Director of Air Transport Group Sees Profitability Ahead; Scolds Governments

Airline officials from IATA’s 290 member airlines, including senior business leaders, equipment suppliers, government officials, and media from around the world, gathered in the Middle East to exchange notes as the aviation industry looks to navigate a series of complex and dynamic operating, business, and geopolitical environments. 

Officials will welcome the positive outlook since—according to Walsh’s remarks—in 2020, the aviation industry registered a loss of $137.7 billion when travel dried up during the pandemic. Things improved in 2021 with vaccine rollouts around the world, but even then, the industry could only cut that loss down to $42.1 billion last year. Now, with border restrictions finally relaxing, IATA estimates that global losses this year could be reduced to $9.7 billion. This positive momentum has led IATA to predict that “industry-wide profit should be on the horizon in 2023.”  

“Aviation is resilient, and we are rebounding,” Walsh said, explaining that the industry is benefiting from two years of pent-up travel demand, now at 83 percent of pre-pandemic levels, which is forcing airlines to scramble to benefit from the upside. He heaped credit on airline leaders for flexing their financial savvy to weather the downturn, though that came with “wage cuts, layoffs, reassignments, or retrenchments.” This rebound comes amid ongoing geopolitical disruptions, primarily from the Russia-Ukraine war, workforce shortages, and fuel shortages, which have sent prices skyrocketing. 

Additionally, IATA pointed out that employment in the global aviation sector was still below the 2.93 million jobs that existed in 2019 and are expected to remain below this level for some time. On the pilot front, airlines have scrambled to recruit and retain pilots to meet demand, with some even raising wages by 50 percent. While hiring is one thing, IATA said, training new hires to be “job-ready” is another. 

“The time required to recruit, train, complete security/background checks, and perform other necessary processes before staff is ‘job-ready’ is presenting a challenge for the industry in 2022. In some cases, employment delays may constrain an airline’s ability to meet passenger demand,” Walsh said.

It is true. For instance, early in June, IATA airline member United Airlines (NASDAQ: UAL) said it would spend up to $100 million to expand its pilot training center—already the largest in the world of its kind—to ease its own pilot shortage and improve the training timeline for its more than 12,000 pilots.

With the rebound in full swing, Walsh said challenges remain. 

“There is no way to sugarcoat the bitter economic and political realities we face. But both the desire to travel and the necessity of moving goods are solid.” 

He cited rising inflation across developed and developing countries, soaring energy prices at 50 percent more than in 2021, and financial rightsizing that some airlines still have to do, given the collective $650 billion of debt on their balance sheets.

But the director wasn’t happy with governments around the world for their pandemic responses among other things. Walsh said their lockdown decisions “dismantled connectivity, destroyed jobs, and inflicted misery on people.” The director said governments did not consult the aviation industry enough, and he mocked that “decisions were based on science, but it was political science, not medical or data science.” In the future, he said there needed to be closer collaboration between countries and governments to better withstand a future pandemic. Yet, his criticism of the pandemic response was just one of many. 

He poked at regulations that the government imposed, which seemingly didn’t benefit airline staff or customers, from poor accessibility rules to exorbitant fees that countries charged for overflight—or fees that airports passed to consumers. On the topic of sustainability, Walsh said that while the industry committed to being net zero in emissions by 2050, governments didn’t have any such skin in the game, and said they needed to play their part.

“Achieving net zero emissions will be a huge challenge. The projected scale of the industry in 2050 will require the mitigation of 1.8 gigatons of carbon,” Walsh explained. “Globally consistent government policies must support investment at that magnitude.”

Finally, with Qatar Airways serving as the host airline for the conference, Walsh was asked to comment on the ongoing dispute between Airbus and the airline. Qatar Airways is suing the OEM for more than $1 billion in damages for erosion issues it discovered in some of its A350s. In a perhaps retaliatory response, Airbus canceled a contract with Qatar Airways to deliver A321s to the airline. In a statement, Qatar said it was “extremely concerned about the precedent that Airbus is setting” and said the mixing of the two issues was “extremely damaging for our industry.” When Walsh weighed in, he told reporters that he’d need to watch the situation more closely if it was confirmed that Airbus was using its strength to exploit its position.