Home Markets Global Trade Tension Causes an Airline Industry to Cut its Profit Forecast

Global Trade Tension Causes an Airline Industry to Cut its Profit Forecast

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The International Air Transport Association or IATA has cut the airline’s sector 2019 profit forecast. It is because of the increased protectionism and global trade tension.

Alexandre de Juniac, IATA CEO and Director Manager spoke at the Annual General Meeting and said that the upset to international trade have adverse effects, particularly to cargo loads.

De Juniac says, “It has significantly impacted our outlook, and it’s clear that this stop in the evolution in international trade comes directly from trade wars and protectionist measures.”

IATA anticipates airline profits to hit $28 billion in 2019, which is lower compared to $30 billion that was reported in 2018. The industry body’s previous forecast for 2019 income was $35.5 billion.

The heated trade war between China and the United States had the demand for cargo drop throughout the airline industry, expecting the dropping trend to continue. The segment’s increase was predicted to be flat this year, after climbing to 3.4% in 2018 and 9.7% in 2017.

Asia, which has 40% of worldwide air cargo traffic, is one of the most affected by the global trade wars. However,  according to de Juniac, the strong passenger demand could cover any troubles the region is facing.

“Asia is also very enormous growth demand. China, five years from now, will become the [biggest] market in the world, India in the next 8-10 will become the third [biggest] market in the world, ” de Juniac said. “So we think that the passenger demand will not overcome, but perhaps compensate for the consequence of the cargo of the protectionist measures and trade wars,” he added.

While the industry is commencing on its tenth successive year of profits, however, the trade, as well as the consumer dependent sector could be in trouble if the problem on trade increases.

According to de Juniac, the job done by the industry to increase competitiveness and cut costs over the past ten years will make it stronger.