If you're interested in trends, it's always worth paying attention to IATA's AGM.
This year's event, which has just ended in Seoul, included a revised aviation industry forecast for 2019.
It's not pretty reading for airlines. It's also not good news for their customers.
At first glance you might think that this only highlights the airlines' internal market issues. Stiff competition among airlines around the world is exerting downwards pressure on fares. Profits are forecast to fall about 20% from the original forecast ($28 billion v the original $35.5bn). There is the traditional explanation — that the growth in costs exceeding the growth in revenue.
It's not just "rising fuel prices" that they're talking about — it's also, and more importantly, "a substantial weakening of world trade".
A worldwide slowdown in economic growth is underway.
The IMF, OECD and World Bank have all cut their original 2019 growth forecasts. The IMF now expects G7 growth to be 1.6% and that of the Euro zone 1.3%. Like airlines' profit that is still positive and in the black but it is not of the magnitude to which both suppliers and buyers have become accustomed.
At the least this is likely to lower overall passenger numbers. And any decrease in business activity is unlikely to result in a growth in business travel.
More importantly, it's worth contemplating their two highlighted risk factors:
- "Downside risks are significant. Political instability and the potential for conflict never bodes well for air travel. Even more critical is the proliferation of protectionist measures and the escalation of trade wars.
- As the US-China trade war intensifies, the immediate risks to an already beleaguered air cargo industry increase. And, while passenger traffic is holding up, the impact of worsening trade relations could spill over and dampen demand."
Both point to some world leaders', and in particular the President of the United States, eagerness to rely on barriers to trade as a tactic to deal with domestic economic and political challenges.
No matter what the reason, trade barriers do not bode well for countries and regions, such as Europe, whose economies are built on high volumes of exports and imports.
The logical consequence of contracting business activity is less travel to meet old clients and find new ones. That comes with challenges for travel managers:
1. Volume targets upon which negotiated rates have been based will become more challenging to meet. That will mean a need to manage supplier relationships.
2. Lower volumes will dampen suppliers' willingness to give corporate travellers soft benefits such as upgrades and lounge access. Travellers' expectations will need to be managed.
3. A downturn in demand is likely to cause suppliers to cut capacity — that could mean less schedule and supplier choice.
4. The realignment of trading partners as a consequence of political decisions such as Brexit will mean new travel profiles, new supplier partners to cultivate, old ones' expectations to manage.
Being forewarned is being forearmed.