Industry experts discuss the future of aviation

Hogan, Tyler and Walsh discuss aviation industry’s challenges at WTTC 2013

GOVERNMENT inaction and a lack of understanding of the positive long term economic impacts of international air traffic growth dominated discussion at the opening session of day two of the 13th annual World Travel & Tourism Council Global Summit, with a panel of airline industry leaders reiterating the call for increased government support – and the abolition of passenger duty taxes – to navigate a route towards sustainable sector development.

Moderated by Peter Greenberg, travel editor, CBS News, the discussion covered political and economic instability, capacity, runway access, government policies, taxes and environmental sustainability as part of a session entitled ‘Airlines: Turbulence or clear skies ahead?’.

“Aviation is a fast-moving, highly competitive environment; high cost, low margins. One of the biggest challenges we face is convincing governments that airlines should have greater and easier access,” remarked James Hogan, president and CEO, Etihad Airways.

Willie Walsh, chief executive officer, International Airlines Group, agreed. “Not a single penny raised through passenger duty goes to the industry or environmental issues. As a vehicle to trigger economic growth, we need a fundamental change in attitude from governments in Europe. A recent PricewaterhouseCoopers shows that if you scrap the tax, you actually boost the economy and see a positive effect.”

The importance of partnerships to today’s airline business model was highlighted by Hogan who says that it is critical in terms of bilateral value, and essential to achieve a lower cost base and scale.

“How we partner is certainly changing and the ability to build a stronger proposition is fundamental. We are seeing the emergence of the battle of the hubs, and so that connectivity model is vital. Government policies make it difficult to move as fast as one would like, but we are seeing strong opportunities for growth,” he remarked.

With consolidation not an option in certain markets, partnership through alliances is the norm, but Walsh says they are a “poor substitute for proper consolidation.”

“We have to accept that if you didn’t have restrictions on ownership or control, you would be seeing more consolidation. But we are an industry that’s always changing; five years from now you will see a very different industry, and 20 years from now it will be unrecognisable,” he said.

“Unless we make a profit, we can’t develop in the way the customer expects, and the way the world economy needs,” added Tony Tyler, director-general and CEO, IATA.

Tyler also raised the perennially debated topic of visa accessibility, using Chinese travellers to the US as a case in point. “The waiting time for Chinese travellers to get US visas approved was previously 160 days, now it’s down to 2-3 days. Aviation support 57 million jobs and is responsible for $2.2 trillion of economic activity, yet governments put things in the ways and visas are a good example.”