Date: 28 May 2014
Remarks of Tony Tyler at the Pre-AGM Press Conference, Doha
It is great to be here in Qatar—on the eve of the International Air Transport Association’s (IATA) 70th Annual General Meeting (AGM) and World Air Transport Summit. Over the next few days, Qatar will be the global capital for commercial aviation as our 240 members meet to discuss the main issues impacting air transport, as well as to exchange ideas about our vision for its bright future. As the industry is also celebrating its 100th anniversary this year, it will be an opportunity to reflect on the contribution that aviation continues to make to our world.
You will notice a very unique atmosphere at the AGM. IATA’s members come from all parts of the world and operate on a variety of business models. We have very large global network airlines. And we have much smaller regional airlines. They compete vigorously in what is a very tough business. But when they are at the AGM, they are focused on the industry and making the best decisions possible to secure its future success.
Before I speak more about the AGM, let me first refer to the latest indicators of industry performance. Yesterday we released statistics looking at the demand for global air cargo. And this morning we are releasing similar statistics for passengers.
The passenger business is doing better than the cargo business. Compared to April 2013, passenger traffic is up by 7.5%. We have seen steady growth in demand for passenger travel. The airlines are meeting this with great efficiency. In April, airlines filled 79.4% of the seats available.
On the cargo side of the business, growth in demand is a much more modest 3.2%. We had a post-recession improvement in cargo volumes which quickly subsided. And we are expecting total cargo volumes this year to be about 52 million tonnes—basically unchanged since 2010.
Middle Eastern airlines are leading the industry in growth. In April the region saw a 17.9% expansion in passenger demand and 8.7% growth in cargo. Much of that growth is being driven by the big three Gulf Carriers—our AGM host Qatar Airways among them.
Running an airline is a tough business. We will update our profit forecast on Monday. It is one of the highlights of the event for the media. But our current forecast is for a profit of $18.7 billion on $745 billion in global revenue. That’s a profit margin of just 2.5%--or about $5.65 per passenger carried.
Profitability has been moving in the right direction. In 2012 the net margin was 0.9% and that doubled to 1.8% in 2013. And as I said we will update our forecast of 2.5% this year. But the point to make is that, despite this improvement—and the enormous efforts that are behind it—the industry profit is still very thin.
There is very little buffer to protect profitability in the face of an increased tax, a rise in the price of fuel, a new charge, or a change in the economic outlook.
The mood of the AGM will be optimistic. We are an industry of optimists. And this year we will be celebrating the 100th anniversary of commercial aviation. Over that century, aviation has done much to change our world for the better with the global connectivity that it provides. Certainly Qatar is a great example of the economic and social contribution that aviation can make.
Globally, aviation supports 58 million jobs and $2.4 trillion in economic activity. Over a third of the value of all the goods that are traded internationally is delivered by air—some $6.4 trillion. So it is no overstatement to say that this is an industry of critical international importance.
The IATA AGM is the highest level event for the industry. We are expecting about 1,000 people to attend from around the world. Of those, about 150 will be at the CEO level. We are highly grateful that Qatar Airways is hosting us so graciously. Their CEO, Akbar Al Baker, is on the IATA Board of Governors and has promised a spectacular event. I am sure that the delegates will be impressed with what they see here, starting with their arrival at the new Hamad International airport, whose official opening was just yesterday.
Of course, you are interested in what they will be discussing. The industry faces many issues, so let me give you a few highlights about what I would expect to see addressed:
- Cargo: The cargo side of the business has been in the doldrums for some time. Part of this is the effect of global economic trends. But we are also working hard to improve the industry’s competitiveness with process improvements. The goal is to shorten total shipping times by 48 hours before 2020. A key component to achieve that is the global e-freight program which aims to replace paper documentation with modern electronic messaging.
- Distribution: We are also looking to modernize the passenger side of the business by modernizing distribution standards. It is what we call “New Distribution Capability” or NDC. The foundation document has just been tentatively approved by the US Department of Transportation. And the industry is very excited about the possibilities that it will create for greater transparency in travel shopping and for new product innovation.
- Sustainability: Last October, governments agreed at the Assembly of the International Civil Aviation Organization (ICAO) to develop the framework for a global market-based measure to help manage aviation’s carbon footprint. This aligns with the industry’s call for a mandatory global carbon offset program. We have committed to carbon-neutral growth from 2020. And a market-based measure is a key element to make that happen. ICAO’s goal is to have the framework approved at its next Assembly in 2016 for implementation as of 2020. We will be discussing how we can help that process.
- Aircraft tracking: The loss of MH370 continues to be on everybody’s mind. IATA is working with ICAO to find a global solution to improve aircraft tracking. We have convened a working group of the top experts in the world to agree on a recommendation by the end of September. There will be a special press briefing to update the media on progress.
- Governments: Another theme that you will hear throughout our AGM is about our relationship with governments. We need them to understand the important economic catalyst that aviation can be. Airlines are highly taxed and subject to onerous regulation. One element of the success of the Gulf carriers is that governments in this region have avoided this. They understand that the real value of aviation is the global connectivity it provides and the growth and development it stimulates, not the tax receipts that can be extracted from it.
- Air Traffic Management: And one last item to highlight is air traffic management. Aviation is a victim of its own success. More people are flying than ever before—3.3 billion this year. Their movements need to be accommodated in airspace that is finite. But governments do not seem to understand the urgency of the need for reform. In Europe, delays to the Single European Sky cost the economy billions of Euro’s a year. But there has been little progress on the Single European Sky project. The situation in the Gulf is on the global agenda. Delays are becoming a serious problem. And it will take cooperation among the Gulf governments to ensure that the finite resource of airspace is used to its maximum capacity.
These are just some of the concerns that will be discussed in what is a full agenda. And I look forward to reading, viewing or hearing your reporting of it.
With that, I am happy to take your questions.