It"™s a pleasure to be with you in this historic center of culture, free-thinking, commerce and manufacturing. I would like to add my thanks to our sponsors for their strong support, which makes events such as these possible.
2015 is a special year for the airline industry. Seventy years ago, the leaders of 57 airlines came together in Havana, Cuba, to form IATA. The goals of the Association were clear. IATA was to promote safe, efficient, and economical air transport. In doing so, it would create great value"”benefitting the peoples of the world and fostering commerce.
The tag line for our 70th anniversary celebration is "Flying better. Together." That reminds us of the fact that IATA was created to be a forum for industry collaboration and partnership, undertaking on a collective basis those activities that would be hugely expensive and inefficient for airlines to do individually. We would also be a vehicle to support the development of the standards and best practices necessary for the safe and efficient operation of the global air transport network.
Aviation today is very different compared to when IATA was formed in April 1945. This year airlines will carry 3.5 billion passengers–or around 9.6 million each day"”which is more than were carried in the entire year of 1945. Over a third of global trade by value is transported through the skies; and aviation contributes some $2.4 trillion to global GDP. And the industry has evolved into a job creation machine, supporting some 58 million jobs around the world when we include the benefits of aviation-related tourism.
The vision to create value is being achieved. The connectivity provided by aviation enables globalized supply chains for agriculture and manufacturing. Thanks to aviation, you rarely are more than a 24-hour journey away from another population center on the globe. Additionally, we are a lifeline when disaster strikes. The earthquake in Nepal highlighted aviation"™s vital role in helping to transport aid and rescue workers, as well as medical supplies and equipment, to those in need. Aviation also enriches the world in myriad non-monetary ways, reuniting friends and families, enabling journeys of discovery, and creating opportunities for greater cultural understanding.
Aviation"™s ability to make the world a richer, more connected place rests on three pillars: We must be safe, sustainable and profitable. Safety is the number one priority for everyone associated with aviation. By sharing our expertise and working together through global standards such as the IATA Operational Safety Audit, we have made it the safest form of long-distance transportation the world has ever known.
Sustainability is our second pillar. It is our license to grow"”and we have achieved remarkable progress over the decades in terms of reducing noise and emissions. The noise footprint of new aircraft is at least 15% smaller than that of the aircraft they replace and they provide fuel efficiencies that are at least 70% greater than jets produced in the 1960s. As an industry we are committed to further reducing aviation"™s impact on the environment and have an aggressive target to achieve carbon neutral growth from 2020, with a 50% reduction in net CO2 emissions by 2050 compared to 2005.
Profitability is our third pillar"”and historically, it"™s been our weakest"” I"™m sure you"™ve heard the joke that the way to make a small fortune in the airline industry is to start with a large one. The good news is that after many years of hard work and restructuring, the situation is improving. For 2015, we expect an industry net profit of $29.3 billion on revenues of $727 billion, for a net profit margin of 4%. What this means is that the airline industry on average is finally earning its cost of capital.
Let me take a moment to observe that no one needs to apologize for the fact that in 2015 this industry at long last is performing above its usual level of barely-breaking-even. If profitability is not a dirty word when Apple turns in a 23% profit margin than it should not be when airlines achieve an average 4% result.
This result also needs to be put into perspective. Firstly, it is an average for the world, but there is a wide disparity among regions. More than half of the global profits are being made in North America. While the overall fortunes of the industry are improving, for many airlines the struggle to keep revenues ahead of costs is still a formidable challenge, as IATA Senior Economist Julie Perovic will examine in her presentation a bit later this morning.
Furthermore, we must recognize that for any other industry, earning the cost of capital is the absolute minimum performance expected. And we will have to continue this performance for the foreseeable future in order to attract the $5 trillion of capital required to support the doubling of air travel expected over the next two decades.
That"™s why this symposium – with its focus on sustained financial health for the industry – is so important. Because if our industry is not profitable, we will not be able to satisfy future demand – and we will certainly not achieve our ambitious environmental targets in the desired timeframe…
