There is no lack of challenges facing aviation: Deputy Prime Minister

Mr Tharman Shanmugaratnam cited pandemics, natural disasters, political upheavals and sharp economic cycles as some of the challenges.

In a speech during the 67th IATA Annual General Meeting and World Air Transport Summit, the Deputy Prime Minister said, “Climate change looms as a longer term challenge. There are also supply side tests - such volatile and escalating fuel prices, competition for human capital, the challenge of ensuring stable labour-management relations, as well as questions over the ability of airport and air navigation infrastructures to keep pace with the projected growth in air traffic.”

He said the aviation sector’s adaptability will therefore be under more frequent and more severe test. The most important strategic response of governments and industry to this challenging environment, according to him, must be to work together to remove measures and practices that impede fair competition. Mr Tharman Shanmugaratnam added that we should guard against well-intended actions that can lead to unintended market distortions.

“In addressing climate change, we should harmonise measures at an international level so as to ensure a level playing field for all, as well as minimise multiple cost layers from unilateral localised emissions trading schemes and environmental taxes. Such coordinated efforts will ultimately yield more efficient outcomes for all stakeholders and allow the industry to grow in an environmentally sustainable manner,” he said.

Meanwhile IATA has further downgraded its 2011 airline industry profit forecast to $4 billion. This would be a 54% fall compared with the $8.6 billion profit forecast in March and a 78% drop compared with the $18 billion net profit (revised from $16 billion) recorded in 2010. On expected revenues of $598 billion, a $4 billion profit equates to a 0.7% margin.

“Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year. That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance. The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7% margin, there is little buffer left against further shocks,” said Giovanni Bisignani, IATA’s Director General and CEO.