The International Air Transport Association have announced that carriers should expect a struggle in their efforts to make a large profit in coming months. The news has not singled out a particular carrier, suggesting that it doesn’t matter if the airline is low cost, or traditional; everyone will lose out.
Some may question this latest revelation after looking at recent figures which suggest that airline companies are to record combined net profits of $18bn, however IATA have said that overheads will massively eat into this impressive figure. As Tony Tyler, the director of general of IATA, adds; ‘It sounds impressive. But the brutal economic reality is that on revenues of $746 billion (£445 bn), we will earn an average net margin of 2.4 per cent. This amounts to less than $6 (£3.50) per passenger. ‘
Many have now began to dig deeper, and investigate where the problem is coming from. In doing so, eyes have turned to blaming China’s economic growth which has slowed down and therefore potentially caused an impact on figure overall. Other reasons included, higher total operating costs as well as rising taxation and regulation.
Willie Walsh, the chief executive of International Airlines Group, has put the blame down to the fact that airline have become ’embarrassed to make profits as they fear passengers would bitch and moan about the high costs. You get people who will pay tens of thousands for a car or fortunes for watches. You don’t hear people say: “What was the margin on the watch I just bought?”
This is worrying news for the airline industry who will now begin paying close attention to solving the problem.
If you would like to hear more about this subject then please join us at our event: World Low Cost Airlines Congress. Not only will this important topic be the main point of discussion, IATA will also be joining us and hosting their own workshop.