The International Air Transport Association (IATA) Director General and Chief Executive Officer Giovanni Bisignani has called for "common vision" among the international aviation industry to tackle pathetic low profit margins.
PATHETIC PROFIT MARGIN
In a release on Monday, IATA quoted Bisignani as saying that the profit margin of the global aviation industry was only 2.7 percent and was expected to shrink to 1.5 percent this year.
The profit margins were a pathetic 0.1 percent over the past 40 years, he said.
Bisignani said the industry, which has been struggling to pull itself out of the downturn, is expected to generate 600 million U. S. dollars in revenues with the burden of 205 billion U.S. dollars in debt.
Over the last decade of crises, the industry lost 50 billion U. S. dollars despite improving productivity by 63 percent, cutting sales and distribution costs by 19 percent and improving fuel efficiency by 20 percent, he added.
"This is not sustainable. We need to look ahead to anticipate change as we prepare to handle the 16 billion passengers and 400 million tons of freight that we will handle in 2050," he said.
The aviation industry has been lagging behind other sectors in global economic recovery and it has been struggling to put behind it heavy debt burdens.
SURGING DEMAND
The picture is not all bleak as the industry expected surging demand in the coming years.
The IATA also released industry consensus forecasts on Monday saying that the international air transport passenger traffic will surge by 32 percent in the five-year period to 3.3 billion by 2014.
The international aviation will handle 38 million tons of air cargo in 2014, up 46 percent from 2009 and meaning a compound average annual growth rate of 8.2 percent.
"Despite some regional differences, the forecast indicates that the world will continue to become more mobile. This creates enormous opportunities but also presents some challenges," Bisignani said.
Of the new travelers expected by 2014, 360 million or 45 percent will travel on Asia Pacific routes, with the Chinese mainland as the biggest contributor, according to the consensus forecasts.
About 214 million of the newly added passengers are expected to be associated with China, with 181 million from the domestic market and 33 million from the international market.
COMMON VISION NEEDED
Bisignani said that the passenger should remain the core of thinking for the industry, calling for the right technology, efficient infrastructure and, last but not the least, financial sustainability.
Nobody has all the answers or a crystal ball to see the industry in 2050 but the general consensus was that one of the industry's biggest challenges is "to evolve from the financial disaster of a partial de-regulation that has created fierce competition among airlines but without giving them the normal commercial freedoms to do business."
"There was consensus among all present that there is strategic value in thinking together ... The industry is sick. To protect the value that aviation delivers to consumers, companies, countries and the global economy, we need a common vision to change as we move forward," he said.
The inputs from the Vision 2050, held in Singapore and featuring great minds like Singapore Minister Mentor Lee Kuan Yew, will be put into a document and presented at the IATA annual general meeting in June this year.