Airlines warned of 'bumpy' future as Iata queries demand forecasts

Airlines warned of 'bumpy' future as Iata queries demand forecasts

Predictions that air passenger numbers will double in 20 years, bringing a new era of profitability for airlines, have been challenged by Iata.

Current demand is "robust" and conditions for the future appear "benevolent", airline association economist Brian Pearce told the Iata World Passenger Symposium in Dublin.

He described demand as "unexpectedly robust in the face of persistently high fuel prices and relatively weak economic growth - weaker than in 2010", with worldwide growth in passenger traffic of 5%.

Pearce said "Expectations are we will see the market more than double over the next 20 years, based on growth in the world's middle-income population."

At the same time, Pearce said: "We've seen a transformation in expectations of the price of energy driven by the shale oil and gas boom.

"The consensus now is we will see prices for crude oil below $90 a barrel in the next five years. If it's true, that is a benevolent environment. Investors could see quite a good return."

But Pearce said: "The key driver is the growth in the middle classes. What gives me pause for thought is the experience of Japan.

"Japan was the tiger economy. Now its economy is smaller than in 1990. It has not grown in 20 years. Japan saw a debt bubble deflate. China has a growing debt issue."

He warned: "We should expect the path of the next 20 years to be bumpy."

Pearce added a second note of caution. "The passenger market has gone up, but cargo has shrunk since 2010," he said.

"Cargo is often the canary in the mine for the wider airline business."

He pointed out the ratio of world trade to industrial production has stagnated since 2010 following continual growth from the early 1990s to 2008.

Pearce said: "There are grounds for concern. World trade is the lifeblood of our industry. It matters far more than GDP.

"Open borders drive our business, but since 2010 we've started to see creeping barriers."

Pearce added: "We've also not really seen passengers return to business-class cabins to the extent they did before the 2008 recession.

"We've seen consolidation in the industry and joint ventures in international markets, but the process is not assured."


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