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Increasing protectionism or isolationist political agendas could compromise the value created by the aviation industry, an expert said.
Speaking at the opening of the 75th annual general meeting of the International Air Transport Association (Iata) in Seoul, South Korea earlier in June, CEO Alexandre de Juniac shared the importance of government policies facilitating the free flow of people and trade.
"For aviation to be a catalyst of prosperity, borders must be open to people and to trade. The more people connected through flying, the greater the benefits to all the people of the world. This is an important message for governments to hear," he said.
"Trade wars and protectionist measures are taking their toll on the cargo business and rising costs for fuel, labour and infrastructure are squeezing margins," he added.
Although airlines in some regions of the world – like Africa – continue to struggle to make profits, Iata estimates that in 2019 airlines will globally make a total profit of about $28bn (about R400bn) under challenging conditions. This is about $6.12 (about R90) per passenger.
"Returns will still exceed the cost of capital, but only just. And the aviation industry’s 3.2% net margin is modest and fragile compared to the margins of 20% or more that Apple and Google regularly enjoy," said De Juniac.
Yet, Iata’s outlook for the future of aviation is optimistic. "Demand is forecast to double over the next two decades and with the cost of travel 40% lower than a decade ago, the freedom to fly is reaching more people than ever."
Developing markets are expected to provide the majority of additional passenger demand. India and China alone are forecast to account for about 45% of all additional passenger trips over the next two decades.
In order to meet the greater expected growth in air transport demand, the industry would have to meet the challenges of sufficient capacity, quality and efficiency, and affordable costs, according to De Juniac.
"Governments should take note. Developing infrastructure – airports or air traffic management – lays an economic cornerstone," he explained.
"Careful planning, broad consultation with users, examination of funding options and a keen focus on affordability are the keys to making it successful. The right decisions today will determine the economic and social benefits that will be realised in the future," he said.
* Fin24 is a guest of Iata at its AGM.
