How Airlines Got Hammered By The US-China Trade War In 2019

It’s been 18 months since the US-China trade war started, with a series of tit-for-tat tariffs being levied on imported goods by both Washington and Beijing. This prolonged disruption of the global trade market has hit airlines hard, and perhaps not in the way you might think. Here’s how the trade war made 2019 even more difficult than it needed to be.

China cargo plane
The US-China trade war has hammered airlines throughout 2019. Photo: Getty

The biggest drop in demand since the global financial crisis

The US-China trade war has had many negative impacts on aviation. Boeing has been a major loser, with some airlines turning to Airbus, potentially in retaliation for the so-called ‘Trump tariffs’. But it’s not just Boeing’s deals that are on the line here.

Many global airlines rely as much on what’s underneath the plane as they do on the paying passengers up top. Emirates, Qatar, Cathay Pacific and Korean Air are some of the biggest air cargo carriers in the world. Thanks to the US-China trade war, 2019 was a tough year for them.

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Late last year, IATA reported that, for the first time since 2012, cargo traffic experienced negative growth in 2019. Demand declined by 3.3%, the sharpest drop since the global financial crisis took its toll a decade ago. Yields from cargo activities dropped some 5% also compared to 2018.

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Cathy cargo plane
Many airlines around the world rely on cargo. Photo: Cathay Pacific

In their most recent report, IATA says that freight volumes are still declining, with November figures showing a 13th consecutive month of downward demand, despite performance that month being the best since March. IATA put November’s higher performance down to large e-commerce events such as Black Friday and Singles Day in Asia.

Alexandre de Juniac, IATA’s Director General and CEO commented that,

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“Demand for air cargo in November was down 1.1% compared with the previous year. That’s better than the 3.5% decline posted in October, but it is a big disappointment considering that the fourth quarter is usually air cargo’s peak season. Looking forward, signs of a thawing in US-China trade tensions are good news, but trading conditions at present remain very challenging.”

Ongoing headwinds

Overall, the e-commerce market is growing at a steady pace. However, transportation of goods by air continues to face some hefty headwinds as the US-China trade war continues to hamper demand.

In the US, demand decreased by 1.1% in November compared to the same period in 2018. However, Asia-Pacific airlines were hit the hardest. The region saw demand for air cargo decline by some 3.7%. Overall, the demand for air freight between Asia and North America is down 6.5% year on year.

Emirates SkyCargo
Both passenger and cargo traffic was lower than expected. Photo: Emirates

And it’s not just air cargo either. Passenger traffic between Asia and North America has been affected significantly. Right now, this market is still in the top 10 of the world’s passenger markets, but is the weakest of the 10.

A brighter 2020 forecast

IATA predicts a better 2020 going forward, as long as some conditions are met.

IATA’s chief economist, Brian Pearce, described the future of the trade war as ‘uncertain’. IATA’s future forecasts for 2020 have been made on the assumption that, ahead of the US elections, there will be a ‘truce’, where existing tariffs will not reduce but will not increase either. This is in line with the assumptions of the WTO and IMF.

Brian Pearce
Brian Pearce speaking at IATA’s Media Day in Geneva. Photo: IATA

If this is the case, then IATA has predicted a modest rise in international trade growth of some 3.3% in 2020. This, they say, will lead to a positive growth in air cargo of 2%.

Pearce notes that this is still a very weak scenario when you consider that GDP growth is forecast at 2.7% in 2020. Prior to the global financial crisis, growth in trade was typically double that of GDP.

Overall, the industry is crying out for a cease-fire in the trade war so that global air cargo can stabilize again.

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Niklas Andersson

Trump, the one that can’t do business, but destroy everything he touch… USA included.

TheDude

I’m an independent conservative. Everything? Strongest economy ever currently. Arguably the strongest military. We don’t have to depend on the ME for oil which means, in theory, we don’t have to be there anymore. The national debt is an absolute joke but that started before him and continues sadly but neither party gives a crap about that.

Zburătorul

Strongest economy but somehow you import more than export… and you can’t seem to live without China. You have the strongest military compared with Iran maybe, meanwhile Russia cleaned your mess in ME. And you don’t depend on ME oil but you still need it

TheDude

We absolutely 100% don’t need ME oil. That is a fact.

Marc Scheuner

“Strongest economy ever currently” . but no *because* of Trump — **inspite** of him …..

TheDude

Keep telling yourself that.

david brackin

so if the US doesn’t depend on middle east oil then why it is going hell for leather invading oil rich middle east countries?

TheDude

Globalist pigs run our country, that’s why.

TheDude

I have no reason to doubt the numbers or impacts. But since I listen to a lot of earning calls I get skeptical when people blame geopolitical issues. Of course it affects them but they should have gotten ahead of it in the first place. After all it was talked about for a long time. Plus what a lot of people seem to forget is there were a ton of waivers given out. Apple as an example.

david brackin

strange that you did not mention the countries currencies around the world falling against the US dollar.im not into economics but using basic sense here.please someone that knows more about this please clarify of my view is right or wrong.