“The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade,” the group said in a statement. “Margins are being squeezed by rising costs right across the board.”
IATA expects airlines’ costs to grow 7.4% this year, outpacing the 6.5% anticipated growth in sales. That means airlines will make about 11% less on each passenger in 2019 than they made in 2018.
Rising trade tensions aren’t helping either. They will most directly hurt the cargo industry, although passenger traffic could fall as people reconsider vacations to some locations and as consumers spend more money on imports.
IATA expects that growth in cargo demand will slow substantially. Growth in passenger demand for air travel will slow a bit too, although far less dramatically than cargo.
“There is no easy money to be made,” said Alexandre de Juniac, IATA’s CEO, in a statement.
IATA noted that the aviation industry is still in good shape. It is set to record its 10th-consecutive profitable year, and airlines have “broken the boom-and-bust cycle” that characterized their businesses for decades. Airlines have consolidated, the global economy has been strong and demand for air travel has been consistently high in recent years.
Yet the industry cautioned that investors need to prepare themselves for rockier times ahead.
“A downturn in the trading environment no longer plunges the industry into a deep crisis,” de Juniac said. “But under current circumstances, the great achievement of the industry — creating value for investors with normal levels of profitability — is at risk.”