By Patrick Appleton
Trade wars show no sign of lessening going into 2020 and continue to pose a significant challenge for airline finances, according to Citi’s Rick Johnston.
With relations between the US and China affecting passenger and cargo traffic, and globalization suffering from protectionism, Johnston said financial institutions working in the air transport industry have much to be wary of.
Speaking during the trade-war-focused ‘Walls and Trenches’ session at the International Air Transport Association (IATA) World Financial Symposium in Miami, the Director of International Government Affairs at Citi warned that the situation—particularly in the US—is likely to get worse before it gets better.
One could say we are in a 21st century version of the ‘Cold War’ now involving China and Russia
Just-launched impeachment proceedings in the US could “muddy the waters in Washington” when it comes to trade, Johnston said, adding that it could lead to failure to pass the US-Mexico-Canada trade agreement.
He added that in the year when the Bretton Woods Agreement turns 75, the level of trade tension across the globe is so high that he is wondering “will there be a 76th anniversary?”
The Citi Director also warned that the attacks on Saudi Arabia’s oil infrastructure and civil unrest in Hong Kong play a huge part in affecting airline finances owing to disruption and uncertainty.
“Oil infrastructure is at risk,” Johnston told delegates. “While other supply chain disruption has seen production moving outside of China to the likes of Vietnam; that is good for Vietnam, but in reality they are lacking in the adequate infrastructure required.”
At present, the trade wars between US and China, and further afield are impacting the industry to the tune of almost $120 billion. With Foreign Direct Investment also falling around the world, Johnston said the situation is unlikely to improve in the short-term.
“We are operating in an altered security environment, the Intermediate Range Nuclear Forces (INF) treaty is coming to a close; there’s going to be a new arms race – one could say we are in a 21st century version of the ‘Cold War’ now involving China and Russia,” said Johnston.