 2019 as trade wars hit global commerce and broader confidence, the industry’s main global body said on Wednesday, while predicting a modest recovery next year.
Cutting its full-year net profit forecast to $25.9 billion, a 5.1 per cent decline from 2018, the International Air Transport Association said an improvement in 2020 was contingent on a “truce” in global trade disputes. In June it had forecast $28 billion in profit this year.
“Trade wars produce no winners,” IATA Director General Alexandre de uniac told an annual media briefing.
De Juniac also cited slower growth, Brexit and social unrest among factors that “all came together to create a tougher than anticipated business environment for airlines” in 2019.
IATA slashed its full-year global revenue forecast to $838 billion from the $899 billion predicted in June and said it expected an improvement to $872 billion for 2020.
“We’ve downgraded our forecasts for 2019 pretty much across the board,” chief economist Brian Pearce said. “It’s pretty clear that this has been driven mostly by the impact of trade wars.”
Reflecting downward pressure on fares, net profit per passenger fell to $5.70 this year from $6.22, with the industry’s net profit margin expected to decline to 3.1 per cent this year from 3.4 per cent in 2018.
But the sharpest deterioration is being felt in airlines’ cargo businesses - where a 3.3 per cent drop in freight demand marked the steepest decline since the 2009 financial crisis, with revenue down 8 per cent year-on-year.
Growth in world trade has all but evaporated to an expected 0.9 per cent this year, sharply down from the 2.5 per cent forecast in June and the 4.1 per cent expansion predicted a year ago, IATA said. — Reuters
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