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Trade group cuts airline sector profit forecast on trade tensions, fuel prices

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Trade group cuts airline sector profit forecast on trade tensions, fuel prices

The International Air Transport Association cut its 2019 forecast for airline sector profit amid growing concerns over global trade disruptions and high fuel prices.

The association in its semiannual report revised the sector's after-tax profit forecast for the year to $28 billion from the $35.5 billion estimated in December 2018. The forecast is for industry profit to fall short of 2018 earnings by about $2 billion.

Weak global trade and difficulty recovering high fuel costs after sanctions on Iran will continue to pose challenges to the airline industry, the report said.

"Trade wars and protectionist measures" limited growth in the global trade sector, the group's director general and CEO, Alexandre de Juniac, told CNBC.

Global trade disputes particularly hurt cargo loads in recent months, the agency said, leading to a "large downgrade" in its growth forecast for the cargo segment. The segment is expected to register flat growth in the year, following a growth rate of 3.4% in 2018 and 9.7% in 2017.

Growth in revenue passenger kilometers, or RPK, will slow to 5.0% in 2019 from 7.4% in 2018, the association predicted.

Despite the slowdown, employment in the airline industry will increase 2.2% in 2019 compared with 2018, the report said.

"I think this industry is significantly more resilient than it was before, and significantly less exposed to the consequences of an economic downturn," de Juniac said.