International Air Transport Association
- Daily Departures
The International Air Transport Association (IATA) is an international trade association for the world's airlines, created in 1945 with 57 founding members. Today, IATA represents some 240 airlines in 118 countries, comprising 84% of scheduled international air traffic. Its mission is, "to represent, lead and serve the airline industry."
IATA has 63 offices in 61 countries, with its Head Office in Montreal, Executive Office in Geneva and Regional Offices in Amman, Beijing, Brussels, Johannesburg, Madrid, Miami, Moscow, Singapore and Washington. The IATA Annual General Meeting & World Air Transport Summit, held in June each year, formalises industry positions on industry and public policy issues and provides a focus for emerging industry issues.
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Emirates chairman and CEO Sheikh Ahmed bin Saeed Al Maktoum has described the global business environment as “challenging”, as the Emirates Group reported a profit of AED2.2 billion (USD600 million) for the six months to 30-Sep-2013. The profit result was up only 4% on the same period in 2012, while group revenue rose 13%. The Emirates Group described the result as a “robust performance” and a reflection of its “steady focus on its long-term vision and business growth”.
Sheikh Ahmed struck an unusually cautious tone for Emirates, despite returning a profit most airlines would only dream of. While Group revenue rose to AED42.3 billion (USD11.5 billion), the carrier’s mainline Emirates passenger airline business saw its bottom line results improved only 2%, to a net profit position of AED1.7 billion (USD475 million). The results show “steady demand for our products and services” according to Sheik Ahmed, and capacity and route growth “continue to match and meet passenger demand”.
US carrier results in their Atlantic entities during 3Q2013 reflect an uptick predicted by IATA in the region at the onset of the quarter as business confidence is showing signs of improvement and economic conditions in Europe and the US are showing some positive development.
While the 16-day US Government shutdown in Oct-2013 may put a slight damper on corporate demand, most of the major US airlines believe the North Atlantic will continue to gain momentum as it seems capacity growth appears rational.
American and Delta continue to tout their respective joint venture business arrangements with their respective partners in the oneworld and SkyTeam alliances. Meanwhile US Airways’ strategy to grow its corporate revenues across the Atlantic also appears to be bearing fruit. The carrier is actively pursuing corporate accounts in Europe without the benefit of joint sales included in the immunised trans-Atlantic joint ventures operated by the three large global groupings.
IATA’s latest financial forecast for the world’s airlines, published on 23-Sep-2013, looks into 2014 for the first time. If IATA is right, next year will see the industry’s second highest operating margin since 1999 and will be its fifth successive year of positive net profit. This would be an unprecedented sequence this century.
It is tempting to point to history and to conclude that this means another down-swing in the airline profit cycle cannot be too far away.
However, although the industry is not yet covering its cost of capital, there is cause for moderating the cynicism traditionally developed by observers of the industry’s financial performance. It seems that airlines are achieving better margins than in the past from current levels of world GDP growth and that they are achieving better margins than might be predicted by our Capacity Index (a measure of overall fleet capacity utilisation). Are we witnessing a structural improvement in world airline profitability?
Freight has become the perennial underachiever in the air transport industry. According to IATA, its share of world airline revenues fell from 12.4% in 2003 to 9.1% in 2012 and will fall to an estimated 8.7% in 2013. While a sharp increase in cargo traffic and yield led the industry back into profit in 2010, freight has been a drag since then. It underperforms the passenger business in traffic growth, yield growth, load factor and daily utilisation.
In early Sep-2013, IATA described the outlook for air freight markets as “cautiously positive” amid signs that a cyclical recovery in demand may be starting. Indeed, this optimism has been echoed in comments from Turkish Cargo and Lufthansa Cargo anticipating better conditions in 4Q2013 and 2014.
That may be so, but major structural reforms are going to be essential in a sector that fails to fill even half of the capacity it supplies into the marketplace.
The European Union has proposed to limit until 2020 its Emissions Trading System to that part of an intercontinental flight that operates within EU airspace, in an attempt to persuade the UN agency ICAO to reach a global solution to the carbon emissions problem. The next three-yearly ICAO assembly, starting in Montreal on 24-Sep-2013, is expected to include a resolution about the use of global market-based measures aimed at reducing aviation’s emissions.
IATA’s annual meeting in Jun-2013 backed a plan based on airlines offsetting their emissions after 2020 by purchasing so-called carbon permits (which allow the purchaser to emit carbon dioxide, CO2) from other sectors that manage to reduce pollution. IATA represents 240 airlines globally, but there remain significant hurdles to a global agreement since, ultimately, it is governments (through ICAO) that will have to agree any measures.
Regional political uncertainty and social turmoil have not been able to stop low-cost carriers in the Middle East from reporting another profitable six months. Two of the region’s key privately owned LCCs, the Sharjah-based Air Arabia and the Kuwait-based Jazeera Airways, have both posted strong profits in 1H2013.
In addition to this, the region’s other two LCCs, the privately owned nasair and the emirate of Dubai-controlled flydubai are anticipating profitable full year results. flydubai reported a maiden profit in 2012 and is looking to continue this momentum into 2013.
nasair has not yet reported a break-even year, despite being launched in 2007, but a restructuring in late 2012 has already seen the carrier reporting profits on a monthly basis.
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