IATA AGM: Sustainability and Profitability in Focus

Things are changing after an uncertain period for the aviation industry. Two years on from the lifting of COVID restrictions and the resumption of widescale international travel, aviation has returned to overall profitability – a remarkable turnaround, given recent challenges. The financial health of aviation was one of a number of subjects at the forefront ofIATA’s recent AGM, which brought together a plethora of industry leaders and experts to discuss these. But what else was on the agenda?

IATA Director GeneralWillie Walshdelivered aspeechaddressing the most critical issues facing the aviation industry – of which sustainability is arguably the most pressing. Nonetheless, it is not something that airlines can tackle alone; ‘it is a global challenge that needs a global solution’. Walsh noted that at theICAO Assemblylast October, ‘governments agreed a long-term aspirational goal for aviation to achieve net-zero emissions by 2050 – aligning governments with our net zero by 2050 resolution at the 77th IATA AGM a year earlier.’

While the aims set out in the ICAO Assembly are not legally binding, Walsh stressed that failure onnet zero goals‘is not an option’. However, he did criticise the ‘amateur’ level of assessment behind research into this subject, citing a recent report by theRoyal Societyon resource requirements for net zero aviation fuels. The study used fuel burn performance data on transatlantic flights by aBoeing 737-300– a plane that went out of production in 1999.

Sustainable aviation fuel (SAF)will likely have a key role in the industry’s net zero goals, though Walsh noted that at present there is insufficient capacity to meet demand for it; today’s production of SAF is less than 0.1% of the amount required for net zero. He underlined the need to increase the number of pathways for SAF production and to diversify feedstocks. ‘Governments should be jumping over themselves to be first in line for the job creation, local economic stimulus, and biodiversity protection that SAF production brings,’ he said – something that goes for ‘developed and developing economies alike.’

IATA has also unveiledroadmapsproviding step-by-step details on how the aviation industry can achieve its net zero goals by 2050. ‘By 2050 we need to be at net zero carbon emissions. And the steps to get there that are outlined in these roadmaps will evolve as the industry’s expertise grows,’ said Marie Owens Thomsen, SVP Sustainability and Chief Economist at IATA. ‘Policy is particularly important early on as it, to a large extent, sets the scene for private sector investors to move. With that, the private sector can decarbonize at scale and with speed’.

From a projected $803 billion in revenue – the first time this figure has been reached since 2019 – airlines will share $9.8 billion in net profit this year. Operating profit is expected to reach $22.4 billion, much improved over the December forecast of $3.2 billion. Costs are expected to grow 8.1% over 2022 to $781 billion. Some 4.35 billion people are expected to travel in 2023, close to the 4.54 billion who flew in 2019.

Walsh highlighted aviation’s return to overall profitability in 2023. Given the tumultuous past three years, which resulted in $180 billion in losses, this is a remarkable achievement. Passenger volume is at 90% of 2019 levels, but the margins for profit remain ‘wafer thin’, equating to an average of $2.25 per traveller: not even enough for a subway ticket in New York City. Walsh admits that this is not sustainable and called for the industry to find ways to increase the value retained from each air trip amid the extra challenges of inflation, cost pressure, and labour shortages. Nonetheless, ‘considering we lost $76 per passenger in 2020, the velocity of the recovery is strong.’

Gender diversity was also a big topic at this year’s AGM.Richard Questmoderated a panel of three female commercial leaderswho discussed some of the challenges they faced as women in the climb to the top, as well as poignant topics surrounding turning demand into revenue in a post pandemic world. The speakers were:

Leanne Geraghty, Chief Commercial Officer,Air New Zealand

María Jesús López Solás, Chief Commercial, Network & Alliances Officer,Iberia

Jo-Ann Tan, Senior VP Marketing Planning,Singapore Airlines(incoming CFO)

The panellists cited a lack of female role models when they began their career; this is beginning to change, and although women remain underrepresented at the C-suite in aviation, Geraghty, a mother of four, noted that there was precious little support for working mothers when she started out. ‘Industry and society have come a long way in that regard.’ Still, all too often organisations are not conscious enough when it comes to enabling female talent to progress. The speakers concurred that mentoring and coaching will help to bridge the gender diversity gap at executive level, as will setting targets to reach these aims. At Venari Partners, we are passionate about celebrating female leadership in aviation, which led us to establishREACH– aLinkedIn groupfor inspirational (and aspirational) women leaders in the industry.

Speaking of female leadership, we are also delighted to note thatRwandAirCEOYvonne Manzi Makolohas been announced as the new Chair of theIATA Board of Governors. She will assume the position for one year, becoming the 81st Chair, and the first woman, to take the role.

As the AGM came to a close, there was a general agreement across the board concerning the need for carriers to deliver basics well. ‘The customer just wants to arrive, with their baggage. I know this doesn’t sound like a huge thing, but I think in the last year, when passengers were traveling and not getting their baggage, the basics are really, really important,’ Tan noted.

Self-service, and the potential of digital and tech to revolutionise this, was also a key part of the discussion. ‘Our attention is very much focused on enabling customers to self-serve. Customers want to be in control of their travel arrangements, particularly when things go wrong,’ Geraghty said. She noted that shaking up the industry’s ‘out of date’ legacy platforms will be key for this: ‘We need to accelerate the process to a modern retail environment.’

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