BEIJING:
The fragile state of the aviation industry marked the general backdrop of the
68th annual general meeting of the International Air Transport Association
(IATA) as the head of the global airline body, Tony Tyler, acknowledged that
the industry's profitability is precariously balanced on a "knife's
edge."
"If the bottom line worsens by an equivalent of just 1% of revenue, our $3-billion profit very quickly becomes a $3-billion loss," IATA director-general and CEO Tony Tyler remarked at the annual conference.
Citing the example of a round trip from New York to Beijing costing seven cents a kilometre as opposed to 31 cents for a New York taxi ride with four people on board, Tyler drew attention to the intense price competition to deliver value, which has toughened further.
He pointed out that the high price of oil and the Eurozone crisis were the most immediate and serious downside risks to the industry in 2012. IATA expects average oil price of $110/barrel for this year.
Calling the EU's carbon tax a "polarising obstacle preventing real progress", Tyler hinted that it has the potential of turning into a trade war. China and India are at the forefront in opposing the EU's Emission Trading System (ETS) as they have forbidden their air carriers to participate in the scheme, touted as a measure to lessen the aviation industry's carbon footprint. The two have also openly spoken about retaliatory taxes on European carriers if the EU decides to hold on to the ETS.
"Sustainability should unite the world with common purpose, not divide it with affronts to sovereignty that risk a trade war that nobody wants...Certainly no airline-European or otherwise-should be a target for retaliation because European governments are acting extra-territorially," Tyler added.
"If the bottom line worsens by an equivalent of just 1% of revenue, our $3-billion profit very quickly becomes a $3-billion loss," IATA director-general and CEO Tony Tyler remarked at the annual conference.
Citing the example of a round trip from New York to Beijing costing seven cents a kilometre as opposed to 31 cents for a New York taxi ride with four people on board, Tyler drew attention to the intense price competition to deliver value, which has toughened further.
He pointed out that the high price of oil and the Eurozone crisis were the most immediate and serious downside risks to the industry in 2012. IATA expects average oil price of $110/barrel for this year.
Calling the EU's carbon tax a "polarising obstacle preventing real progress", Tyler hinted that it has the potential of turning into a trade war. China and India are at the forefront in opposing the EU's Emission Trading System (ETS) as they have forbidden their air carriers to participate in the scheme, touted as a measure to lessen the aviation industry's carbon footprint. The two have also openly spoken about retaliatory taxes on European carriers if the EU decides to hold on to the ETS.
"Sustainability should unite the world with common purpose, not divide it with affronts to sovereignty that risk a trade war that nobody wants...Certainly no airline-European or otherwise-should be a target for retaliation because European governments are acting extra-territorially," Tyler added.
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Recounting various examples worldwide of bad regulation of infrastructure supplies, Tyler criticised India heavily for trebling charges at the Delhi airport, which he said, has placed it among the world's most expensive airports.
THE FUTURE
Putting aside the present challenges that the industry is facing worldwide, Tyler predicted a bright future for the sector by 2030. He estimated global air traffic to double to 5.9 billion, while cargo could triple to nearly 150 million tonnes, supporting 82 million jobs, thereby contributing $6.9 trillion to global GDP.
"Modern economies cannot grow, prosper and create jobs if they are not connected to global opportunities through aviation. That should make airlines and governments strong partners in supporting aviation's success," Tyler said.
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