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Monday, June 06, 2011

Focus on Airlines: IATA AGM 2011: Sustainable profit holds key to future of aviation

IATA 2011: Sustainable profit holds key to future of aviation | Focus | Breaking Travel News


The International Air Transport Association held their 67th annual general meeting this past week in Singapore.

Key information that was shared by Director General and CEO Giovanni Bisignani included:

  • We expect airlines to make just $4 billion profits this year on revenues of $598 billion (less than 1% profitability)
  • Sustainable profitability remains elusive
  • Cost cutting alone does not increase long-term profits
  • Unbundling erodes the value of the base product
  • Re-regulation would kill efficiency and innovation
  • Need stronger partnerships across the value chain - breaking down silos in the value chain to rebalance financial reward with risks
  • Create a new value proposition so that competition is not just based on price
Another key theme is the price of oil.  Today, jet fuel is selling for $130/barrel, up 51.5% from a year ago.    Globally, for each dollar increase in the average annual oil price, airlines face an additional $1.6 billion in costs.

The last time that fuel was this high was the summer of 2008, a devastating time for the US airline industry where we saw not only cutbacks in capacity and frequency, but a reduction of the number of segments booked in the GDS systems and a reduction of the tickets issued by the agency community.

We live in a highly connected travel ecosystem.  When the foot is injured, the hand hurts.

Perhaps instead of arguing about merchandising and direct connect we can come up with ways to make our industry profitable moving forward.  Now that would be worth some emotional energy.

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