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  • ANALYSIS: Outside shocks dominate debate at IATA AGM

ANALYSIS: Outside shocks dominate debate at IATA AGM

If there were any reminders needed of the potential for external events to impact the airline industry, developments both immediately before and during the recent IATA annual general meeting in Cancun provided further evidence of how outside factors could threaten to push the industry from its profitable altitude.

Delegates woke on the morning of the AGM on 5 June to news that Qatar had been diplomatically isolated by neighbouring countries. That would potentially hit IATA member Qatar Airways' network – as well as those of other carriers – and threatened to reduce traffic in a region that was already showing signs of slowing growth. A week later, the diplomatic row continues.

"We are not in favour of bans, and we would like connectivity to be restored as soon as possible," said IATA director-general Alexandre de Juniac during the AGM's opening press briefing. "We would like open borders."

This development came days after the UK was hit by a terrorist attack, the latest in a series of incidents in Europe that have dented travel demand.

And this was while the news was still sinking in from the Trump Administration's announcement on the eve of the AGM that it was to withdraw thee USA from the Paris Agreement, raising concerns about its commitment to CORSIA. Trump also kicked off a renewed effort to implement a travel ban on people from certain Middle Eastern countries by launching a challenge in the Supreme Court to rulings that had blocked his original executive order.

For an industry already grappling with an unpopular ban on personal electronic devices (PEDs) in the cabins of certain flights, and a rise in anti-globalisation and protectionist rhetoric, director-general Alexandre de Juniac's "business of freedom" message was looking particularly timely.

"Aviation is globalisation at its very best," he told delagates during his opening address. "Today we face headwinds from those who would deny the benefits of globalisation... As aviation's leaders, we must bear witness to the achievements of our connected world."

The challenge for IATA is that national authorities and governments are not always looking for industry input before introducing new measures.

"Keeping our passengers and crew safe and secure is our top priority," de Juniac says. "While that creates a natural partnership with government on security, the relationship is showing cracks."

De Juniac went on to outline IATA's estimates on the productivity impact of UK and US bans on PEDs in the cabins of certain flights. "That [productivity loss] could surge to $1.2 billion if the ban is expanded to flights from Europe to the US," he says.

While IATA is now talking with US authorities about the future of the PED ban, the threat of an extension still exists.

The assembly later reaffirmed the industry's commitment to security by supporting ICAO's work on the Global Aviation Security Plan (GASeP) and urging governments to work with IATA on "critical areas of common interest".

A resolution on sustainable fuels also gained the assembly's support, after de Juniac expressed confidence that CORSIA would not be derailed by actions of the Trump administration.

"Let me also reassure you that the disappointing decision of the US to back out of the Paris agreement is not a setback for CORSIA," he says. "Our membership remains united behind CORSIA and our climate-change goals."

FUNDAMENTALS HEALTHY

As the outside shocks persisted, de Juniac was still able to offer reassuring views on the airline industry's health and therefore its ability to weather such developments. "Strong demand is driving profitability," he said. "That includes air cargo, which has awakened from a six-year coma."

That strong demand has prompted IATA to raise its industry forecast for this year to $31.4 billion – which would make it among the most profitable years ever and only a little down on the $35.9 billion high of 2015. It would also mark a third consecutive year of airlines delivering returns above their cost of capital.

"This solid financial performance is epoch-making for an industry that has always struggled with profits," de Juniac states. “Our optimism, however, must be tempered with some caution."

De Juniac also drew attention to industry's achievements, particularly around safety and economic benefits: "Today, 11 million people will trust our companies to transport them safely. And our aircraft will be full with 150,000 tonnes of cargo... This is our industry at work – an engine of commerce."

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