Converting growth into profitability is airlines’ future challenge

JOY ORLEK TURNING GROWTH into profitability is the major challenge for airlines in the years ahead. That’s the view of Giovanni Bisignani, director general and CEO of the International Air Transport Association, who opened the Second IATA/Asian Aerospace Aviation Summit in Singapore recently. “Airlines have lost US$42 billion since 2001 and we expect another US$4 billion in losses again this year. While Asian passenger traffic is expected to grow at 6.5% and cargo at 8.5% each year until 2009, growth is not profitability. Some of Asia’s carriers are among the industry’s most profitable, yet the average margin is 2% – far from the 7 to 8% needed to cover the cost of capital,” said Bisignani. The three major challenges facing the industry, in his view, are low cost competition, capacity management and avian influenza. “Currently the disease is confined to birds. But if we see efficient human-to-human transmission develop, the impact on airlines and the global economy could be enormous.”