Addressing the IATA annual general meeting in Dubai in June, Willie Walsh, the IATA Director General said that globally airlines performed well in 2023 with improved profitability. It was also the safest ever year – and a key thrust for the future is the drive towards net zero carbon emissions by 2050
Walsh noted that by February 2023, domestic markets had fully recovered from the pandemic shock and the recovery of long-haul markets was largely complete by year-end.
“All told, airlines lost about four years of passenger growth as a result of the pandemic. The expectation is that 2024 will see travel exceed 2019 levels and progress toward an average annual growth rate of 3.8% to 2043.”
Profitability
Walsh says that latest estimates indicate a $27.4 billion profit for 2023 with the expectation of strengthening profitability in 2024. Considering the enormous losses of 2020-2022, achieving this level of profitability is a major achievement. But with net profit margins of just 3.0%, sustainable profitably continues to elude airlines at the aggregated industry level.
The cargo business also transitioned to a more normal level of activity in 2023. After seeing extraordinary demand in 2021, followed by a sharp drop in 2022, a gradual strengthening set in during most of 2023. Cargo rates experienced a different pattern and are continuing their downward correction to normality after unprecedented highs during the pandemic.
It is also notable that both air cargo and passenger traffic have defied a challenging macro-economic environment. Despite consumer inflation, people continue to travel in growing numbers. And emerging opportunities, such as time and temperature sensitive cargo and e-commerce, have been strong air cargo performers.
Persistent supply chain issues continue to affect the maintenance of existing fleets and the delivery of new aircraft. This is an enormous frustration for airline planning and operations, the impact of which extends to airline financial performance. Walsh insists that solutions must be found.
Safety
The airline industry’s safety performance recorded “best-ever” results by several key measures. In 2023, there were no fatal accidents involving any IATA member airline, and there were no fatal accidents by any airline on the registry of the IATA Operational Safety Audit (IOSA).
Globally, there was a single fatal accident involving a turboprop. And that is a reminder that safety is a continuous challenge. A key tool that is helping address that challenge is IOSA. In 2023, IOSA marked the twentieth year since the first airline joined the registry. Carriers on the registry have consistently outperformed those not on the registry by a significant margin.
Several initiatives are further improving safety, notably a Safety Leadership Charter, the strengthening of IATA data capabilities with the advancement of the Global Aviation Data Management (GADM) initiative, and the progressive transition of IOSA to a risk-based approach that will deliver even more meaningful results.
Sustainability
A major focus for 2023 was on progressing the industry’s goal to achieve net zero carbon emissions by 2050. IATA estimates that 65% of the carbon mitigation needed for net zero by 2050 will come from Sustainable Aviation Fuels (SAF).
Walsh notes that the industry has used, ‘every drop of SAF produced. But in 2023 that was just 0.2% of total fuel used. The problem is simply that not enough SAF is being produced.’
In November 2023, governments, through ICAO, set a target of a 5% reduction in CO2 emissions through SAF. ‘This emphasizes the urgent need for those same governments to be more effective with policies to support the scaling up of SAF. And it highlights the need for policies to support the other decarbonization levers, such as direct air capture, which will be needed to complement SAF.’
IATA will establish the SAF Registry to accelerate the uptake of Sustainable Aviation Fuels (SAF) by authoritatively accounting and reporting emissions reductions from SAF. The Registry will help meet the critical needs of all stakeholders as part of the global effort to ramp-up SAF production.
Some of the key capabilities of the SAF Registry are:
- Its wide geographic scope: The Registry will allow airlines to purchase SAF regardless of where it is produced. Each batch’s certified environmental attributes can be tracked and assigned to the purchasing airline. By ensuring that the environmental attributes of SAF are properly recorded and transferred between parties, airlines and their customers can report emissions reductions accurately, aligning with any reporting obligations and international standards.
- Broad application and neutrality: The Registry will be neutral with respect to regulations, types of SAF, and any other specificities under relevant jurisdictions and frameworks, making it capable of handling all such user requirements.
- Governance: Independent governance will ensure the system’s impartiality and robustness.
- Cost efficiency: Participation in the registry will be on a cost recovery basis to avoid adding unnecessary cost barriers to the SAF ramp-up.
- The Registry is being developed in consultation with airlines, government authorities, international organizations, OEMs, fuel producers and suppliers, airports, and corporate travel management companies.
Global standards
Global standards are essential for aviation as they are the bedrock of its safety. They will also be a key to net zero carbon emissions by 2050. A focus of IATA’s advocacy efforts has been defending global standards, for example:
- IATA resisted plans from the Dutch Government to ignore the ICAO Balanced Approach on Noise and illegally impose a capacity-cut at Amsterdam’s Schiphol Airport.
- IATA is opposing international corporate income tax proposals that would require airlines to report revenue in each location where it was generated. Currently, airlines report all revenue in their headquarter’s jurisdiction. There are no flags of convenience giving access to friendlier tax regimes, so governments will gain nothing from the change. But airlines will face enormous cost and complexity should the proposals be adopted.
IATA is also promoting standards that modernise business practices. This includes:
- Modern airline retailing to serve air travellers better, by replacing complex legacy processes with a system of “offers and orders” system that will parallel what most other retailers use.
- Working with aircraft and engine manufacturers to promote best practices, recognizing that airlines own the operational data generated by their fleets and that they must be in control of how it is used.
- IATA’s Financial Settlement Systems (IFSS) continue to process transactions between airlines and agents (passenger and cargo), “efficiently, safely and on time. In 2023, the IFSS processed a total of $445.3 billion excluding $18.2 billion in refunds,” Walsh concluded.