New Delhi (AFP) – 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 United States and potentially raised costs for aviation. Trump’s bid to impose tariffs on the United States’ trading partners have upended commercial flows, with legal challenges against his plan adding to uncertainties. The tense atmosphere in the United States, 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 it “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 percent from an already unprecedented 2024. It predicted carriers would generate $36.6 billion in cumulative net profit, on revenue exceeding $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.
As early as March, the North American air transport market, which represents 23 percent 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 United States was on track to lose some $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. Didier Brechemier, an airline industry expert at Roland Berger, said: “Today, bookings for the North Atlantic are lower than they were at the same time last year.” IATA Director General Willie Walsh noted on Thursday “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. But 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.
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. Prime Minister Narendra Modi is expected to address delegates on Monday, organisers said.
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.
© 2024 AFP
