Tony Tyler, Director General and CEO, IATA
In the Chinese zodiac we are now in the year of the goat. It is a sign characterized by calmness and creativity. I am not a superstitious person, but some relevance is apparent. After four years of oil prices over $100, the recent fall certainly can be considered as a calming factor. But it is not a panacea.
Fuel is still a major expense—roughly 26% of the industry’s cost structure. The actual relief will vary based on hedging positions. And the strength of the US dollar is significantly moderating the positive impact—particularly for airlines with a high proportion of non-dollar revenues.
Profitability, nonetheless, will improve. We expect the industry to make a collective $25 billion in 2015. That’s a 3.2% net profit margin—the best since 2010. But it’s still only an average of about $7 per passenger.
Airlines and investors alike still see room for improvement, but past experience warns that we should not take lower oil prices with any long-term certainty. Running an airline in 2015 will continue to be challenging.
The second characteristic of the year of the goat is creativity. Airlines have to be innovative every day in the battle to keep revenues ahead of costs. But this year presents a new opportunity for creativity with New Distribution Capability (NDC). After years of work the basic standards have been developed, tested and approved by the regulator. With implementation, we will enter into a modern age for the air travel shopping experience.
It’s exciting. And it is very appropriate that NDC will move into its implementation stage in a year characterized by creativity and one in which airlines mark a significant milestone in working together. This year marks IATA’s 70th anniversary. On 19 April 1945, airlines joined together in Havana, Cuba, to form the International Air Transport Association. The far-sighted founding members had a vision for an industry that would provide global connectivity. And they understood that it could only be achieved by building global standards that would enable them to work together.
IATA’s activities shifted dramatically over the years in line with the needs of the industry. But there has been one constant. The focus has always been on areas where more value is created collectively than individually.
This has played a tremendous role in making flying safe—our top priority. And it applies across the scope of IATA’s activities. The IATA financial systems enable global mobility with a single ticket purchase in a single currency. The industry worked together through IATA to develop e-tickets and bar codes that are revolutionizing the airport experience. A united voice with our airport partners is helping us to work with governments to achieve risk-based security. And our common commitments on sustainability are keeping us on the front foot in the climate change debate.
This year we are celebrating the achievements of an industry working together. Flying has become critically important to modern life—safely connecting people and business globally. And airlines must be creative to survive in an intensely competitive business. By working in association, airlines have built a global platform of standards and established a united voice on critical issues that is unique and invaluable. Through IATA, all our 250 members are: “Flying Better. Together.”