3 days ago
- Business
- Free Malaysia Today
Airline chiefs meet in India amid Trump turbulence
The International Air Transport Association predicted that carriers will generate US$36.6 billion in cumulative net profit. (AP pic)
NEW DELHI : Airline bosses meet from Sunday in New Delhi at their annual industry conference, battling to mitigate the impact of Donald Trump's policies that have hit travel to the US and potentially raised costs for aviation.
Trump's bid to impose tariffs on the US's trading partners had upended commercial flows, with legal challenges against his plan adding to uncertainties.
The tense atmosphere in the US, from Trump's plans to revoke foreign students' visas to reports of travellers detained at US borders, has also put a dampener on tourism.
'The airline sector is always sensitive to the economic and political climate,' Paul Chiambaretto, professor of strategy and marketing at France's Montpellier Business School, told AFP.
'Any form of uncertainty will reduce traffic,' he added, noting that 'especially' impacted business travellers, the most profitable segment.
The influential International Air Transport Association (IATA) is due to update its traffic and profitability projections as the delegates from the group gathering 350 airlines hold their talks.
In December it forecast a record 5.2 billion air journeys in 2025 – up 6.7% from an already unprecedented 2024.
It predicted carriers would generate US$36.6 billion in cumulative net profit, on revenue exceeding US$1 trillion.
However, the US president's 'Liberation Day' tariff blitz and his administration's stance on issues from immigration to education could throw a spanner in the works.
Putting up the 'closed' sign
As early as March, the North American air transport market, which represents 23% of global traffic, began to decline and several US-based airlines warned they would not meet their financial targets.
A study released this month by the World Travel and Tourism Council and Oxford Economics found that the US was on track to lose some US$12.5 billion in revenue from foreign tourists this year owing to worries about travelling to the country.
The group, made up of leading travel firms, said this 'represents a direct blow to the US economy overall, impacting communities, jobs, and businesses from coast to coast'.
'While other nations are rolling out the welcome mat, the US government is putting up the 'closed' sign,' WTTC president Julia Simpson said.
'Today, bookings for the North Atlantic are lower than they were at the same time last year,' Didier Brechemier, an airline industry expert at Roland Berger said.
IATA director general Willie Walsh noted yesterday 'some signs of fragility of consumer and business confidence with continued weakness in the US domestic market and a sharp fall in North American premium class travel'.
Air transport has for decades benefited from the removal of import taxes, rising living standards – particularly in Asia – and open borders, with the number of air trips tripling since 2000.
However, the return of protectionism is endangering the industrial model of aircraft manufacturers, whose assembly lines mobilise suppliers worldwide, with costs likely to increase, putting more of a burden on carriers.
Lower energy costs
There's good news for carriers, though, with oil prices falling owing to an anticipated slowdown in economic growth.
That could help firms reduce their fuel bills – representing between a quarter and a third of their operational costs – by hundreds of millions of dollars.
Washington's new Republican administration is also fully supporting the development of fossil fuels, in contrast to that of Democratic former president Joe Biden, who subsidised Sustainable Aviation Fuel (SAF).
Sustainable development 'has largely disappeared from the airline industry's immediate priorities', says Jerome Bouchard, a partner at consultants Oliver Wyman.
Also likely on the agenda for IATA will be the impact of geopolitical tensions on the industry.
India is experiencing explosive growth, with the number of airports and passengers in the world's most populous nation doubling over the past decade, while major airlines IndiGo and Air India have hundreds of aircraft on order.
However, the country's recent deadly spat with neighbour Pakistan, which saw the two sides impose airspace bans on each other, highlighted the fragility of civil aviation in the face of such upheavals.
The row poses an additional complication for connections to Asia, as Russia has banned US and EU aircraft overflights in retaliation for sanctions linked to its invasion of Ukraine.
