Good morning. It is great to be with you here in Luxembourg as IFALPA celebrates its 70th anniversary. Thank you for inviting me. Speaking as the former Chairman and CEO of Air France KLM, I must say that I have not often received a warm welcome when appearing before a group of pilots!
We are meeting in a period of industry well-being. Financially, airlines are doing better than at any time in their history. IATA is forecasting a profit of $38.4 billion this year. 2018 will be the fourth consecutive year in which earnings will exceed the cost of capital—in other words a normal profit for any other business.
But the situation cannot be described simply as strong demand, improved efficiency and profits. To begin with, profitability is not evenly spread—about half is being generated by airlines in North America. Furthermore, costs are rising—particularly for fuel, but also for labor. Let's also keep that $38.4 billion profit figure in perspective—it represents a 4.7% net margin on revenues, or a bit more than 7 euros per passenger. Apple, a single company, recorded a net income of $48.4 billion for its last fiscal year—a 21% net margin.
Lastly, the sad trajectory of Air Berlin, Alitalia and Monarch--and many other airlines over the past 15 years--reminds us that the industry is extraordinarily challenging, even in the best of times. An airline that cannot adapt to changing market conditions, that cannot generate a sustainable profit for shareholders, will be unable to offer its employees long-term job security.
So my first message to you is that it is vital that we work as a team. It was a huge struggle for all involved to transform the industry post-9.11…and again after the Global Financial Crisis. It is important that we continue to work together to keep aviation in the black.
Because my time with you is limited, I would like to share some thoughts in a few areas that I believe have particular relevance to this group.
Let's begin with safety, our highest priority.
There is no question that 2017 was an extremely safe year for our industry, perhaps the safest. There were no fatal jet accidents involving passenger flights for the second time in three years. Yet we also know there is room for improvement. We experienced six fatal accidents involving turboprops and cargo flights in 2017, and we've had three fatal accidents so far this year. In addition, we had some well-publicized events in which margins were compromised and the outcomes could have been far worse than they were. I envision a time when we have zero accidents and no fatalities, but we are not there yet.
In preparation for this speech, I asked our safety and flight operations team to provide some examples of areas where our two organizations are working together to improve safety. These include accident classification, conflict zones, cyber-security, drones, fatigue management, human factors, pilot emotional and mental health, runway excursions, training, unstable approaches and more.
It is a very impressive list, and a strong illustration of the working together approach that has contributed so much to our industry's superb safety record. To get to zero accidents, however, we will have to increase this cooperation. So my second message is to thank you for all your efforts and to express my hope that our organizations can expand our collaboration and alignment to other areas, particularly those issues before the International Civil Aviation Organization (ICAO).
Safety naturally leads into another area, which is innovation and new technology
Like all industries, aviation is being challenged by the digital revolution. Nobody knows what opportunities it will bring. But it is clear that constant innovation is crucial to survival. It is tempting to think that our industry has transformed itself sufficiently through the restructurings that already have occurred. I must warn against such an attitude of complacency. We must be open to change.
Drones are an excellent example. I'm confident that by working together with ICAO and state safety regulators as well as other stakeholders, we can assure the integration of drones without compromising safety or airspace efficiency. In fact, it is an absolute pre-requisite for anything that may follow with this exciting new technology.
But we do not know what the implications for our businesses are. We have seen what has happened in other industries that were unable or unwilling to respond to the introduction of new technologies or ways of working. So my third message today is that we always must be innovating and keeping an open mind to change, not only at the corporate level, but in our daily jobs and responsibilities. Because the alternative is that others more willing to try new things will define our future for us.
I would like to share one final thought.
We work in a highly visible industry. People are fascinated by aviation and airlines. And they respect the positions and roles of the professional women and men who operate their flights. Social media has added a new dimension, shining a 24-hour spotlight onto virtually everything we do. It is a great opportunity for us to connect with our customers. But, as we have seen with the Dr. Dao incident last year, we are all under a microscope. As a competitive service industry, the challenge has always been for everyone in the airline—including pilots—to work together even more closely and with an absolute focus on serving the passenger. And with social media the bar has been raised very high.
I hope you will not take my remarks as indicating pessimism about our industry or its future. Far from it. I am quite optimistic about what I call the business of freedom. Aviation liberates us from the constraints of geography, distance and time. In this way, it enables us to lead better lives, and makes the world a better place. Aviation empowers us to explore the world, to do business globally, and to enrich our lives. Aviation connectivity gets goods to markets, and vital aid to those in need. By value, a third of the goods traded internationally travel by air. And the aviation industry supports some 63 million jobs worldwide, among them, all of us in this room.
We are fortunate to participate in an industry that contributes so much value to how we live. That value is created each and every day by the team of 2.7 million people who work in the airline industry—including those who fly the aircraft that we operate. We can and should be proud of providing safe global mobility for over 4 billion travelers each year. To build our future, we must work together—to make the airline business even safer, more accessible and sustainably profitable.
My congratulations to IFALPA on your 70th anniversary this year and I wish you a successful conference.