Despite projected subdued growth for the global economy this year and only a gradual recovery in 2017, the global airline industry will still be profitable, according to the International Air Transport Association (IATA). The global body of airlines expects the global airline industry to make a “record” net profit of $35.6bn this year and a net profit of $29.8bn in 2017.
While the record profits this year will be on the back of lower oil prices, IATA does not expect such a repeat in the industry’s performance next year in view of the estimated rise in average crude price.
Expected higher oil prices will have the biggest impact on the outlook for 2017, IATA’s chief economist Brian Pearce said at a global media event in Geneva at the weekend.
In 2016 oil prices averaged $44.6/barrel (Brent) and this is forecast to increase to $55 next year.
This will push jet fuel prices from $52.1/b (2016) to $64.9/b next year.
Fuel is expected to account for 18.7% of the industry’s cost structure in 2017, which is significantly below the recent peak of 33.2% in 2012-2013.
Connectivity continues to set new records, IATA said as it expects nearly 4bn travellers and 55.7mn tonnes of cargo in the coming year.
And almost 1% of global GDP is spent on air transport – some $769bn.
By next year IATA expects the industry to support up to 69.7mn jobs worldwide.
Support is also provided through the taxes paid by the industry – payroll, corporation and product taxes – which it forecasts to rise to $123bn in 2017, equivalent to 45% of the Gross Value Added generated by the airline industry.
As well as the tax revenue and jobs supported by the air transport value chain itself, perhaps a more important economic benefit is created by the users airlines carry – the spending of the tourists that travel by air and the value of the goods shipped by air.
That said, IATA chief Alexandre de Juniac is upset over the lack of adequate support from governments around the world to the vital air transport industry.
“Governments do not make aviation’s work easy. The global tax bill has ballooned to $123bn. Over 60% of countries put visa barriers in the way of travel. And the total number of ticket taxes exceeds 230. Billions of dollars are wasted in direct costs and lost productivity as a result of inefficient infrastructure. These are only some of the hurdles, which confront airlines. Our aim is to work in partnership to help governments better understand and fully maximise the social and economic benefits of efficient global air links,” de Juniac said.
Undoubtedly, air transport is the “business of freedom” as IATA has highlighted.
The safe and efficient global movement of goods and people is a positive force in the world.
Aviation’s success betters peoples’ lives by creating economic opportunity and supporting global understanding.
Hence, the industry must stand firm in the face of any rhetoric that will put limits on aviation’s future success.
