Profit forecast cut for airlines: Asian carriers to earn average of just $4.80 per passenger in 2019

SEOUL - For every passenger flown, Asian carriers including Singapore Airlines (SIA) are expected 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$6.0 billion in 2019, down from US$7.7 billion in 2018.

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 on Sunday (June 2).

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

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Instead of a global collective profit of US$35.5 billion (forecast in December), airlines are now expected to make US$28 billion in 2019.

In 2018, estimated profit was US$30 billion.

Mr de Juniac said: "This year will be the tenth 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 US-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 stressed.

Turning to the other regions, Iata warned that carriers in the Middle East like 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 in 2019.

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

This article was first published in The Straits Times. Permission required for reproduction.