IATA’s Director General, Willie Walsh, recently gave a wake-up call to the aviation industry about the precarious state of airline profit margins. His revelations were part of a broader discussion at IATA’s 79th Annual General Meeting and World Air Transport Summit, held in Istanbul, Türkiye.

The Current Profit Situation

This year, the aviation industry anticipates an astounding $803 billion in revenues. However, a shocking revelation is that only $9.8 billion of this colossal figure will translate into net profit. This means that, on average, the profit per passenger is a meager $2.25, an amount that can’t even cover the cost of a subway ticket in New York City. “Clearly, that level of profitability is not sustainable,” warned Walsh. Yet, he acknowledged the powerful recovery velocity, comparing it favorably to the $76 loss per passenger in 2020.

Identifying Major Hurdles

Walsh went on to elaborate the significant hurdles facing the industry. These include rising inflation, increasing operating costs, and enduring labor shortages. Along with these fundamental challenges, the industry is wrestling with specific pressures from OEM suppliers and oil companies. Walsh’s critique of OEM suppliers centered around their slow response to supply chain disruptions, which are both escalating costs and limiting aircraft deployment. “Airlines are beyond frustrated. A solution must be found,” Walsh expressed, reflecting the mounting exasperation within the industry.

Alongside the supply chain predicaments, Walsh pointed fingers at oil companies. He accused them of thriving at the airlines’ expense, noting that the crack spread for jet fuel was at record highs for most of 2022.

Walsh also didn’t hold back in his criticism of certain airports for shifting their operational inefficiency costs onto airlines. He singled out Schiphol Airport for its egregious 37% charges hike spread over three years—with a 12% increase this year alone. He also flagged concerns around South African airports and ATC’s shocking 63% charges increase proposal.

Despite the enormity of these challenges, Walsh applauded the airline industry for maintaining profitability. He ended his speech with a powerful call to arms for increased accountability and stricter economic regulation for monopoly suppliers. In light of his critique, calls for lighter regulation should be dismissed outright.

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The question that remains is: How can airlines and other stakeholders address these challenges to strengthen the airline profit margins? Your thoughts and opinions matter, share them in the comments section below.