The International Air Transport Association (IATA) reported that the global airline industry’s performance on safety, sustainability and profitability is solid, but the industry faces the threat of protectionist measures being implemented by governments.
IATA also called for governments to enhance their collaboration with the industry to meet rising security challenges, avert a looming infrastructure crisis and to build smarter regulation.
The Director General’s Report on the Global Air Transport Industry was delivered to the 73rd IATA Annual General Meeting and World Air Transport Summit. The event opened today and has gathered 1,000 industry leaders and stakeholders in Cancun, Mexico.
Profitable, but Still Only Marginally
Industry Financial Performance: Although regional differences remain stark, overall the air transport industry is generating profits above its cost of capital. In 2017 the global airline industry is expected to generate a $31.4 billion profit on $743 billion in revenues. That’s a $7.69 average profit per passenger.
Defending Against Protectionism
“Nothing should stand in the way of aviation—the business of freedom. Aviation is globalization at its very best. But to deliver aviation’s many benefits we need borders that are open to people and trade. Today we face headwinds from those who would deny the benefits of globalization and point us in the direction of protectionism. This is a threat to our industry. We must bear witness to the achievements of our connected world. And we must ensure the benefits of aviation for future generations,” said Alexandre de Juniac, IATA’s Director General and CEO.
Strong Safety Performance
Flying remains the safest form of long distance travel by a wide margin. In 2016 the industry performed 40.4 million flight sectors and there were 10 fatal accidents. A major achievement on safety performance in 2016 was in Sub-Saharan Africa. The region had no jet hull losses last year.
IATA signaled its concern for states’ not living up to their obligations to fully investigate air accidents.
“Accidents are rare, but each represents an opportunity to learn more about making aviation safer. That’s why their investigations are mandated in Annex 13 of the Chicago Convention. But, of the 1,000 accidents investigated over the last decade, reports are available for only 300, and many of these are not exhaustive. There can be no excuse for a statistic like that. Governments must do better,” said de Juniac.
Keeping Aviation Earth-Friendly
A major achievement of 2016 was the landmark Carbon Offset and Reduction Scheme for International Aviation (CORSIA) agreed at the International Civil Aviation Organisation’s (ICAO) 39th Assembly. Already 70 states representing at least 80% of anticipated future growth have indicated their voluntary participation in the scheme. This will be a major enabler of the industry’s commitment to carbon-neutral growth from 2020 and to cut net emissions to half of what they were in 2005.
The success of CORSIA is unaffected by the US decision to withdraw from the Paris Agreement.
“The disappointing decision of the US to back out of the Paris Agreement is not a setback for CORSIA. They are completely separate from one another. The alternative to CORSIA is a patchwork of measures that would be ineffective, costly and unmanageable. Our membership remains united behind CORSIA and our climate change goals,” said de Juniac.
The AGM passed a resolution calling on governments to finalise the details of CORSIA with enough time for implementation by airlines, support the commercialisation of sustainable alternative aviation fuels and modernise air traffic management.
The Electronics Ban
IATA warned that while air travel faces security threats, alternatives must be found to the ban on large portable electronic devices (PEDs) in the cabin by the US and the UK on some flights from the Middle East and North Africa.
“We must trust that valid intelligence underpinned the UK and US decisions to ban large PEDs on flights from some African and Middle Eastern airports. But, the measures themselves test the confidence of the industry and the public. We need to get security right. There is a clear duty for governments to make sure that the measures are logical, effective and efficient. That is not the case with the current PED ban. And it must change,” said de Juniac.
IATA called for governments to adopt alternatives to the current ban.
“In the short-term, these include more intense screening at the gate and skills training. In the medium-term, faster and more advanced explosive detection technology is the solution to evolving bomb threats. But painfully slow certification processes must be accelerated so that we can actually use it,” said de Juniac.
De Juniac emphasised the importance of working with governments on security challenges.
“Security is ultimately a government responsibility. But airlines also have a big stake in the matter. The safety and security of our passengers and crew is our top priority. We have vital operational expertise that can help governments and it’s difficult to understand their resistance to greater collaboration. We could achieve better solutions by working together,” said de Juniac.
The AGM passed a resolution calling for governments to work more closely with the industry and among themselves to keep flying secure.
It also strongly endorsed the efforts of ICAO to establish a Global Aviation Security Plan (GASeP) which will lay the foundation for more effective collaboration on security.
Infrastructure Crisis Looms
“An infrastructure crisis is looming. Infrastructure in many parts of the world can barely cope with demand today. And development plans are not ambitious enough to accommodate the 7.2 billion passengers we expect in 20 years’ time,” said de Juniac.
Bottlenecks and deficiencies in airport and air navigation services exist in all corners of the earth.
IATA called for governments to fully implement the IATA Worldwide Slot Guidelines to fairly and efficiently manage scarce capacity. It also warned that the guidelines are not a substitute for building capacity where demand exists.
“Governments have a responsibility to provide sufficient capacity, with service quality aligned to user expectations and at an affordable cost, capacity, quality and affordability. It is a common sense mantra that we must insist on in our dialogue with governments,” said de Juniac.
IATA also urged governments to be cautious when privatising aviation infrastructure assets.
“Privatisation has failed to deliver promised benefits in many countries—India, Brazil, France, and Australia to name just a few. The concessionaire makes money. The government gets its cut. The airlines pay the bill—usually a big one. And passengers and the local economy suffer the results of higher costs. When governments privatise critical infrastructure, economic regulation is essential. To date I cannot name a single long-term success story. Finding the solution is an important piece of work that needs government and industry collaboration. It’s the only way to balance the investor’s need for profit with the community’s need for cost efficient connectivity,” said de Juniac.
Building Smarter Regulation in an age focused on immediate gratification is a challenge.
The majority of the 100,000 flights that operate each day, do so without incident. However, when things go wrong the potency of social media to hold individual companies and entire industries instantly accountable is formidable.
“Regulators and politicians can feel confident that the discipline of competitive market forces has been given a boost. And regulators themselves face pressure to respond to social media frenzies with immediate solutions. Hastily-built regulation almost always brings unintended consequences. That’s why Smarter Regulation principles are absolutely critical,” said de Juniac.