His Excellency, Akbar Al Baker, Group CEO, Qatar Airways and Willie Walsh, IATA’s Director General, exchanged crucial industry insights during a fireside chat session at IATA’s World Financial Symposium.

Conducted by CNBC Anchor Hadley Gamble, the chat began with a look at the biggest challenges in the short term. Al Baker said the immediate problem was “political upheaval” but also mentioned the high oil price, a lack of manpower, and infrastructure inadequacies.

In the longer term, sustainability was the overriding concern. Al Baker noted that huge investment would be needed in new aircraft and new technologies. The risk, however, is that airlines won’t have the finance they need to invest in sustainable solutions due to short-sighted regulations.

“The right policy framework is absolutely critical to sustainability,” said Walsh. “Politicians like taxation, but all the evidence says taxation does nothing for the environment.”

To highlight the point, Walsh noted that most CO2 is generated by long-haul flights for which there is no alternative to aircraft. The idea that taxation will drive people to other modes of transport is therefore misguided. Connectivity would be sacrificed for minimal environmental gain. In addition, the money gained through airline taxes disappears into government coffers and is not specifically used to reduce carbon.

Poorly thought-out regulations were also emphasized when the discussion turned to the pandemic. The global economic damage caused by lockdowns and travel restrictions was massive. But it could have been avoided by a simple of review of policies once data was available, as numerous studies showed that closing borders did nothing to protect people.

Qatar Airways fared better than most but still had to shrink networks. Fortunately, it was able to ramp up fast and opened new destinations. In his earlier keynote speech, Al Baker also revealed that Doha’s Hamad International Airport will soon open an expansion that will increase capacity to 58 million passengers per annum in time for the FIFA World Cup. In January 2023, the airport will break ground on the next phase of development that will see its passenger handling ability jump to 70mppa by late 2025.

Whatever the initiative or problem to be solved, Al Baker and Walsh agreed that collaboration—within the industry and with external partners—is essential. When it comes to sustainability, for example, aviation will only meet its 2050 goal if other stakeholders in the aviation value chain play their part. Oil companies must do more in terms of sustainable aviation fuels (SAF) production. Al Baker said that Qatar Airways would happily buy more SAF if they were available at a reasonable price. SAF are up to three times more expensive than kerosene and the fact that any SAF are being purchased is a sign of airline commitment to environmental mitigation.

Engine and airframe manufacturers must also play their part by developing new technologies. Hydrogen propulsion is still more than a decade away, however, and hybrid-electric power won’t be in widespread use until the 2030s either. That makes increasing SAF production even more important.

From a financial point of view, though, the critical factor is that airlines have enough cash to invest whenever these breakthroughs become available. “The industry needs deep pockets,” Al Baker noted. There will be ups and downs, he added, but airlines should ensure they have enough liquidity to keep going and to invest at appropriate moments.

It won’t be easy. The decade preceding the pandemic was the most successful in aviation history, but the profit margin was just 5.5%. Given the huge losses sustained because of the COVID crisis, there is little spare cash to invest. Nevertheless, decisions on investments now, especially in sustainability, will have a significant impact on airline finances in the short and long term and affect future investment capability.

Al Baker sounded a warning. There is still the potential for tourism and air travel demand to be affected by poor regulations or crises. “We are in dangerous times,” he said. “And we just don’t know how things will develop.”

 

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