Trade war, fuel, and Boeing Max cloud airline summit

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

The industry’s bosses converge on Seoul 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 (IATA) said ahead of the annual meeting of the body, which groups 290 airlines representing over 80% 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 €32bn in industry profits this year now looks unsustainable due to the falling cargo market and weaker passenger growth, and Mr 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 3.7% in April including a 7.4% fall in the Asia-Pacific, is a concern for big freight carriers like Cathay Pacific and the summit host Korean Air Lines.

“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 CEOs is the largest gathering since the industry was plunged into crisis over the grounding of the 737 Max in March following two crashes. 

IATA members have invested hundreds of billions in the Max and are anxious to contain any public or regulatory backlash. 

Aviation leaders maintain flying remains remarkably safe relative to other forms of transport.

But the decision by China, the EU and others to ground the Max before the US opened an unusual split in the regulatory system, worrying airlines and planemakers.

IATA, which is taking an increasingly central role in the crisis by hosting talks of Max customers, believes the aircraft could return to service in August. 

But that is too late to prevent disruption to summer schedules.

Reuters

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