Through crisis, connectivity, change, cargo growth, to sustainability. The 76th AGM last week covered a multitude of topics regarding the ongoing challenges, effects and solutions, and forecasts for recovery and the future.
"The history books will record 2020 as the industry's worst financial year, bar none. Airlines cut expenses by an average of a billion dollars a day over 2020 and will still rack-up
unprecedented losses. Were it not for the $173 billion in financial support by governments we would have seen bankruptcies on a massive scale," Alexandre de Juniac outlined the situation.
IATA has revised its airline industry financial forecast from JUN20 where an $84.3 billion net loss was envisaged for 2020, to a net loss of $118.5 billion, and has doubled its original net loss
forecast for 2021 to $38.7 billion instead of $15.8 billion forecast in JUN20.
A new line-up at the top
The nomination of Willie Walsh, former CEO of International Airlines Group (IAG) to succeed de Juniac as IATA's 8th Director General from 01APR21, was approved. In addition, Robin Hayes, CEO of JetBlue was declared new Chair of the IATA Board of Governors (BoG), immediately succeeding Lufthansa CEO, Carsten Spohr (2019-2020), until the 78th Annual General Meeting in 2022. “Hayes will serve an extended term as Chair covering two AGMs due the disruption to governance cycles necessitated by the COVID-19 crisis.” He will then be succeeded by SAS Group CEO, Rickard Gustafson, CEO of SAS Group, who will hold the position as Chair until the 79th AGM in 2023.
Cargo has grown in importance and revenues
“In 2019, cargo accounted for 12% of revenues and that is expected to grow to 36% in 2020”, IATA announced. "Cargo is performing better than the passenger business. It could not, however, make up for the fall in passenger revenue. But it has become a significantly larger part of airline revenues and cargo revenues are making it possible for airlines to sustain their skeleton international networks," de Juniac enunciated. Given the 45% drop in capacity mostly through the loss of passenger bellies, cargo will not outperform the previous year in terms of tonnage but has benefited from a 30% increase in yields. In figures, 2020 will see an uplift of 54.2 million tons compared to 61.3 million in 2019, and 2020 cargo revenues are expected to reach $117.7 billion in comparison to $102.4 billion in 2019.
The cargo outlook for 2021 continues to be good, especially with a view to the upcoming COVID-19 vaccine logistics. The uplift for 2021 is forecast to match 2019 figures, with 61.2 million tons, and yields are expected to increase another 5% (since the slow return of passenger bellies along with the mass of vaccines requiring transportation, will continue to keep capacity tight), bringing the forecasted cargo revenues to an unprecedented high of $139.8 billion.
IATA urges governments to support SAF transition
High up on the Sustainability Agenda is the use of Sustainable Aviation Fuel (SAF), the adoption of which is crucial if 2005 level net emissions are to be halved by 2050. Yet SAF is still around 2-4 times more expensive than fossil fuels, and production is currently at just 0.1% of the total amount of aviation fuel consumed each year. That needs increasing to 2% to become competitive, and will require government incentives, investments, or load guarantees to push transition. "We have long known that an energy transition to SAF is the game-changer. But energy transitions need government support. The cost of SAF is too high and supplies too limited. This crisis is the opportunity to change that. Putting economic stimulus funds behind the development of a large-scale, competitive SAF market would be a triple win—creating jobs, fighting climate change, and sustainably connecting the world," Alexandre de Juniac urged during the AGM where the industry resolved to work on solutions to reach net zero emissions. Though the transition will take time, the safety of SAF has been proven and the environmental benefits given the reduction of CO2 emissions by up to 80% are undisputed. “SAF is scalable and ready to use in today's fleet. No engine modifications are needed. And it can be blended with jet kerosene as supplies increase.”
ACE launch is further sustainability move
ACE stands for “Aviation Carbon Exchange” and is tool that has been developed in conjunction with commodities trader Xpansiv CBL Holding. It enables companies in the aviation industry to offset their carbon footprint by purchasing credits in certified projects aimed at reducing carbon emissions, such as forestry projects, clean wind energy operations, or eco-systems protection projects, for example. "ACE gives airlines access to top quality carbon offsetting schemes in real-time with full transparency. CORSIA is a key enabler of our long-term strategy to reduce emissions to half of 2005 levels by 2050, and this new platform will be of enormous benefit to our members and other industry stakeholders," Sebastian Mikosz, IATA's Senior Vice President for Member and External Relations, explained at the launch. “ACE is the first centralized, real-time marketplace that is integrated with the IATA Clearing House (ICH) for the settlement of funds on trades in carbon offsets.” The first transaction in the new tool was made by JetBlue Airways. It bought credits in the first phase of the Larimar wind farm project in the Dominican Republic which began development in 2015 and will reduce average emissions by more than 200,000 tons of CO2 per year once completed.
Ensuring safety and encouraging passenger travel
Naturally, most of the AGM was focused on passenger travel and included solutions aimed at improving customer confidence, flight safety, and airline recovery. Aside from discussions on greater slot flexibility and relief, and governmental financial support for ailing airlines, one such passenger solution mentioned was the IATA Travel Pass, a digital health pass allowing contactless processes, informing on travel requirements and tests, and enabling the secure transmission of Covid-19 test results, for example. It will be launched in Q1/21 following a pilot in DEC20. It should also help to remove quarantine restrictions which is another barrier to travel.
Global economies are at risk
Ramping up to recovery was another key AGM focus and governments were called on to cooperate with airlines in ensuring “safety standards and critical skill levels during the crisis and in a safe re-start and scale-up of operations in the recovery.” […] “Air transport is a major engine of the global economy. In normal times some 88 million jobs and $3.5 trillion in GDP is supported by aviation. More than half of this employment and economic value is at risk from the collapse in global air travel demand.”
IATA data published on 25NOV20 showed the dramatic connectivity drop across the world due to the effects of border closures, quarantines, and airline groundings. Unless governments step in to support the aviation industry, the knock-on negative effect on economic recovery will be severe. "COVID-19 has devastated the balance sheets of our member airlines and we need continuing government support to enable the aviation industry to restart and rebuild connectivity. Without the economic benefits that aviation delivers, the global economic recovery will be much weaker and slower," said Alexandre de Juniac.
The next AGM will be in Boston, USA
Whereas the 76th AGM was held online due to the current circumstances, the 77th will take place in Boston, USA, on 27-29JUN21, hosted by JetBlue, given that its CEO is the incoming Chair.
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