Bisignani: Sustainable Profitability Remains Elusive
The International Air Transport Association (IATA) called on the
global aviation industry to build a platform for a sustainable
future based on renewed leadership, continuous innovation, and a
united stand in addressing challenges and finding solutions.
These bold steps were spelled out by IATA Director General and
CEO Giovanni Bisignani in the annual State of the Industry address
at the Association’s 67th Annual General Meeting (AGM) and
World Air Transport Summit in Singapore. Bisignani also reported on
the results of Vision 2050—IATA’s initiative to
determine a long-term vision for the air transport
industry—and reviewed the past decade to highlight
achievements and unfinished business.
“After a decade of crises and shocks, airlines today are
safer, stronger, leaner, and greener. But sustainable profitability
remains elusive. We expect airlines to make just $4 billion profits
this year on revenues of $598 billion. The challenge is to prepare
to handle 16 billion passengers and 400 million tonnes of cargo by
2050 with efficient infrastructure and effective technology, while
making sustainable profits and satisfying customer needs,”
said Bisignani.
Since Vision 2050 was first outlined at IATA’s 2010 AGM in
Berlin, a group of 35 strategic thinkers have developed the Vision
and agreed that many things must change to better serve our
customers and build a stronger industry. “We need efficient
processes to cope with the volumes and evolving customer demand. We
need technology-based solutions for the environment and security
challenges, and we need air traffic management that goes beyond
national borders. We need airport development that is smarter in
meeting future demands. And we need sustainable profitability to
support innovation and reward shareholders,” said
Bisignani.
Bisignani noted that sustainable profitability would be the
biggest challenge for an industry with a net return of 0.1% over
the last four decades. “We know what will not work.
Cost-cutting alone does not increase long-term profits. Unbundling
erodes the value of the base product. And re-regulation would kill
efficiency and innovation,” said Bisignani.
The key conclusions of Vision 2050 are the need for stronger
partnership across the value chain and a more proactive role for
governments. “We must break down silos in the value chain to
rebalance financial reward with risks, and create a new value
proposition so that competition is not just based on price. And
governments must deliver policy decisions that replace intervention
with commercial freedoms, reduce barriers to exit, and allow
airlines to restructure like normal businesses,” he
added.
Many elements outlined in Vision 2050 already exist. “We
must combine the proactive policies of Asia, the coordinated
planning we see in the Middle East, the great ideas that drove
innovation in North America and Europe—like open skies and
single markets—and the trans-national approach to air traffic
management that we see with the Agency for Aerial Navigation Safety
in Africa and Madagascar (ASECNA). At the same time, we must reject
ideas that cling to the outdated ownership restrictions of the
bilateral system and any view that does not put safety
first,” said Bisignani.
To advance Vision 2050, Bisignani drew three personal
conclusions based on industry unity, renewed leadership, and
constant innovation. He said industry leaders must resolve tensions
around the rapid growth of the Gulf carriers. “The solution
to call in governments as advocates or referees has not worked. And
it will not work. As leaders of a global industry, we must find a
fair and reasonable way forward ourselves." China and India must
take on a greater leadership role. “With size comes
responsibility. In place of our traditional leaders, I am convinced
that China and India will soon become the driving force of aviation
in this century. They will grow aviation stronger through
change,” said Bisignani. And finally, he said that innovation
and openness to change will determine the future. “We must
continue the momentum of the last decade to drive change across the
value chain, not as a response to crises but as a new way of doing
daily business."
IATA urges the development of a Checkpoint of the Future for
aviation security. “Aviation is much more secure today
than in 2001, at a cost of $7.4 billion annually. But our
passengers only see hassle because governments are not working
together. Passengers should be able to get from curb to gate with
dignity—without stopping, stripping, unpacking, and certainly
without groping.” said Bisignani. IATA called for security
improvements that focus on replacing the 40-year-old airport
checkpoint with a modern approach that is risk-based and powered by
intelligence and technology.
Additionally IATA calls on Big Oil to commercialize sustainable
biofuels at competitive prices, and demands that Europe abandon its
plans to include international aviation in its Emissions Trading
Scheme (ETS) from 2012. “Uncoordinated and punitive regional
measures distort markets and undermine global efforts to reduce
emissions. The EU ETS is a $1.5 billion cash grab that will do
nothing to reduce emissions. BASTA! (Enough!) to Europe’s
short-sighted actions. It’s time to be serious about climate
change and honest in developing global solutions,” said
Bisignani.
Reuters reported over the weekend that there have been rumblings
out of China about possible retaliation against Airbus should the
EU proceed with its plan. Bisignani said that could be the "kiss of
death" for the struggling European economy, which he described as
in "survival mode."
But European Climate Commissioner Connie Hedegaard said the EU
is refusing to back down on its insistance for the purchase of
carbon credits, which goes into effect January 1st of next
year.
This was Bisignani’s last State of the Industry address as
he will retire as Director General and CEO on July 1st.