The International Air Transport Association (IATA) last week reported that the global airline industry’s performance on safety, sustainability and profitability is solid, but the industry faces the threat of protectionist measures being implemented by governments.
According to Alexandre de Juniac, IATA’s Director General and CEO, governments must enhance their collaboration with the industry to meet rising security challenges, avert a looming infrastructure crisis and build smarter regulation.
He believes the industry will perform better than it was earlier projected through strong public-private sector partnerships.
During a recent summit in Cancun Mexico, Juniac talked to Business Times’ Peterson Tumwebaze about the industry’s projected performance and how emerging airlines like RwandAir can become more profitable.
What is your take on the industry’s financial performance?
Although regional differences remain, overall the air transport industry is generating profits above its cost of capital.
In 2017, for example, the global airline industry is expected to generate $31.4 billion in profit and $743 billion in revenues. That’s a $7.69 average profit per passenger.
And we expect that nothing should stand in the way of aviation going forward because it is now the business of freedom. Secondly, aviation is globalisation at its very best, but to deliver aviation’s many benefits, we need borders that are open to people and trade.
Today we face headwinds from those who would deny the benefits of globalization and point us in the direction of protectionism.
This is a threat to our industry. We must bear witness to the achievements of our connected world. And we must ensure the benefits of aviation for future generations.
Flying remains the safest form of long distance travel by a wide margin.
Any evidence to support the argument that flying remains the safest form of long distance travel?
In 2016 the industry had 40.4 million flights and there were 10 fatal accidents. A major achievement on safety performance in 2016 was in Sub-Saharan Africa. The region had no jet hull losses last year.
How do you then ensure that aviation becomes a self-sustaining economic activity, especially for emerging markets like Rwanda?
Governments must move to implement policies to accelerate the deployment of sustainable aviation fuels. They must also ensure they deal with the infrastructure crisis which is looming especially as demand for air transport continues to grow.
Infrastructure in many parts of the world can barely cope with demand today. And development plans are not ambitious enough to accommodate the 7.2 billion passengers we expect in 20 years’ time.
Bottlenecks and deficiencies in airport and air navigation services exist in all corners of the earth including Africa which is projected to register an impressive growth in aviation.
We are therefore calling upon governments to fully implement the IATA Worldwide Slot Guidelines to fairly and efficiently manage scarce capacity.
Providing sufficient capacity, with service quality aligned to user expectations and at an affordable cost will make the airline industry more profitable.
However, governments must be cautious when privatising aviation infrastructure assets.
But many will argue that business thrives where the private sector takes the lead?
Privatisation has failed to deliver promised benefits in many countries including India, Brazil, France, and Australia to name just a few.
This is because the concessionaire makes money, government gets its cut and it is usually the airlines that will pay the bill- usually a big one.
Overall, it’s the passengers and the local economy that suffer the results of higher costs when governments privatize critical infrastructure.
Therefore in this case economic regulation is essential.
To date I cannot name a single long-term success story. Finding the solution is an important piece of work that needs government and the industry collaboration. It’s the only way to balance the investor’s need for profit with the community’s need for cost efficient connectivity.
However, regulators and politicians can feel confident that the discipline of competitive market forces has been given a boost.
And regulators themselves face pressure to respond to social media frenzies with immediate solutions.
Aviation is one of the big polluters and contributors of carbon emissions; environmentalists and experts argue that the industry must do more to combat this threat, what is your take?
We have passed a resolution reaffirming the industry’s commitment to work with governments to implement the Carbon Offset and Reduction Scheme for International Aviation (CORSIA) global carbon emissions agreement.
One of the major achievements of 2016 was the landmark Carbon Offset and Reduction Scheme for International Aviation (CORSIA) agreed at the International Civil Aviation Organization’s (ICAO) 39th Assembly.
Already, 70 states representing at least 80% of anticipated future growth have indicated their voluntary participation in the scheme.
This will be a major enabler of the industry’s commitment to carbon-neutral growth from 2020 and to cut net emissions to half of what they were in 2005.
The CORSIA agreement is a vital part of our strategy in combating aviation emissions.
We are committed to carbon neutral growth from 2020 and to cutting net emissions to half the 2005 levels by 2050.
While offsetting is critical to managing emissions in the short-term, in the long-term we rely on clean technology improvements to achieve our goals. Sustainable aviation fuels are an integral part of our comprehensive strategy, but at the moment they are not being produced in enough quantity at a competitive cost.
How are you working with industry players to address security challenges, including the laptop ban?
We have already warned that while air travel faces security threats, alternatives must be found to the ban on large portable electronic devices (PEDs) in the cabin by the US and the UK on some flights from the Middle East and North Africa.
We must trust that valid intelligence underpinned the UK and US decisions to ban large PEDs on flights from some African and Middle Eastern airports. But, the measures themselves test the confidence of the industry and the public.
We need to get security right. There is a clear duty for governments to make sure that the measures are logical, effective and efficient.
We are calling on governments to adopt alternatives to the current ban. In the short-term, these include more intense screening at the gate and skills training. In the medium-term, faster and more advanced explosive detection technology is the solution to evolving bomb threats.
But painfully slow certification processes must be accelerated so that we can actually use it.
We will continue to emphasize the importance of working with governments on security challenges.
This is because security is ultimately a government responsibility. But airlines also have a big stake in the matter. The safety and security of our passengers and crew is our top priority.
We have vital operational expertise that can help governments and it’s difficult to understand their resistance to greater collaboration. We could achieve better solutions by working together.