IATA director aviation environment Paul Steele stated the association sees emissions trading “as a useful tool and we've not backed away from that at all” but reiterated the IATA position is that a global solution is preferred (China Daily/Reuters, 07-Jun-2011). IATA has expressed its concerns that the EU’s unilateral inclusion of air transport in the Emissions Trading Scheme is an “illegal extraterritorial” move that could lead to retaliatory measures from the US, Russia and China and a USD1.5 billion “cash grab that would do nothing to reduce emissions”. Mr Steele also expressed concerns related to the accountability mechanisms related to the use of "equivalent measures" to allow exemptions from the scheme, and the verification and monitoring of such measures.
IATA pushing for global approach to aviation emissions trading
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WestJet positive about its revenue performance as it works to shore up falling returns
Canada’s WestJet is maintaining a reasonable level of confidence that its unit revenue growth will outpace cost inflation in early 2017, as it attains positive unit revenue in 1Q2017 for the first time in eight quarters. Improving conditions in the province of Alberta and growing ancillary revenue are helping to lift WestJet’s unit revenues in early 2017.
WestJet’s return on invested capital has been falling during the last few months, dropping out of its targeted range of 13% to 16%. The airline is not offering a specific timeframe to post an improved ROIC performance, but believes a better operating environment in Alberta should create a favourable scenario to attain targeted return levels.
After WestJet’s pilots endorsed a new deal in late 2016 that allows for the expansion of the airline’s widebody operations, speculation grew about a potential aircraft order from the company in the not too distant future. But WestJet is taking a cautious approach to its widebody evaluations, as current capital expenditures could reach CAD920 million (USD703 million) in 2017 and investors are looking for definitive progress in restoring historical ROIC performance.
CAPA airline profit outlook: 2016 was top of cycle, but margins to stay above past cyclical peaks
The CAPA world airline industry operating margin model forecasts that margins will fall from 2016 to 2018, suggesting that the estimate of 8.3% in 2016 may have been a cyclical peak. This six monthly update of CAPA's world airline profit outlook, which adds 2018 to the model for the first time, attributes the expected declining margin trend to increases in oil prices and in the rate of fleet growth.
Moreover, although global economic growth is forecast by the IMF to pick up in each year from 2016 to 2018, there are many uncertainties surrounding the world economy. The IMF's Jan-2017 outlook warns that risks to global growth are skewed to the downside.
However, previous cyclical peak margins did not exceed 6%, and the CAPA model forecasts that the industry's operating margin will remain higher than this throughout the forecast period, provided that the downside risks to the global economy do not materialise. Putting the forecast into a historical context – the world's airline industry is set to remain in a period of unprecedentedly high profitability, at least until 2018.