'Pathetic' margins are hurting aviation
Giovanni Bisignani, IATA director general and CEO, has described aviation as a “sick” industry that makes way too little profit.
Speaking at IATA’s Vision 2050 meeting in Singapore, Bisignani said: “Aviation supports 32 million jobs and facilitates the global village by supporting $3.5 trillion in economic activity. In 2011, we expect to generate almost $600 billion in revenues with the burden of $205 billion in debt.
“But our margins are pathetic – just 0.1 percent over the last 40 years. This is not sustainable. We need to look ahead to anticipate change as we prepare to handle the 16 billion passengers and 400 million tonnes of freight that we will handle in 2050.”
Delegates representing governments, airlines, airports, air navigation service providers, manufacturers, leasing companies, general business and academia debated four key issues: an industry structure for financial sustainability, understanding the passenger of the future, aircraft and technology for the future, and infrastructure for the future.
“The timing of the meeting was critical. Over the last decade of crises, the industry lost $50 billion. It also changed completely — improving productivity by 63 percent, cutting sales and distribution costs by 19 percent and improving fuel efficiency by 20 percent,” Bisignani said.
“IATA contributed with $55 billion in savings since 2004 through campaigns to Simplify the Business, improve the cost-efficiency of infrastructure providers, and reduce fuel burn with shorter routes and shared industry best practices in fuel management. And still we only earned a 2.7 percent margin in 2010, which we expect to shrink to 1.5 percent this year.
He added: “We could not miss using this window of profitability, however weak, to look beyond the crisis of the day and answer fundamental questions about what the future should look like and how we can get there.
“Nobody has all the answers or a crystal ball to see the industry in 2050. But there was consensus that one of the industry’s biggest challenges is to evolve from the financial disaster of a partial deregulation that has created fierce competition among airlines but without giving them the normal commercial freedoms to do business,” Bisignani said.