December 31, 2012
Credit: Credit: International Air Transport Association
Aviation Week: How did the world's airlines perform in 2012?
Tyler In September we had anticipated a $4.1 billion profit for the industry in 2012, based on the very weak first quarter, with a slight improvement in the second quarter. Financial performance in the third quarter improved considerably despite some big challenges, including global GDP growth hovering just above 2% and high fuel prices—which have become a fact of life. The rate at which passenger traffic is growing has slowed and cargo has been basically stagnant.
Against that backdrop, airlines have been restructuring and consolidating and this is starting to have a positive impact, which is why this month we modestly upgraded our profit outlook for 2012 to $6.7 billion, rising to about $8.4 billion in 2013. That's good news, but let's keep the figures in perspective. On an expected $637 billion in revenues, a net profit of $6.7 billion is a net margin of 1%. And $8.4 billion on expected revenues of $659 billion will mean a net margin of 1.3%. The industry is keeping its head above water. But only just.
What were the biggest issues they face?
Safety is aviation's top priority. The good news is that through Nov. 30, the industry was on track to achieve a record safety performance for a third consecutive year. So clearly we are moving in the right direction. However, not all regions are performing at the same level. In particular the Middle East/North Africa and Latin America/Caribbean regions face challenges.
IATA and other stakeholders are working to bring these regions up to world-class levels of safety. We are also focused on enhancing aviation security. Security is the responsibility of states, but it cannot be effectively delivered without the cooperation of the whole value chain. We are working with government and industry stakeholders on the Checkpoint of the Future project. The vision is for a hassle-free security experience by 2020.
Taxation and regulation are another big issue. Aviation has a global economic impact of $2.2 trillion and supports 56.6 million jobs worldwide. But it is a very tough business. In our best year this century, the industry's net margin was just 3.5%. That is not sufficient to attract the capital necessary to be sustainable long-term.
Part of the problem is that too many governments, particularly in Europe, view aviation and air travelers as an easy source of tax revenue to fill depleted treasuries, rather than recognizing that aviation is a catalyst for economic growth. Taxes dampen that growth.
What are the biggest challenges of the coming year?