Today’s aviation industry seems to lurch drunkenly from crisis to crisis, beset by government regulation and with many of its members perpetually balanced on a knife-edge of financial vulnerability. But the organization that represents the world’s airlines has a vision for a much brighter future.
In 2050, according to IATA CEO Giovanni Bisignani, there will be close to zero accidents involving aircraft. Carbon emissions will be half what they are today. Line-ups will disappear thanks to integrated systems and biometric security and just a dozen global airline brands will be supported by regional and niche players. Oh yes, and the industry will make money too – a 10% margin at minimum.
“It is time to think big and to look beyond the cycles and shocks. Our duty is to work together to define a vision on which to build a sustainable future,” said Bisignani in a speech that opened the 66th IATA Annual General Meeting and World Air Transport Summit in Berlin.
In a year where the industry has already faced its share of shocks - including six days in April where European air traffic was brought to a standstill by volcanic ash - the summit kicked off with positive news,. Revising an earlier forecast of a $2.8 billion industry loss, IATA now says quicker-than-expected economic recovery will result in a 2010 profit of $2.5 billion. If the prediction is correct it will mark the industry’s first profit since 2007 – and the end of a decade in which airlines have cumulatively lost nearly $50 billion.
IATA’s vision for 2050 rests on what it calls ‘four cornerstones of change’:
Profitability: “Efficiency gains never make it to the bottom line because airlines are deprived of the commercial freedom to operate their businesses like a normal business,” Bisignani contends. IATA believes the root cause of low profitability is government regulation, which prevents what it sees as necessary consolidation. “The restrictions of the bilateral system are a dam that holds us back. It is time for that dam to burst. Governments must act responsibly to ensure safety, security, and a level playing field. And airlines need the freedom to build efficiencies across borders, better serve their customers, and achieve sustainable profits to fund growth and innovation,” said Bisignani.
Infrastructure: “Infrastructure must be reshaped around the needs of airlines -- the core of the industry’s value chain. Airports should compete for airline business based on efficiency. Commercial revenues will drive their business. I can see airports paying airlines to bring shoppers and airport revenues funding the air traffic management system,” said Bisignani. Air traffic management is another IATA bugaboo: Bisignani says 10 global air navigation service providers (ANSPs) could replace the current 180 at half the cost.
Powering the Industry: “Today’s jet fuel cannot sustain air transport in the long-term. We must find a sustainable alternative and our most promising opportunity is bio fuels, which have the potential to reduce our carbon footprint by up to 80%,” said Bisignani. He says governments should invest in biofuel technology because it could provide economic opportunities anywhere on the planet. “Not only will this secure a future power source for our industry, this will also break the tyranny of oil and drive economic development in all parts of the world.”
The Customer: IATA sees exponential growth over the next four decades, projecting 16 billion travellers by 2050, from 2.4-billion today. “In just a couple of decades, we will see the middle class nearly triple from the 1.3 billion today to 3.5 billion people -- a quarter of which will be in India and China. To help push its agenda, IATA wants “to turn our customers into industry activists.” But to make that possible IATA admits it needs to improve its value proposition.”We have reduced the price of flying by 40% since deregulation. But as we made travel more accessible, speed and quality suffered. The infrastructure has not kept pace, resulting in delays both in the air and on the ground. New security procedures created new hassles. Our challenge is to gain the support of customers in demanding change from the governments. Our goal is to build an industry that is even more successful at serving its customers—so successful that our customers will be our biggest advocates,” said Bisignani.
