News from the 75th IATA AGM in Seoul

• Slowing Demand and Rising Costs Squeeze Airline Profits 
• IATA AGM Endorses 5 Resolutions
• KLM Royal Dutch Airlines to Host 76th IATA AGM in Amsterdam
• Carsten Spohr New IATA Board Chairman

The IATA Annual General Meeting and World Air Transport Summit is being hosted by Korean Air in Seoul, 1-3 June with some 1,000 aviation leaders and media participating.

Slowing Demand and Rising Costs Squeeze Airline Profits 

The International Air Transport Association (IATA) announced a downgrade of its 2019 outlook for the global air transport industry to a $28 billion profit (from $35.5 billion forecast in December 2018). That is also a decline on 2018 net post-tax profits which IATA estimates at $30 billion (re‑stated).

The business environment for airlines has deteriorated with rising fuel prices and a substantial weakening of world trade. In 2019 overall costs are expected to grow by 7.4%, outpacing a 6.5% rise in revenues. As a result, net margins are expected to be squeezed to 3.2% (from 3.7% in 2018). Profit per passenger will similarly decline to $6.12 (from $6.85 in 2018).
 
“This year will be the tenth consecutive year in the black for the airline industry. But margins are being squeezed by rising costs right across the board—including labor, fuel, and infrastructure. Stiff competition among airlines keeps yields from rising. Weakening of global trade is likely to continue as the US-China trade war intensifies. This primarily impacts the cargo business, but passenger traffic could also be impacted as tensions rise. Airlines will still turn a profit this year, but there is no easy money to be made,” said Alexandre de Juniac, IATA’s Director General and CEO.
 
In 2019, the return on invested capital earned from airlines is expected to be 7.4% (down from 7.9% in 2018). While this still exceeds the average cost of capital (estimated at 7.3%), the buffer is extremely thin. Moreover, the job of spreading financial resilience throughout the industry is only half complete with a major gap in profitability between the performance of airlines in North America, Europe and Asia-Pacific and the performance of those in Africa, Latin America and the Middle East.
 
“The good news is that airlines have broken the boom-and-bust cycle. A downturn in the trading environment no longer plunges the industry into a deep crisis. But under current circumstances, the great achievement of the industry—creating value for investors with normal levels of profitability is at risk. Airlines will still create value for investors in 2019 with above cost-of-capital returns, but only just,” said de Juniac.

IATA AGM Endorses 5 Resolutions

The International Air Transport Association (IATA) announced that five resolutions have been passed by the 75th Annual General Meeting. These are:

Environment: The overwhelmingly passed AGM resolution called on Governments to implement the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) as agreed through the UN’s International Civil Aviation Organization (ICAO). CORSIA is the first global carbon pricing instrument for an industry sector. It will cap net CO2 emissions from international aviation at 2020 levels (carbon-neutral growth, or CNG). The AGM looked beyond CORSIA to the next climate action commitment—cutting net emissions to half 2005 levels by 2050. Airlines were urged to implement all available fuel efficiency measures and to participate fully in a long-term switchover to sustainable aviation fuels. These are key to achieving the industry’s 2050 commitment. A detailed release and full text of the resolution are available on the IATA website.

Slots: The AGM reaffirmed the importance of a harmonized global airport slot system, and called upon governments to urgently address capacity shortages. The resolution also reaffirmed that the Worldwide Slot Guidelines (WSG) is the global standard for the policies, principles, and procedures of airport slot allocation and management. In addition, it endorsed a Statement of Objectives focusing on delivering consumer benefit, proving convenient schedules, ensuring transparency and non-discrimination in the process and using existing capacity to its full potential. A detailed release and full text of the resolution are available on the IATA website.

RFID for Baggage Tracking: The AGM resolved to support the global deployment of Radio Frequency Identification (RFID) for baggage tracking. The AGM also called for the implementation of modern baggage messaging standards to more accurately track passengers’ baggage in real time across key points in the journey. The resolution commits airlines to: transition to bar-coded bag tags with RFID inlays and use RFID data alerts to enact processes with airports and ground handlers that prevent potential mishandlings. A detailed release and full text of the resolution are available on the IATA website.

One ID: The AGM resolved to accelerate the global implementation of the One ID initiative, which uses a single biometric identifier to move passengers through the airport, without the need for paper travel documents. The IATA One ID resolution calls for stakeholders—including airlines, airports and government authorities—to work together to promote and implement a paperless passenger process utilizing biometric recognition. A detailed release and full text of the resolution are available on the IATA website.

