Departing IATA Boss Calls for Sustainable Profitability as Forecast Dips

 - June 13, 2011, 7:52 AM
IATA’s outgoing director general and CEO Giovanni Bisignani called for airlines to focus on sustainable profitability even as the association downgraded the projected combined profits of its members for 2011 to $4 billion, 54 percent below the March 2011 forecast.

Outgoing IATA director general and CEO Giovanni Bisignani called on his members to aspire to sustainable profitability as he announced a new leadership team for the association at its Annual General Meeting in Singapore on June 6. On July 1, former Cathay Pacific Airways CEO Tony Tyler will succeed the charismatic Italian, while Peter Hartman, president and CEO of KLM, will serve as the new board chairman for 2011-12. Bisignani will become IATA’s director general emeritus.

“After a decade of crises and shocks, airlines today are safer, stronger, leaner and greener,” said Bisignani. “But sustainable profitability remains elusive. We expect airlines to make just $4 billion profits this year on revenues of $598 billion.”

The projected $4 billion profit figure does, in fact, reflect a 54-percent decline from the $8.6 billion forecast by IATA as recently as March. It also represents a 78-percent decline from the $18 billion surplus that IATA members achieved last year.

In fact, airlines have only recorded a net return of 0.1 percent over the past four decades, said Bisignani. “We know that will not work; cost-cutting alone does not increase long-term profits [and] ‘unbundling’ erodes the value of the base product…and re-regulation would kill efficiency and innovation,” he concluded.

IATA has created “Vision 2050” to create a different path. Outlined at IATA’s 2010 AGM in Berlin, the vision lists the many improvements required to meet a goal to carry 16 billion passengers and 400 million metric tons of cargo annually by 2050.

Despite the challenges ahead, AGM attendees could reflect on a decade of achievement with Bisignani at the helm. For example, the industry registered a 42-percent improvement in safety (hull loss rate in 2010 dropped to one in every 1.6 million flights) and a 24-percent improvement in fuel efficiency.

Bisignani called for a “checkpoint of the future” to allow passengers to “get from curb to gate with dignity, without stopping, stripping, unpacking, and certainly without groping.” He then called for the energy industry to commercialize sustainable biofuels at competitive prices, while attacking oil companies for preferring to “pocket $1 trillion in profits” rather than investing in green initiatives. “Big oil is green in its advertising, but not in its actions,” he asserted.