Trump tariffs’ impact on airlines similar to travel hit from 9/11 aftermath, Iata chief says

The effects of US tariffs on global airlines are likely to be similar in scope and duration to the aftermath of the September 11, 2001 attacks, but carriers will adapt quickly and are "cautiously optimistic" about the outlook for the year, the head of the International Air Transport Association said. Having learnt lessons from past crises, airlines will respond with speed and flexibility to tariff disruptions by shifting capacity from markets where demand has decreased into areas that continue to grow, Willie Walsh, director general of Iata, told The National on Tuesday. "Depending on what the uncertainty eventually is, it's probably somewhere near the impact we witnessed following the tragic events of 9/11, which was significant in terms of transatlantic traffic, but short-lived, and the market recovered within a few months," he said on the sidelines of the annual Iata World Cargo Symposium in Dubai. "I don't see it having the same impact as the global financial crisis and certainly nowhere close to what we witnessed during the pandemic." The administration of US President Donald Trump has imposed tariffs on goods from trading partners worldwide, leading to fears for the US and global economies, before this month suspending most for 90 days. In this year's first and second quarters, most transatlantic markets, with the exception of US-Canada routes, are still growing, with US-Middle East travel demand rising 8 per cent from the same period in 2024, according to Iata. "You won't see airlines panicking because there's no reason to at the moment, because demand remains quite strong and that's true on the passenger side and cargo side," Mr Walsh said. "They will monitor very closely what the trends are going forward." But some airline chiefs have pointed to "softening" transatlantic travel demand in the second half of this year, Mr Walsh said. "We now have to respond to that with price stimulation rather than capacity reduction," he said. This will not have a big impact on airlines' networks and any changes will be minor, he added. Airlines are benefitting from lower oil prices, which may help to offset the impact of some of the softening travel demand expected in the second half of 2025, Mr Walsh said. Fuel bills make up about 25 per cent of total costs for airlines and are their biggest single cost. Iata had forecast in December that global airlines will end 2024 with a net profit of $31.5 billion, which is estimated to improve to $36.6 billion in 2025, with an oil price assumption of $75 per barrel. Brent was trading at $64.74 per barrel at 5.30pm UAE time on Tuesday, after President Donald Trump 's tariffs policy roiled markets, dented oil prices on prospects of slowing crude demand and sent gold prices soaring. Lower oil prices are paralleled by lower jet fuel prices. "We have a tailwind now in terms of the oil price. It's significantly lower than we had expected. Some airlines are taking the opportunity to lock in that lower oil price, which will have a long-term benefit," Mr Walsh said. "That gives a bit of a boost to airline profitability, which maybe, and it's a big maybe at this stage, could offset some of the softening of demand in the second half of the year." Airlines are reasonably bullish as they are used to conditions of uncertainty and are better at dealing with it now than 20 years ago, he added. "I remain cautiously optimistic about the overall outlook for the industry and I'm confident that airlines, having learnt from challenges we've gone through, including during the pandemic, will respond quickly to any change in the external environment," Mr Walsh said. Iata will factor the effects of tariffs into its airlines' profitability report in June, but sees the current fall in jet fuel prices as "very much a positive". "We will have to wait and see what the demand environment is like, but you could argue this is happening at a time when airlines don't have the same amount of capacity as they would normally have because of problems with jet deliveries," Mr Walsh said. "So there's a lot of levers airlines can pull to address any change in demand outlook." Measures to mitigate any weakness in demand could include taking out of service older aircraft that airlines had kept flying because of delays in receiving new jets. "There's still a lot of decisions that can be taken to maintain, or even boost, profitability for some airlines," Mr Walsh said. "For industry profitability, you'll have to wait and see what we say in June, but there are a lot of moving parts at the moment." Airlines are operating at record seat factors of about 85 per cent, passing the record in 2019 of about 82.6 per cent. "We've exceeded it in 2024 and