Disabled Passengers: The AGM resolution aims to improve the air travel experience for the estimated one billion people living with disabilities worldwide. Airlines committed to ensuring that passengers with disabilities have access to safe, reliable and dignified travel, and called upon governments to use IATA’s core principles for accommodating passengers with disabilities. These principles aim to change the focus from disability to accessibility and inclusion by bringing the travel sector together with governments to harmonize regulations and provide the clarity and global consistency that passengers expect. A detailed release and full text of the resolution are available on the IATA website.

KLM Royal Dutch Airlines to Host 76th IATA AGM in Amsterdam

The International Air Transport Association (IATA) announced that KLM Royal Dutch Airlines will host the 76^th IATA Annual General Meeting (AGM) and World Air Transport Summit in Amsterdam, the Netherlands, on 22-23June 2020.
 
This will be the third time that the Netherlands will host the global gathering of aviation's top leaders (Following events held in the Hague in 1949 and Amsterdam in 1969). KLM is a founding member of IATA and is celebrating its 100^th anniversary this year.
 
“It is absolutely wonderful that Amsterdam was chosen for the IATA gathering in 2020 and that we as KLM can host IATA in 2020. This year in October 2019 KLM celebrates our 100th anniversary. A very special moment for all KLM colleagues. We are ready and fit for the next century and—as one of the founders of IATA—very proud to welcome everyone in Amsterdam next year,” said Pieter Elbers, President and CEO of KLM.
 
"The aviation industry looks forward to meeting in Amsterdam for the 76^th IATA AGM. The Netherlands has a rich aviation history with its vibrant economy driven by connectivity. It is particularly significant that we will be hosted by KLM. While we work together to achieve sustainability, build the infrastructure needed to support growth and evolve smarter regulations, KLM’s century of success reminds us of the constant innovations that have underpinned the development of global aviation,” said Alexandre de Juniac, IATA’s Director General and CEO.
 
The decision to host the 76^th IATA Annual General Meeting and World Air Transport Summit was made at the conclusion of the 75^th AGM and World Air Transport Summit in Seoul, which attracted 1,000 aviation leaders from IATA member airlines, industry stakeholders, strategic partners and members of the media.

Carsten Spohr New IATA Board Chairman

The International Air Transport Association (IATA) announced that Lufthansa Group Chief Executive Officer, Carsten Spohr, has assumed his duties as Chairman of the IATA Board of Governors (BoG) for a one-year term effective from the conclusion of the 75th IATA Annual General Meeting in Seoul, Republic of Korea. Spohr is the 78th chair of the IATA BoG. He has served on the BoG since May 2014. 

Spohr succeeds Qatar Airways Group Chief Executive His Excellency Akbar Al Baker, who will continue to serve on the BoG. 

“I’m honored and excited to take on this role at this important time for our industry. We face a number of challenges, including growing protectionism, high taxes and trade wars. Probably the greatest challenge of all is sustainability. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is a major achievement that will stabilize our carbon emissions from 2020. Now we must map out the path to achieving our much more ambitious 2050 goal — to cut net emissions to half 2005 levels. Aviation is serious about its climate change commitments. And we will be pushing hard for governments to do their part by sorting air traffic management inefficiencies and laying the policy framework for the commercialization of sustainable aviation fuels,” said Spohr.

Spohr has been Chairman of the Executive Board of Deutsche Lufthansa AG since 1 May 2014. In this role, he manages the Lufthansa Group comprising the business segments Network Airlines, Eurowings and Aviation Services, with around 135,000 employees worldwide. Spohr began his aviation career after receiving a graduate degree in business engineering at the University of Karlsruhe and holds an A320 family captain’s license.

“I look forward to working with Carsten as Chair of the IATA Board of Governors. As we continually seek to broaden the IATA membership, his experience within the Lufthansa Group will be particularly valuable.

“I look forward to working with Carsten as Chair of the IATA Board of Governors. As we continually seek to broaden the IATA membership, his experience within the Lufthansa Group will be particularly valuable.

I also want to thank Akbar Al Baker for his strong leadership and support as Chairman over the last year. Under his leadership, IATA has made progress on a number of IATA initiatives including New Distribution Capability, One ID and digital transformation. Akbar also encouraged our gender diversity initiatives, leading to the creation of the association’s Diversity and Inclusion Awards to recognize those companies and individuals who are leading in this effort,” said Alexandre de Juniac, IATA’s Director General and CEO.

IATA also announced that JetBlue Airways President and CEO Robin Hayes will serve as Chairman of the BoG from June 2020, following Spohr’s term.

The full list of the 2019-2020 IATA Board of Governors is as follows: