International Air Transport Association reveals what airlines make out of each passenger slides as profits are squeezed

Air New Zealand expects its earnings this year to be at the lower end of forecasts. Photo / Supplied

Airline profits are being squeezed this year, down 25 per cent on earlier estimates in a slowdown that's been felt around the world, including in New Zealand.

The International Air Transport Association today announced a downgrade of its outlook for the global air transport industry to a $US28 billion (NZ$42b) profit - down from $35.5b billion forecast in December last year.

Airline chiefs heard the business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade.

This year overall costs are expected to grow by 7.4 per cent, outpacing a 6.5 per cent rise in revenue.

Profit per passenger will fall to $6.12 (from $6.85 in 2018). In the Asia-Pacific region net profit for each passenger was $3.51, down nearly 30 per cent on last year.

''Margins are being squeezed by rising costs right across the board - including labour, fuel and infrastructure. Airlines will still turn a profit this year, but there is no easy money to be made," said the association's director general and chief executive Alexandre de Juniac.

Air New Zealand has adjusted its profit outlook this year, last week saying it expected its earnings to be at the lower end of forecasts.

The airline has dropped guidance for earnings this financial year to $340 million, the bottom of its previously announced range.

This allowed for a $25 million headwind from increased jet fuel prices.

In October last year it was forecasting pre-tax profit as high as $525m but had suffered from a marked dip in demand on domestic routes and inbound tourism was levelling off.

The airline will cut frequency on its domestic routes by about 2 per cent from next month to save costs and improve yields, prompting a warning that air fares could rise.

Consultants have also been called in to cut overhead costs at its head office by 5 per cent.

Domestic rival Jetstar is also trimming some services over winter and next month Virgin Australia will cut back some transtasman flights over winter.

The airline, which is going it alone after a bust up with Air New Zealand last year, put on extra transtasman flights on from last October but says it will cut Auckland-Sydney services from 18 to 15 a week and the Sydney-Christchurch service will drop back to a seasonal service.

''Virgin Australia remains committed to the transtasman market and will continue to operate 200 services per week between Australia and New Zealand over the July to September period,'' said a spokeswoman.

Auckland Airport's general manager of aeronautical commercial, Scott Tasker, said the Tasman remained a ''dynamic'' market with all carriers continually adjusting capacity.

Air New Zealand has about 41 per cent of capacity, Qantas and Jetstar about 34 per cent and Virgin 17 per cent. The remainder of seats are flown by Latam and China Airlines.

Tasker said having Virgin was important.

''To have a third airline is very important for competition.''

Airline chiefs are meeting in Seoul, South Korea, for IATA's annual meeting where they were told the high price of fuel in last year ($71.6 per barrel) will continue this year with an average cost of $70.00/barrel expected.

This was 27.5 per cent higher than in 2017. Total passenger numbers are expected to rise to 4.6 billion, up from 4.4 billion last year.

Airlines agreed on a concerted global push for the implementation of the ''One ID'' initiative, which uses a single biometric identifier to move passengers through the airport, without the need for paper travel documents.

The IATA resolution calls for airlines, airports and governments to work together to promote and implement a paperless passenger process using biometric recognition.