we're likely to exceed it in 2025," he said. The EU is expected to retaliate against Mr Trump's tariffs in some industries, with the combined measures raising airlines' worries about the impact on aircraft deliveries on both sides of the Atlantic. Mr Walsh said airlines will have to "wait and see" if the tariffs confusion could put at risk shipments of planes, engines and components. "The uncertainty may lead to some airline CEOs decide not to take aircraft," he said. Air fares are expected to remain "broadly flat" this year, all things remaining equal, Mr Walsh said. The exception will be in some markets where weaker demand may prompt airlines to reduce prices, leading to lower average yields and air fares, he added. The risk of an unfolding global trade war will have direct and indirect impact on air cargo flows, Maja Marciniak, senior economist at Iata, said at the event on Tuesday. The world has reached the "peak of globalisation" in terms of trade, she said. Trade between regions has risen to 49 per cent of the total, while trade within regions has been dropping to about 51 per cent, thereby nearing an "equalising point". The US tariff announcements and retaliatory responses are raising economic uncertainty and an immediate reaction of "sit back and wait to see where the cookie crumbles", Ms Marciniak said. "No matter where we end up with the tariffs and what actually gets introduced and passed through, there will be already some slowing down impact as businesses just sit back and wait for a moment figuring out what their next set should be,” she said. Direct impacts on the air cargo industry includes changing trade flows, customs processing delays, reduced trade due to price increases and an increase in aircraft prices, Ms Marciniak said. Indirect impact on air cargo sector includes reduced investments due to heightened uncertainty, she said. Higher inflation and lower consumer confidence, especially in the US, could slow growth in e-commerce sales and dampen demand for air travel, her presentation showed. "All of this is subject to how the exchange rates react … they might be able to soften the blow a little bit," she said. The US accounts for 13 per cent of global imports, so 87 per cent of the world's imports are not subject to levies and will be "business as usual", Ms Marciniak said. Highlighting the importance of air cargo to the global economy, Iata is forecasting that 72.5 million tonnes of freight will be carried by air in 2025, a 5.8 per cent increase from 2024. The value of air cargo last year exceeded $8 trillion, highlighting its vital role in global trade amid geopolitical uncertainty in sea shipments through the Red Sea. Therefore, any measures undermining the free flow of goods ultimately hurt businesses, consumers, and economies, Brendan Sullivan, Iata's global head of cargo, said at the event opening. “Current trade tensions are deeply concerning. Trade drives prosperity. The more the world trades, the better off we all are. So, whatever the resolution of current trade tensions is, we know that air cargo will be there to deliver the goods people need and want,” Mr Sullivan said Iata forecasts air cargo demand is likely to rise by 6 per cent this year, with strong growth across regions, but this is subject to tariffs' effects, Ms Marciniak said. The Middle East region is expected to grow the fastest with a 7.5 per cent increase in cargo demand this year, she added. Global air cargo revenues are expected to grow 5.4 per cent this year, on higher yields, she said. Asked during a panel discussion if globalisation is dead, Mr Walsh said: "It's certainly ill at the moment. I don't think it's dead." "We're going through a disruptive period, which hopefully will stabilise in the near future and we will return to a more normal environment. It won't be exactly the same as it was," he said. "I don't think you can move to a big, isolated situation, given the interdependence that we all have in the global economy." On Tuesday, Mr Walsh told reporters he remained confident in the continued growth of the air cargo industry, despite tariffs turbulence, as it turns to where demand exists. “The year has started well and I would expect that to continue through the year,” he said. But he acknowledged that the Trump administration's attempts to reset US trade deficits with the rest of the world is likely to tip the aviation industry towards downside risks. "It's probably fair to say that there's more negative downside than positive upside, but the year started well and our industry is adaptable," Mr Walsh said.

Trump tariffs’ impact on airlines similar to travel hit from 9/11 aftermath, Iata chief says

Carriers are nevertheless 'cautiously optimistic' about outlook for 2025 as they will adapt quickly, Willie Walsh says