Vancouver: Appreciating growth in the global aviation sector and its return to profitability, the International Air Transport Association (IATA) has said the projected total profit of $ 5bn (Rs4,000 crore) for the entire industry was “peanuts” as compared to its size but asked airlines to sustain this profitable growth.
Noting that India and China were leading the Asia-Pacific region to become the single largest market in the world, IATA Director General and CEO Giovanni Bisignani said “we expect airlines to make $ 5bn profit this year” but the airlines itself were a $470 bn industry.
“Profit of $5bn is meagre, especially when what we need is $40 bn just to cover the cost of capital. The industry is moving in the right direction, but with a debt of $200 bn, the financial hole is rather deep.
Challenge is to turn peanuts into sustainable profits,” Bisignani said in his inaugural address at the IATA Annual General Meeting. Observing that the industry had changed tremendously in five years, he said labour productivity was up 56%, distribution costs down 13%, non-fuel unit costs dropped 15% and load factors were at a record high of 76% in 2006.
“Airlines needed an oil price of less than $20 a barrel in 2002 to break even. Today we are profitable at $70 per barrel,” Bisignani, who was unanimously re-elected as the IATA chief, said.
He also outlined six priorities for the industry - safety, security, simplifying business, infrastructure, liberalization and environment.