Real cost of flying 40 per cent lower than a decade ago: IATA

At the IATA annual general meeting, which is taking place in India after 42 years, Walsh also said the rate of growth in the airline industry has slowed down as a result of supply chain issues

New Delhi: The real cost of flying has fallen 40 per cent from a decade ago despite rising cost and tax challenges, global airlines’ grouping IATA’s Director General Willie Walsh said on Monday, as the number of air travellers is projected to cross 5 billion annually.

At the IATA annual general meeting, which is taking place in India after 42 years, Walsh also said the rate of growth in the airline industry has slowed down as a result of supply chain issues.

---

The International Air Transport Association (IATA), which represents over 350 carriers globally, on Monday projected that airlines will make a profit of USD 36 billion on USD 979 billion revenues.

The expected profit this year translates to a net margin of 3.7 per cent or USD 7.20 net profit per passenger. “Our profitability is not commensurate to the enormous value that we create at the heart of a value chain supporting 3.9 per cent of global GDP and providing and supporting jobs for 86.5 million people,” Walsh said.

Despite ever increasing cost and tax challenges, he said the real cost of flying is 40 per cent less than a decade ago. India is one of the fastest growing civil aviation markets in the world and air traffic demand is on the rise, while there have been concerns about airfare trajectory.

Meanwhile, referring to the supply chain issues that have been impacting the aviation industry, the IATA DG said that regarding aircraft, the manufacturing sector is failing badly.

“The delivery backlog of 17,000 implies a 14-year wait between ordering and delivery… the number of deliveries scheduled for 2025 is 26 per cent less than what was promised a year ago,” he said.

More than 1,100 aircraft under 10 years of age are in storage, which Walsh said is 3.8 per cent of the entire fleet, nearly three times the pre-pandemic comparison of 1.3 per cent.

Also, the annual fleet replacement rate of 3 per cent is well below the normal 5-6 per cent. “This hits revenues because some demand goes unmet. And scarcity pushes up maintenance and leasing costs.

“It’s just not acceptable that manufacturers estimate it could take until the end of the decade to sort this mess out,” Walsh said as he also advocated for keeping aerospace outside of trade wars.

According to the IATA DG, bad regulation can destroy value and stand in the way of affordability. “The litmus test for any regulation is cost-benefit analysis. As business leaders we take this much more seriously than regulators. They are not playing with their own money, and the difference between political success and solving a problem is often wide. That makes bad regulation far too prevalent,” he said.

While talking about safety, Walsh said less than half of the accident investigations over the last six years have been published with a final report. “Missing insights from accident reports are lost safety opportunities,” he noted.

Last year, there were seven fatal accidents among 40.6 million flights, and 244 fatalities among 4.8 billion passengers. In the last 12 months, Walsh said two civil aircraft were downed in conflict zones, several airports with civilian aircraft on the ground were bombed in military operations, and incidents of interference with navigation systems near conflicts rose sharply.