Airline group wrestles with headwinds

| REUTERS 3 Jun 2019

Global airlines are meeting under a storm pattern of trade tensions, rising oil prices and a two-month-old grounding of the Boeing 737 MAX jetliner - threatening to put a halt to five years of strong profits in the cut-throat air travel industry.

The sector's bosses converge on Seoul, South Korea for a summit this weekend, but what might have been a celebration of growth in one of the world's most vibrant regions, now risks being thrown off course by a crippling US-China trade spat and growing environmental pressures spreading from Europe.

"The last six months have been pretty tough for airlines," the head of the International Air Transport Association said ahead of the annual meeting of the body, which groups 290 airlines representing over 80 percent of air travel.

"Rising costs, trade wars and other uncertainties are likely to have an impact on the bottom line," IATA director general Alexandre de Juniac added.

The June 1-3 summit is a chance to examine passenger and cargo trends: key barometers of consumer confidence and trade amid a faltering global economy.

IATA's most recent projection for US$35.5 billion (HK$278.43 billion) in industry profits this year now looks unsustainable due to the falling cargo market and weaker passenger growth, and de Juniac has given a strong steer that the group would trim the forecast at the upcoming Seoul meeting.

The cargo slump, with volumes down by 3.7 percent in April including a 7.4 percent fall in the Asia-Pacific, is a concern for big freight carriers like Cathay Pacific (0293) and the IATA summit host Korean Air.

"We have really since the end of last year seen quite a deterioration of cross-border trade following the earlier round of tariff increases," IATA chief economist Brian Pearce said.

The meeting of some 200 chief executives is the largest gathering since the industry was plunged into crisis over the grounding of the 737 MAX in March following two crashes.

Pressure on Boeing grew ahead of the IATA meeting as the China Air Transport Association estimated losses to Chinese airlines of some 4 billion yuan (HK$4.55 billion).

IATA began in 1945 as a quasi-regulator and price-setter. It is now mainly a lobbying group. Its perennial list of concerns includes high airport charges and what IATA calls "scandalous" air traffic delays in Europe.

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