by Anil Tyagi and Anish Gandhi from Dublin, Ireland
HISTORIC Royal Dublin Society was aesthetically decorated in the first week of June to host the 72nd International Air Transport Association (IATA) annual general meeting (AGM) at Dublin, Ireland. $709 billion Air Industry with an estimated profit $39.4 billion this year and representing over 260 airlines accounting for 83 per cent of global air traffic, Dublin AGM was splendid by all means. Air should make more money than previously expected this year, helped by low oil prices and effort by airlines to fill planes and drive ancillary revenues. This was the second time the IATA AGM was organised in Ireland—the first being in 1962.
- Consumers benefit from lower fuel prices with lower fares, more routes, and will spend 1% of world GDP on air transport.
- Economic development is a big winner from the doubling of city pairs and halving of air transport costs over the past 20 years.
- Governments gain substantially from $118bn of tax next year and from almost 63 million ‘supply chain’ jobs.
Load factors are forecast to slip a little as capacity accelerates, but break even should fall even further as fuel hedges unwind.
- Equity owners see a far better 2015 and 2016 with a 9%+ average airline ROIC, above the cost of capital for the first time.
- Credit metrics improve further with net debt, adjusted for operating leases, forecast to decline from 4x to 3.6x EBITDAR this year.
- Jobs in the industry should reach 2.61 million, productivity will be up 3.4% and GVA/employee over $100,000.
Infrastructure use costs are rising further, plus inefficiencies in Europe alone add €2.9bn to airline costs next year.
- N American airlines perform best with a forecast 10.8% net post-tax profit margin in 2016. Africa is the weakest with a 3.5% loss.
The International Air Transport Association (IATA) announced leadership changes at the conclusion of the Association’s 72nd AGM.
Willie Walsh, CEO of International Airlines Group (IAG), succeeds Andres Conesa, CEO of Aeromexico, as Chairman of the IATA Board of Governors (BoG). Walsh, who represents British Airways (BA) on the IATA BoG, takes up his duties immediately for a one-year term until the conclusion of IATA’s 73rd AGM.
Alexandre de Juniac, Chairman and CEO of Air France-KLM, was confirmed to succeed Tony Tyler as IATA’s Director General and CEO. His appointment is effective from September 1, 2016.
IATA’s AGM was concerned about Terrorism and Safety, Environment, Security of the passengers along with illegal trade in wildlife and wildlife products. The outgoing DG Tony Tyler was worried about Taxation.
There are nearly 2,000 government-imposed aviation taxes and charges in IATA’s database—of which 230 are statutory taxes imposed on tickets. Most increases are
incremental, but they add up. And, it is not unusual for the net impact of government taxes and charges to reach 20 per cent or more of the cost of travel—nearly four times the airlines’ average net margin.
Many governments are simply not doing the maths. The UK government pockets GBP 3 billion a year from its Air Passenger Duty. PwC estimates that the UK economy would be GBP 18 billion more prosperous if the tax was abolished.
“The foundation stone of security has been rocked by tragedy. In the last twelve months, terrorists have laid claim to atrocities involving Metrojet 9268, Daallo 159, and at Brussels Airport. These are grim reminders that aviation is vulnerable. Airlines rely on governments to keep passengers and employees secure as part of their responsibility for national security. And we are committed to working with them in that challenging task,” said Tony Tyler, IATA’s Director General and CEO.
“Intelligence is the most powerful tool that governments have to protect their citizens wherever they are—at work, in their homes or while travelling. One of the biggest risk areas are large crowds. Industry is helping to bolster these efforts with practical measures—Smart Security and Fast Travel—that will mitigate risk by reducing airport queues,” said Tyler.
Juniac, the perfect choice
ALEXANDRE de Juniac was confirmed by the 72nd IATA Annual General Meeting to take on the role of the Association’s seventh Director General and CEO from September 1, 2016. De Juniac has almost three decades of experience in both the private and public sectors. This includes senior positions in the airline and aerospace industries and the French government.
De Juniac is currently the Chairman and CEO of Air France-KLM. He has held this position since 2013 and will end these duties on 27 July 2016. He has also served as Chairman and CEO of Air France (2011-2013). De Juniac has broad aviation sector experience, including 14 years at French aerospace, space, defence, security and transportation company Thales, and its predecessor companies Thompson-CSF and Thompson SA (1995-2009). In his last position at Thales, de Juniac was responsible for the company’s operations and sales in Asia, Africa, the Middle East and Latin America. De Juniac has also held positions in the French government. His career began with the Conseil d’Etat (State Council) from 1988 to 1993. Subsequently, he served in the Department of Budget (1993-1995); and in the Ministry of Economy, Industry and Employment as Chief of Staff to then Minister Christine Lagarde (2009-2011). A French citizen, de Juniac was born in 1962. He is a graduate of the Ecole Polytechnique de Paris and Ecole Nationale de l’Administration.
IATA unanimously endorsed a resolution denouncing the illegal trade in wildlife and wildlife products and pledging to partner with government authorities and conservation organisations in the fight against the traffickers of endangered animals.
IATA AGM was concerned about blocked funds globally, the sum of which exceeds $5 billion. The top two countries blocking the repatriation of airline funds are Venezuela and Nigeria. Airline funds blocked from repatriation in Venezuela total $3.8 billion. Currency controls implemented in 2003 necessitate government approval to repatriate funds.
Total airline funds blocked from repatriation in Nigeria are nearing $600 million. Repatriation issues arose in the second half of 2015 when demand for foreign currency in the country outpaced supply and the country’s banks were not able to service currency repatriations.
A highlight of the World Air Transport Summit was a panel discussion on the industry’s top issues featuring Bernard Gustin, CEO, Brussels Airlines; Ed Bastian, CEO, Delta Air Lines; Sir Tim Clark, President, Emirates Airline; Jayne Hrdlicka, CEO, Jetstar Group; and Charamporn Jotikasthira, President of Thai Airways. The discussion was moderated by CNN’s Richard Quest. There were only two airlines representatives from India, Jet Airways Chairman and MD Naresh Goyal and Air India’s Pankaj Srivastava, Director Commercial and Board Member. Next year’s AGM will be held in Mexico.
VOL. 10, ISSUE 4 | JULY, 2016