es facing sector include demand, strikes and cyberattacks. Ian Taylor reports from Dublin
Airlines tipped to make record profit of $39bn
Airlines anticipate a record year for profits, with Iata raising its forecast for the industry’s collective profit this year by more than $4 billion to $39.4 billion.
Yet Iata reported falling “unit
revenues” as capacity outpaces passenger growth and demand for premium travel stalls. Iata director general Tony Tyler
told the association: “It will be only the second year in our history, and the second in a row, in which airlines make an aggregate return in excess of the cost of capital. “This is the seventh consecutive
year of profit [for the sector] and fifth year of growing profits.” However, he said: “Profitability
is not evenly spread. “Some regions are doing very
well, others are struggling. Some are experiencing good times, others face a world in crisis. “A net profit of $39.4 billion
sounds a big number, but that is a net margin of 5.6%.” Iata chief economist Brian
Pearce said: “It’s an impressive performance given the economic
cycle is pretty weak. It’s a fragile economic situation. International trade has slowed to a stop in the last few months. Cargo revenue is back to where it was 10 years ago.” However, Pearce said: “Air travel
volumes have grown well above trend. There has been some price stimulation, most recently from the falling fuel price, and there is more to come because of hedging. In the past, airline profitability has been tied very strongly to the economic cycle, so it’s a sign of change. “We’ve started to see the pace of
air travel growth slow a little, but passenger numbers will still be 6.2% up this year [on last].” He added: “A lot of analysts are
worried about [airline] revenue, but passenger revenue has grown strongly. Unit revenues have fallen but unit costs have fallen
TYLER: ‘A profit of $39.4bn sounds big but is a net margin of 5.6%’
further. We expect to see costs fall further this year and to see further improvements in profitability. It’s not just down to lower fuel prices. “There was a step change in load
factors after the financial crisis and that is driving profitability. “This year airlines will generate
$1.30 for every $1 invested. “Part of this is due to
extending aircraft lives, but also to adding new services. This is unprecedented in the industry.” However, Pearce said: “We’ve seen load factors come off their peak [and] premium travel has been held back by the weakness of international trade.”
‘EU should intervene when ATC staff strike’
Iata has called on the EU to intervene in air traffic control strikes by encouraging controllers in neighbouring countries to take over the air space when a country’s controllers go on strike. French air traffic controllers called off a strike at the
last minute last week but plan to strike next week. Rafael Schvartzman, Iata vice-president for Europe, described the strikes as “one of the biggest challenges”. He said: “It’s unacceptable that we have these constant
disputes affecting the industry. Air controllers are highly rewarded and should be accepting reforms. It’s time for governments to ensure measures to keep air space open, including looking to neighbouring countries to keep space open. Technically it’s possible.” Paul Steele, Iata senior vice-president for member
and external relations, said: “The technology exists to manage European air space within a single authority. It’s all tied up with issues of national sovereignty.”
9 June 2016
travelweekly.co.uk 79
“Profitability is not evenly spread. Some regions are doing well, others are struggling”
‘Hackers and terrorists are a growing threat’
Airlines are a growing target of hack attacks and need to cooperate on measures to tighten security. Alan Pellegrini, president and chief executive of aviation technology supplier Thales USA, told Iata: “The threat of hackers to aircraft is real. We’ve seen several high-profile hacks over the last two years. We’ve had hacks into the Wi-Fi connectivity of passengers. We’ve had hackers get into the ground systems of an airline. “How do you protect your
aircraft given you are connecting passengers to Wi-Fi on aircraft? Some of you are adding connectivity to crews, your operations are connected on the ground, some are experimenting with cloud-based avionics controlling aircraft operations. How is data in the cloud secure? “There is no silver bullet.” Calin Rovinescu, chief executive of Air Canada and chairman of the Star Alliance executive board, described recent attacks as “a real wake-up call for the industry”. He said: “The airline industry
has ratcheted up its protection in this area. This is not an overnight wonder. It involves a multi-year plan with responsibility at the highest level.” Major general Linda Urrutia-
Varhall, director of national intelligence for aviation security in the US, said: “Aviation is a central focus for terrorists, state and criminal opportunists.”
Alan Pellegrini
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