IATA – nature of trade war unlikely to impact air cargo

An escalation in global trade tensions could reduce the long-term passenger and freight demand from airlines according to IATA. However it is unlikely to trigger a major crisis for the industry.

The findings come from IATA Economics, which says moves towards global trade protectionism are not good for air transport, though due to the nature of the trade wars taking place the impact may well be minimal.

“The overall scale of the economic damage depends on both the extent and the severity of any tariffs and other restrictions that are put in place,” it added.

The nature of the tariffs being imposed by the different economic blocs is important here. The US is imposed tariffs on steel and aluminium, that only rarely travel buy air. There is however a 10% tariff en car parts and semiconductors made in China, some of which travel by air. These do tend to travel via Canada and Mexico, and this lesson is the impact on air cargo. However IATA sees a key risk for air freight if the trade war escalates and forces firms to reconsider their supply chains.

Regarding passengers, IATA believes that the impacts in question will be derived from lower GDP growth and its impact on incomes. The association believes that passenger demand growth will continue at a slightly lower rate rather than reversing in numbers.

“We would still expect to see ongoing growth in passenger demand over the coming years even in this scenario. However, the losses would add up, with more than 3% fewer passenger journeys expected to take place over the next six years than in the no-escalation scenario,” says IATA.

Reduced global trade will impact on oil prices, which will cushion the impact of lower cargo volumes. At present the trade war is only bilateral, but if it becomes global then things could get a lot worse.

“While a full-blown global trade war does not form part of our central outlook, it represents an important risk.”