The aviation industry cuts profit prospects; loading activities damaged by the trade war

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Commercial airliners are located at the Southern California Logistics Airport in Victorville, California.

Mike Fiala | Getty Images

SEOUL – Global trade tensions and rising protectionism prompted the International Air Transport Association (IATA) to cut its profit prospects for the airline sector in 2019.

Speaking with CNBC during the annual general meeting of the trade group, IATA general manager and managing director, Alexandre de Juniac, said the interruptions in international trade particularly damaged cargo.

"It has had a significant impact on our perspective, and it is clear that this halt in the evolution of international trade derives directly from trade wars and protectionist measures," said de Juniac.

The industry body expects airline profits to reach $ 28 billion in 2019, a decline from the $ 30 billion reported in 2018. IATA previously predicted that 2019 profits would reach $ 35.5 billions of dollars.

The intensification of the trade war between the United States and the Chinese trade war has seen the fall in cargo demand in the airline sector, with a downward trend that should continue. The growth for that segment should be flat this year, after an increase of 3.4% in 2018 and 9.7% in the previous year.

Growth prospects for China and India

Asia, which accounts for about 40% of global air traffic, is particularly vulnerable to global trade wars, but de Juniac said that potentially strong passenger demand could help deny any trade barriers that the region faces .

"Even Asia is a huge growth demand, China, in five years, will become the largest market in the world, India in the next 8-10 will become the third (largest) market in the world ", he has declared. "So we think that passenger demand will not be exceeded, but perhaps compensate for the consequences of the burden of protectionist measures and trade wars".

The world aviation industry is undertaking its tenth consecutive year of profits, but the industry dependent on trade and consumers could be at the forefront if trade disagreements intensified.

De Juniac said that the work done by the industry to cut costs and increase competitiveness in the last decade will make it more resilient.

"I think this sector is significantly stronger than it was before, and significantly less exposed to the consequences of an economic recession," he said. "However, if there is an economic crisis, this sector will suffer, but probably less than the case of 15 or 20 years ago."

IATA represents 290 airlines, or 82% of total air traffic. It is based in Montreal.

SEE: Inside the new 1.3 billion Singapore destination

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