IATA director general Alexandre de Juniac arrives for his second AGM in the chair with industry profits at almost unprecedented levels – but with plenty of challenges to be faced in sustaining them.
The headline numbers are strong. IATA in its last financial outlook last December projected industry net profits of $38 billion for 2018 – a fourth consecutive year of profits in excess of $30 billion.
While the sharper-than-expected rise in oil prices over this year's first half may lower these expectations, airlines are largely far better prepared now to deal with $80-per-barrel Brent crude.
"We are coming back to the [oil price] levels that were problematic a few years ago, but in the meantime the airlines have been very active in trying to clean their balances, restructuring their operations, reducing their costs and being more competitive and resilient," de Juniac told FlightGlobal in Sydney on the eve of this year's AGM, which begins on 3 June. "So we think the fuel-price increase shouldn't have the same consequences it did [a few years ago]."
Industry profit levels, while now delivering returns above invested capital, are still below the double-digit margins which other industries enjoy, however.
"We are making slightly less than $8 a seat, which means something like 4-5%, which is still thin margins," de Juniac notes. "The period is exceptionally long and high, but still in the lower part of what should be the normal profits."
Sustaining those profits is not straightforward either: de Juniac highlights rising labour and infrastructure costs alongside fuel as challenges for airlines.
"We have been very vocal and I think influential in giving guidance to governments in terms of managing their infrastructure, of being cautious about privatising. There are a lot of results in that area, which is absolutely crucial. We have the problem of infrastructure everywhere in the world, whether it's airports or ATC.
"If we want to cope with the potential growth, we desperately need it to be efficient, affordable, and [to have] enough infrastructure to cope with that."
He believes IATA progress in this area represents some of the association's most significant action over the last 12 months, alongside working with governments on a collaborative approach to security. That followed the high-profile restrictions on on-board personal electronic devices that US and UK authorities implemented last year.
"We have been very active in terms of advocacy to convince governments to co-operate with the industry when they want to implement new measures, particularly with security," he says. "I think the most significant result we have reached is [that] none of these governments will implement unilaterally any measure."
Since taking over as IATA director general almost two years ago, de Juniac has consistently flagged the sector's role in supporting the "business of freedom". That has against a backdrop of increased protectionist rhetoric along with trade and political disputes.
"Any measure that is aiming at closing borders to people or trade is bad news. It's bad news for the economy, even worse for the aviation business. We are the first to be hit," he says.
That was evident during last year's AGM in Cancun, when a diplomatic spat in the Middle East escalated into the closure of airspace to Qatar by four neighbouring states. A year on, the block remains in place.
Likewise, president Trump's decision to impose tariffs on steel and aluminium imports to the USA – bringing with it the prospect of retaliatory moves by Europe, Canada and Mexico – provided a timely reminder of ongoing challenges as this year's AGM loomed.
"Our policy is to increase the connectivity for obvious reasons," says de Juniac. "Some get that; some don't, for various reasons – sometimes political, economic or commercial. [But] we strongly say globalisation has been a good thing."
He also highlights continuing work by IATA to support the industry on environmental issues, like the introduction of ICAO's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA); distribution initiatives; and efforts in the field of data analytics.
"We are investing a lot in data products. Analytics that serve the industry in safety," he says, noting that this builds on IATA's established role in supporting industry safety, developed through its IOSA audit programme.
"Preparing for the collecting and putting in the right format [of] safety data for the industry is probably among one of our big missions," he says. "The big data and data analytics and all the tools that can used by IT now, it will provide a lot of relevant, accurate information and predictive information to help prevent or limit accidents."
IATA has added several new members in the last year and still represents a majority of the industry – around 82%. But several of the biggest low-cost carriers remain outside of the association.
"Ten percent of our members are low-cost or new-model carriers – we have almost all of them that are medium- or small-size. Yes, we have not succeeded yet to attract the five or six big ones. But we are working on that – we are trying to convince them," he says.
"Already, some are IOSA-certified, some others are considering to be IOSA-certified, so frankly I think they will join. One day it will happen. And I think it will be a good thing for everyone, particularly them," he says.
For more stories from this year's IATA AGM in Sydney, visit flightglobal.com/IATA
Source: Flight Daily News