Airlines are expected to post a profit of $2.5 billion in 2010, according to Giovanni Bisignani, the International Air Tranpsort Association's (IATA) director general and CEO. Bisignani made the forecast in his State of the Industry address at the start of the 66th IATA Annual General Meeting and World Air Transport Summit in Berlin.
The industry’s first profit since 2007 will come after a decade in which airlines have lost a cumulative $47 billion. “It is time to think big and to look beyond the cycles and shocks. Our duty is to work together to define a vision on which to build a sustainable future,” Bisignani said, citing the need for improved airline services, changes in air traffic management and an end to airline industry fragmentation.
Bisignani’s vision for sustainable aviation in 2050 includes: “We will be very near to zero accidents. We will emit half the carbon. We will have eliminated queues with integrated systems ensuring security as we process more passengers. We will operate with almost no delays in globally united skies. We will share costs and profits equitably across the value chain. We will be a consolidated industry of a dozen global brands supported by regional and niche players. And we will deliver value to investors.”
“In just over a decade, I can see $100 billion in industry profits on revenues of $1 trillion. As we move towards 2050, this 10% margin will become even more robust. This is not just a crazy dream. Before the recession, at least a dozen IATA members already had 10% margins. We must make this a much broader reality. Change in all areas is possible. This vision—including sustainable profitability—can be our future,” said Bisignani.
“Efficiency gains never make it to the bottom line because airlines are deprived of the commercial freedom to operate their businesses like a normal business. Our poor profitability makes every shock a fight for survival,” said Bisignani. He laid the blame on the industry’s hyper fragmentation with 1061 airlines as a result of the bilateral system which regulates the global aviation industry. The restrictions on international capital prevent consolidation across borders, IATA said.
“The restrictions of the bilateral system are a dam that holds us back. It is time for that dam to burst. Governments must act responsibly to ensure safety, security, and a level playing field. And airlines need the freedom to build efficiencies across borders, better serve their customers, and achieve sustainable profits to fund growth and innovation,” said Bisignani.
“Infrastructure must be reshaped around the needs of airlines—the core of the industry’s value chain. Airports should compete for airline business based on efficiency. Commercial revenues will drive their business. I can see airports paying airlines to bring shoppers and airport revenues funding the air traffic management system,” said Bisignani.
Air traffic management must also change. “I can see ten global air navigation service providers (ANSPs) replacing the current 180 at half the cost,” said Bisignani. The Single European Sky (SES) would be the first of the ten global ANSPs. “But we need real leadership to replace the uncoordinated bureaucratic mess that Europe is today,” said Bisignani.
Powering the Industry: “Today’s jet fuel cannot sustain air transport in the long-term. We must find a sustainable alternative and our most promising opportunity is bio fuels, which have the potential to reduce our carbon footprint by up to 80%,” said Bisignani.
“The customer is at the center of our future vision. By 2050, we will have 16 billion travelers and handle 400 million tons of cargo. In just a couple of decades, we will see the middle class nearly triple from the 1.3 billion today to 3.5 billion people—a quarter of which will be in India and China. Accommodating that growth efficiently will be a challenge for all parts of the value chain—airports, air navigation service providers, manufacturers and governments. The solution must be strategic and aligned,” said Bisignani.
Bisignani noted that the air transport industry must engage its 2.4 billion passengers to change government’s “over-regulate and under-appreciate” attitude.
“April gave us a vivid picture of life without aviation. Ten million people were stranded. Hotels and convention centers were empty. Seafood and flowers rotted. And just-in-time production was delayed. The volcano cost the global economy $5 billion—far more than the $1.8 billion of lost airline revenue. The volcano’s eruption was a wake-up call. It reminded us that without air connectivity, modern life is not possible,” said Bisignani.