Airlines are making more profits than ever before, boosted by lower fuel prices and carrying more passengers on fuller planes, according to the industry’s global body.
The International Air Transport Association said global profits will almost double to $29.3bn (£19bn) in 2015, with American-based airlines having a particularly lucrative year on the back of a strong dollar.
Iata’s director general Tony Tyler said the industry was “collectively more profitable than at any time in our history” but criticised George Osborne’s demands that airlines cut fares because of falling oil prices.
Tyler said that a 4% profit margin on expected revenues of $727bn owed much to “favourable but fragile” conditions. Half of the global profits will be generated in North America – although international competitors were suffering from the dollar’s sharp rise against most global currencies, offsetting potential savings on fuel.
Brent crude oil is forecast to average $66 a barrel this year compared with $101 in 2014. Yet Tyler insisted that far more than the fuel price was responsible for the changing fortunes, saying: “The strongest driver is efficiency: airlines are filling more seats” with load factors, or the proportion of occupied seats, reaching 82.7%.
He warned that European aviation still faced a “quadruple whammy” of faltering economies, high taxes, onerous regulation and the slow progress in co-ordinating European airspace.
Tyler took a swipe at the UK chancellor whohas called for airlines to cut fares in the light of cheaper oil. “It’s astonishing that some politicians wrongly interpret hard-earned financial sustainability ... No politician is asking for iPad prices to fall,” Tyler said.
He said Osborne should instead abolish air passenger duty, which he described as “the most stringent air passenger tax in the world, it’s unnecessary and bad for the UK economy. Once the Scottish authorities have powers to abolish it [England] will be even more isolated. It’s such a no-brainer, I don’t why he hasn’t already.”
The Iata chief said he was pessimistic that the Airports Commission’s impending verdict would lead to action on expanding London’s airport capacity. He said the debate was “buffeted by politics and parochial interests”. “If we can get past those hurdles, challenging and time consuming debates on funding and regulation are bound to follow.“
Brian Pearce, chief economist of Iata, said that airlines would be transporting goods worth $6,000bn, around 35% of all world trade. Aviation will now be employing 2.5 million people – back above pre-2001 levels, with the industry having seen a huge downturn after the 9/11 terrorist attacks on the US.
Many of those jobs now are on considerably worse terms and conditions. The burgeoning profits of American airlines have not been unremarked: catering workers supplying inflight meals were outside the Iata summit to call for a nickel on ticket prices to boost wages that are now lower in dollars per hour than in 2001.
Tyler meanwhile tried to contain the growing row between Gulf airlines and American carriers, telling the summit meeting in Miami that Iata was “not the battleground on which any resolution will be achieved”. United and American Airlines have called on the US government to investigate alleged unfair state subsidy and limit the rights of Emirates, Etihad and Qatar Airways to operate in the US.
However, his attempt to dodge the row was denounced by Akbar Al-Baker, the chief executive of Qatar Airways and a Heathrow airport board member, who warned that the American carriers risked starting a wider trade war between the US and the Gulf states. He said that the move would “lead to retaliatory protectionism affecting all aspects of trade”.
Doug Parker,chief executive of American Airlines, who is chairing the summit, tried to deflect the row, saying: “Our dispute is not with those three airlines. We’re just trying to get the US government to enforce its trade policies.” But, he warned: “We expect that they will take some action in the future.”
Meanwhile, Tyler insisted that “flying has never been safer” despite the three major aviation disasters of the last 15 months.
While the twin Malaysian disasters of MH370 and MH17 and the crash of Germanwings 9525 had driven constant headlines, Iata figures showed that 2014, with only one “hull loss” (or major crash) for every 4.4m flights worldwide, was statistically the safest to date.
Tyler said the industry was still making progress in addressing the safety issues raised, including more regular tracking of aircraft.
He said that Iata was continuing to push for a global convention on controlling anti-aircraft missiles after MH17 was apparently shot down over eastern Ukraine by rebel soldiers. But he warned that the industry would be limited in its response to Germanwings 9525 – “a deliberate and horrible act by one of our own” – saying “there is no immunity to mental health issues”.
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