Global airlines slash profit forecast 21% on protectionism fears
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FILE PHOTO: An airplane prepares to land at Cointrin airport in Geneva, Switzerland December 5, 2017. REUTERS/Pierre Albouy/File Photo
SEOUL (Reuters) – Global airlines slashed a key industry profit forecast by 21% on Sunday amid concerns over an expanding trade war and higher oil prices.
The International Air Transport Association, which represents about 290 carriers or more than 80 percent of global air traffic, said the industry is expected to post a $28 billion profit in 2019, down from a December forecast of $35.5 billion.
“Airlines will still turn a profit this year, but there is no easy money to be made,” IATA Director General Alexandre de Juniac said at the group’s annual meeting in Seoul. “Creeping protectionist or isolationist political agendas are on the rise,” he added.
Airline profits help detect trends for consumer confidence and global trade, economists say.
Global stock markets fell on Friday after U.S. President Donald Trump on Friday threatened tariffs on Mexican goods, adding to fears that escalating trade wars will push the U.S. and other major economies into recession.
Airlines had reported $30 billion in annual profits in 2018, but conditions in the air cargo market – an extra source of revenue for carriers – have weakened substantially.
“You see that international trade is now at a zero growth rate, so there is an immediate impact on our cargo business,” de Juniac told Reuters TV.
IATA voiced concerns that trade tensions that have forced several carriers to ground air freighters could spill into the passenger market.
Passenger capacity growth, which reached 6.9 percent in 2019, is forecast to slow to 4.7 percent this year, with average fares flat following a 2.1 percent decline in 2018.
Reporting by Jamie Freed, Tracy Rucinski, Heekyong Yang, Editing by Tim Hepher