Trade hostility, costs hit airlines • • •
By ROBERT WALL THE AUSTRALIAN 12:56PM JUNE 2, 2019 Airline industry earnings this year are expected to fall 21 per cent short of expectations with global trade tensions and rising costs denting the outlook for collective profits, the industry’s leading trade group said. Airlines this year should post $US28 billion ($40.3bn) in collective net profit, down from $US35.5bn forecast six months ago, said the International Air Transport Association, which represents more than 200 airlines from the US to Australia. Carriers last year returned a combined net profit of $US30bn. More than half the industry’s net profit, IATA said, should be generated by North American carriers. They are expected to return $US15bn in combined profit. “Margins are being squeezed by rising costs right across the board,” IATA directorgeneral Alexandre de Juniac said at the lobby group’s annual meeting. The Trump administration this northern summer plans to impose higher tariffs on numerous goods made in China, denting freight demand. The airline industry is only one of several to feel the sting. Danish shipping giant AP Moeller-Maersk last month reported a first-quarter loss and warned that rising trade tensions between the US and China could cut container growth by up to a third this year. “Weakening of global trade is likely to continue as the US-China trade war intensifies,” Mr Juniac said. The effect of those trade tensions on airlines is varied, said executives at the IATA meeting. Qantas chief executive Alan Joyce said demand growth had slowed notably on some routes as Chinese flyers prepare for protracted trade tensions. Delta Air Lines chief executive Ed Bastian, though, said “we are not seeing a significant impact”. Deutsche Lufthansa boss Carsten Spohr said airfreight demand had clearly been hurt, but the passenger business remains robust.
Costs also are on the rise. IATA expects fuel to represent about 25 per cent of average airline costs, up from 23.5 per cent last year. Nonfuel unit costs are expected to rise 39.5 per cent, IATA said. Cost increases of $US822bn across the industry are outpacing $US865bn in higher sales. Airlines also face a financial hit from the grounding of Boeing 737 MAX jetliners in March. The size of the cost is still uncertain, and dependent, in part, on when the jetliners are cleared to fly again. The fleet of several hundred MAX planes was idled after the March 10 fatal crash of one of the jets in Ethiopia. It came less than five months after another MAX had crashed in Indonesia. Accident investigators have implicated a MAX flight-control system flaw in both accidents. Boeing has been working on a fix that has been delayed several times. Mr Juniac last week said airlines expected the fleet to remain idled at least 10 to 12 more weeks and he urged regulators to act in concert to return the plane to the air. Emirates Airline president Tim Clark said he expected the MAX might still not be flying worldwide in late December. In addition to having to sign off on the update to the MAX flight-control software, regulators also are considering adding extra training requirements for the plane’s pilots. That could add further costs for airlines. “The recent Boeing 737 MAX accidents have put our reputation in the spotlight,” Mr Juniac said at the IATA meeting. “Trust in the certification system has been damaged.” IATA this month plans to convene a second meeting of current and future MAX operators to discuss how to restore confidence in the plane among passengers and airline employees. Airlines in the US, Europe, China and other locations have said they expect Boeing to cover their losses from the grounding. Boeing chief executive Dennis Muilenburg last week said the plane maker was holding discussions with carriers. Not all reimbursements were expected to be cash payments, he said, adding the financial hit to Boeing isn’t going to be “material”.
In a sign of continued anxiety about the plane, Ethiopian Airlines chief executive Tewolde Gebremariam said the carrier was still unsure about the future of the MAX in its fleet after one of its planes was involved in the March accident. The carrier will wait for all regulators and all other operators of the grounded plane to put it back in the sky before deciding what to do.
NORTH WEST STAR, MAY 31 2019 - 1:00PM
Tourism set to make Isa an all year round destination The Mount Isa Tourism Association's annual launch took place this week at the Buffs Club, with more than 40 tourism operators and business owners attending. Chairman Gary Murray said the annual event was a soft launch. "We don't like to think of it as a seasonal launch because we like to think Mount Isa is a destination all year round, however the majority of tourism events happen between May and November," Mr Murray said. "The launch is basically to keep tourism in the front of everyone's minds." "Tourists are already coming through town so if we provide great products and everyone's friendly and we have tourism in the front of our minds then they may stay longer." Despite the recent floods Mr Murray said tourism is growing. "The figures I have seen have climbed three times, in general, over the last couple of years," he said. Inspiration Entertainer and Professional Speaker Julie Cross attended the launch and told guests to 'own the vision, we all make a difference in tourism'. She shared this positive message and one of resilience to more than 40 guests. Ms Cross said resilience is very relevant to this community. "This region has seen droughts, then more recently floods and may be experiencing community grief," Ms Cross said. "We need to support each other and project positive energy onto others. It's contagious." "What happens then is everyone gets effected by this energy and it creates enthusiasm. "That's when people such as myself and tourists keep coming back," she said. Ms Cross has returned to Mount Isa four times in the last four years. "I fell in love with your town through the eyes of the locals. Although, initially when I first came here I was skeptical, but after talking to local people and business operators, I could see the passion in their eyes for this community. And I was won over."