Date: 2 June 2016
Tony Tyler's Remarks - AGM Opening Press Conference, Dublin
Good morning and welcome.
You have just heard a lot of speeches and there is no point in repeating them. I trust that you have heard our message that aviation is a force for good in our world. The industry’s foundation stones of safety, security, global standards and sustainability are solid. But there are also challenges for each of these and we do earn our stripes every day.
We have a strong message for governments—that the airline industry can do more “good” when tax burdens and infrastructure constraints are removed and the principles of Smarter Regulation are applied properly.
Before we take your questions, I did want to emphasize a few elements of our outlook.
The industry’s net profit of $39.4 billion is a big number. But it is shared amongst hundreds of airlines around the world. And on $709 billion of revenue, it translates to a 5.6% net profit margin.
For those who follow the airline industry regularly, you will know that airlines have long-struggled with profitability. This is a seventh consecutive year of profits and a fifth consecutive year of improving profitability. 2016 will also be the second time in history—and second year in a row—for airlines to make a profit that exceeds their cost of capital.
This is all good news. It means that airlines should be taken seriously as businesses. But there are challenges. With a 5.6% net margin, the average profit per passenger is still $10.42 on an average one-way fare.
The job of repairing balance sheets is under way. We have had a few years of good profits and some airlines have started to pay down debt. It will, however, take a longer run of profits before balance sheets are returned to health.
You will see that the mood at this AGM is optimistic—mixed with some caution. Trade is weak. Economic growth is weak. And we are probably nearing the peak of the positive stimulus from lower oil prices. But, on the positive side, the industry is operating at high levels of efficiency. Load factors are high. Ancillary revenue streams are growing. And various forms of partnership are producing strong results.
Airlines are producing solid results in a challenging environment. It’s an impressive performance.
And lastly, if it wasn’t clear from my remarks, the biggest agenda item this year is environment. In the next session, our members will consider a resolution that will ask governments to agree a global mandatory carbon offset scheme. The goal is to devise a scheme that has environmental integrity and is simple to implement and avoids market distortions.
The resolution also reminds governments that we need one scheme. So current regional or local economic measures or taxes should disappear as the global scheme is implemented. And no new schemes should be introduced.
And of course the reason why this is such a big issue at this AGM is because the International Civil Aviation Organization will discuss a proposal for a Carbon Offset and Reduction Scheme for International Aviation at their Assembly in September. We need a decision at this assembly in order to have the scheme operational from 2020 in line with our commitment to carbon neutral growth.
With that we look forward to your questions.