The International Air Transport Association upheld its outlook that 2019 will mark the tenth year of profit and the fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital. However, profits will come in lower than initially expected due to rising costs and a weakening of world trade. IATA said on Sunday that net income for 2019 will likely total $28 billion, which is almost a fifth lower on its initial forecast of $35.5 billion released in December.

Speaking at the trade body 's annual general meeting in Seoul, IATA director-general and CEO Alexandre de Juniac described the expected profit as “solid under challenging conditions.” Passenger demand is robust but trade wars and protectionist measures are taking their toll on the cargo business, he noted, cautioning that the weakening of global trade is likely to continue as the U.S.-China trade war intensifies. “This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise,” he said, while pointing out that costs are rising across the board—labor, fuel, and infrastructure.  

Overall expenses are expected to rise 7.4 percent, to $822 billion, while overall revenues are forecast to grow only 6.5 percent, to $865 billion, as yields are under pressure due to stiff competition.

IATA today also—again—downgraded its profit forecast for 2018. It now expects the world’s airlines collectively—including non-IATA members like Ryanair, AirAsia, and Southwest—to report a $30 billion net profit for last year. In December it still had expected net income for 2018 to total $32.3 billion. This was already down on a forecast of $33.8 billion in June.

If airlines manage to make a $28 billion profit this year, it would mark a $2 billion reduction on the latest 2018 industry net profit and almost $8 billion less than the 2017 net profit. On a passenger basis, likely profit per passenger will decline to $6.12, from $6.85 in 2018 and $9.18 in 2017.

The good news, de Juniac said, “is that airlines have broken the boom-and-bust cycle. A downturn in the trading environment no longer plunges the industry into a deep crisis.” Airlines will still create value for investors in 2019 with above cost-of-capital returns, “but only just.” In 2019, the return on invested capital earned from airlines is expected to be 7.4 percent whereas the average cost of capital is estimated at 7.3 percent, according to IATA data.

IATA expects all regions except North America and Latin America to report a reduction in profitability this year; regional difference remain significant.

North American airlines will, once again, account for the largest chunk of the industry’s net profits. Forecasts call for them to collectively earn $15 billion in 2019, or $14.77 per passenger—up from $14.5 billion, or $14.66 per passenger on average last year. The body’s forecast calls for European operators to earn $8.1 billion jointly and $6.75 per passenger, slightly down from $9.1 billion and $8.20, respectively, last year. It sees Middle East carriers posting a combined loss of $1.1 billion this year while also African carriers are again expected to post a loss in 2019. Latin American carriers are expected to deliver a small net profit of $0.2 billion this year, an improvement from the $0.5 billion loss in 2018. Operators in the Asia-Pacific region will deliver a net profit of $6 billion, down from $7.7 billion last year.