Asian airlines’ profit down in latest forecast, Latest Business News - The New Paper

Asian airlines’ profit down in latest forecast

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Margins affected by rising costs, looming trade war

For every passenger flown, Asian carriers including Singapore Airlines (SIA) expect to earn an average of just US$3.51 (S$4.82), as the region continues to take the brunt of rising fuel prices and a substantial weakening of world trade.

Collectively, airlines in Asia are expected to deliver a net profit of US$6 billion this year, down from US$7.7 billion last year.

Accounting for about 40 per cent of global air cargo traffic makes the region the most exposed to weakness in world trade, said the International Air Transport Association (Iata), which unveiled its latest industry forecast yesterday.

Speaking at the opening of the association's 75th annual general meeting, Iata chief executive and director general Alexandre de Juniac said current challenges have led to a cut in the profit forecast.

Instead of a global collective profit of US$35.5 billion (forecast in December), airlines are now expected to make US$28 billion this year.

Last year's profit has been estimated to be US$30 billion.

Mr de Juniac said: "This year will be the 10th consecutive year in the black for the airline industry. But margins are being squeezed by rising costs right across the board - including labour, fuel and infrastructure.

"Stiff competition among airlines keeps yields from rising. Weakening of global trade is likely to continue as the United States-China trade war intensifies."

While this primarily impacts the cargo business, passenger traffic could also be impacted as tensions rise, he warned.

"Airlines will still turn a profit this year, but there is no easy money to be made," he noted.

Turning to the other regions, Iata warned that carriers in the Middle East, such as Emirates and Etihad Airways, can expect to have an even worse year than their Asian counterparts.

Together, they are forecast to lose US$1.1 billion this year.

"The region has faced substantial challenges in recent years, both to the business environment and to business models," Iata said.

Airlines there are going through a process of adjustment and announced schedules point to a substantial slowdown in capacity growth next year.

Mr de Juniac said: "Aviation needs borders that are open to people and to trade. Nobody wins from trade wars, protectionist policies or isolationist agendas. But everybody benefits from growing connectivity."

He added: "A more inclusive globalisation must be the way forward."

Mr de Juniac was addressing more than 1,000 airline and airport heads, as well as other industry partners at the Coex Convention Centre in Seoul.