SEOUL, South Korea--Global airlines slashed a widely watched industry profit forecast by 21% on Sunday as an expanding trade war and higher oil prices compound worries about an overdue industry slowdown.
The International Air Transport Association (IATA), 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.
Global stock markets tumbled on Friday after U.S. President Donald Trump's unexpected threat of tariffs on Mexican goods added to fears that escalating trade tensions will push the United States 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 the trade tensions, which have forced several carriers in Asia to ground or delay taking delivery of 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.
The dip is potentially significant because airline profits track consumer confidence and global trade, economists say.
