IATA Sees Good Times Continuing for Airlines

Dec 6, 2017 - 3:01 PM

Airlines expect to record their fourth consecutive year of “sustainable profits” in 2018 on continued rising passenger growth and cargo, International Air Transport Association (IATA) leaders reported at the airline trade association’s annual media day. Forecasts suggest a 6 percent increase in business travelers, to 4.3 billion, despite a 3 percent increase in ticket prices, and total profits of $38.4 billion notwithstanding slightly thinning operating margins.

“These are good times for the global air transport industry,” said IATA director general and CEO Alexandre de Juniac. “More people than ever are traveling. More routes are being opened. The demand for air cargo is at its strongest level in a decade. Safety performance is solid. Employment is growing.”

He cautioned, however, that airlines face rising fuel and labor costs, as well as increasing infrastructure expenses.

IATA chief economist Brian Pearce noted that although historic trends indicate a downturn after an eight-year air travel growth cycle, the association sees no reason for that typical pattern to repeat next year.

Adjusting for inflation, tickets cost 64 percent less than they did in 1996, Pearce said, noting that “airlines can only lower airfares for consumers if costs come down.” He criticized the fee structure of airport and air navigation services provider infrastructure, which, he said, has risen steeply over the past decade, partly because of weak competitive pressures.

De Juniac advocated for the “corporatization” of the U.S. air traffic management system, viewing it as a means of removing ATM from legislative funding politics, thereby accelerating development of the Federal Aviation Administration (FAA) NextGen modernization program. “In Europe, narrow national interests are blocking the implementation of the Single European Sky,” he also complained. “So we are working with governments to develop national airspace plans that could be building blocks for a single sky.”

Conversely, he said he has not seen a single example of airport privatization that has lived up to expectations, noting “the five best airports in the world are publicly managed.”

Asked about the possible effect of the UK’s “Brexit” from the European Union, the IATA leader said the “worst case” of a prohibition against UK-based carriers landing in Europe would prove a disaster, but that such a scenario appears unlikely. “I think it will not happen,” he said. He also warned that although schedules now call for implementation of Brexit to begin at the end of March 2019, a decision about air connectivity must occur by October 2018 because airlines establish their schedules six months in advance.

Deflecting an assumption that he flies first class exclusively and is therefore unsympathetic to “main cabin” passengers, de Juniac said he flew economy class on a long-haul low cost carrier as recently as a month ago. He acknowledged that the smaller seats in dense aircraft configurations are “not comfortable,” especially for tall or heavy or disabled passengers, but pushed back against personal-space regulation. “You cannot ask the airline to charge the lowest price and provide the best product and the largest space,” he said. “People don’t want to pay; they don’t care on a two-hour flight to have nothing to eat or drink and no space for their legs. It’s market forces.”