By : Alexandre de Juniac
Airlines make the extraordinary a normal daily occurrence. Crossing continents and traversing oceans in a matter of hours is an amazing technical feat. And the air transport industry does it with such reliability that we take it for granted. But safely operating over 100,000 flights a day is no less than a modern marvel.
And that marvel adds huge value to our world. How different would our lives be without aviation? Everything from how to work or relax to how we learn or the perspective we have on life would be different. Aviation enriches our lives. And that’s true even for those who have never set foot on a plane.
Historically, that value has never generated the returns to sufficiently reward our investors. The first commercial flight took place on 1 January 1914. And it took a century until the industry delivered its first collective annual return that exceeded its cost of capital in 2015.
We look forward to 2018 with optimism. We expect airlines to earn $38.4 billion. If we are right that will be a fourth consecutive year of sustainable profits.
That’s supported by strong demand, rising revenues, and improving yields. The headwinds are on the cost side. The headline item being fuel. But we can expect continued pressure from labor, infrastructure, and other key cost items. Maintaining margins will be a challenge.
The one figure that keeps impressing me is the number of people traveling. We expect 4.3 billion passengers to board planes next year. That’s 230 million more than in 2017. The industry has the planes ready to do the job. But the pressure on global infrastructure is immense. And there are precious few governments that have understood the severity of the challenge.
We face bottlenecks in the air and on the ground. Aside from inefficiency and delays, the failure of infrastructure to keep pace with demand will have an economic toll. Spending by international tourists traveling by air tops $750 billion. And global supply chains depend on aviation to deliver over $6 trillion of goods. And those are just the most obvious areas at risk if we don’t have the infrastructure to do our job.
For most, our time horizon focuses on an annual series of events. But the looming infrastructure crisis needs a much longer span of thinking. And policy-makers should not interpret the solid financial performance of the industry as an indication that all is well in the aviation world. The 230 million more customers in 2018 will likely be followed by a similar increase the following year, and the year after, and the year after that.
There will no doubt be many urgent issues to deal with in the New Year. But let’s also keep a view on the infrastructure foundations that will secure aviation’s benefits for generations to come. Among our top messages to governments must be the need for serious planning to meet the growing demand for connectivity with sufficient quality infrastructure at affordable costs.
