You might have seen IATA’s report on demand for air transport in July. Compared to last year passenger traffic was up 5.9% and growth in demand for cargo was not far behind at 5.0%. I was happy that my first comments as IATA’s Director General and CEO on global traffic trends were to reflect on such positive news.
Of course, it was not long ago that I was an airline CEO (about six weeks to be precise). So I am also very conscious that behind those top line numbers are lots of struggles and challenges. Like all businesses, airlines are affected by the political and economic uncertainties of the day, with the challenge of terrorism on top of that. The growth in demand is very positive. But it would be a mistake to take the continuation of that trend for granted.
When you are new to a job, everything is fresh. That gives you a unique opportunity to think about why certain things are done. So I was pondering why IATA releases traffic statistics each month. The obvious answer is to track industry performance. But I think that we can identify more significance to it.
To start, aviation is an important economic sector supporting $2.7 trillion in economic activity and 63 million jobs worldwide. So the performance of the airlines gives an important insight into the health of the economy.
That is particularly true of cargo. The cargo business is experiencing tough times as a result of fragile business confidence and a slow-down in world trade. The restructuring of global supply chains and miniaturization of components has resulted in cargo being a less of a leading economic indicator than it was previously. But careful analysis does provide confirmation of some key macro-economic trends.
Unfortunately, the trend that we are seeing now gives evidence that the protectionist rhetoric on both sides of the Atlantic is already being reflected in the economy. Before the global financial crisis, the rule of thumb was that trade expanded at about twice the growth of industrial production. Now it basically runs in parallel or even lags behind. I hope that we have not surpassed what IATA’s Chief Economist Brian Pearce calls “peak trade openness”, but it is something to be watched closely because the implications are significant for our globalized world.
In contrast, it is encouraging to see that the desire for people to travel by air continues to grow. It’s helped by lower oil prices which are reflected in some great “deals” on travel. In the long-term that’s a very positive trend. Travel builds understanding between cultures and facilitates global business opportunities—both of which are counter-weights to protectionism.
And with that belief firmly in mind, later this month airlines will be asking governments—in no uncertain terms—to help grow connectivity sustainably by agreeing a global carbon offset and reduction scheme for air transport. We are anxious to see such a scheme in place and we are calling on governments to sign-up for the voluntary implementation period from 2021 to 2026.
Coming full circle, the statistics confirm that the demand to fly continues to grow. And, while keeping a careful eye on trends in world trade, the aviation industry is making good on its commitment to keep the world sustainability connected.