The worldwide airline industry should return to profitability in 2007, but profit levels will be modest and the industry faces a potential “wild card” threat in the form of avian flu, said Giovanni Bisignani, director general of the International Air Transport Association yesterday.
Speaking at the Asia Pacific Aviation Summit in Singapore, Bisignani said that IATA had learned from the damage that the SARS virus did to the aviation industry and was working with the World Health Organisation – “the expert in these matters”.
He said: “If we see human-to-human transmission [(of avian flu], then the negative impact on air transport could be enormous.”
He added that IATA has published a series of industry best practices for communicable diseases.
Turning to the economic health of the industry, Bisignani said that while Asian carriers led the industry in terms of profitability in 2005, even within the region the picture was mixed. Singapore Airlines
was returning a 12% operating margin, “but this is the exception, not the rule”.
He added: “Most are below the 7-8% needed to cover the cost of capital and give our investors an acceptable return.”
He said that in two years the industry fuel bill worldwide had more than doubled to nearly $100 billion, or 23% of operating costs.
Asian airlines should make a collective profit of $2 billion this year, he told delegates. “But do not start opening the champagne. That is still less than a 2% margin.”
Despite that, there remained huge opportunities for the industry, which remains inextricably linked to economic growth. He praised the example of Singapore, which has adopted a co-ordinated approach to air transport that has brought broad economic benefits.