Podcast: What Were The Highlights Of IATA's 80th AGM?

Aviation Week Network's team on location in Dubai sits down to discuss key themes from IATA's 80^th Annual General Meeting, the biggest yearly gathering of airline executives.

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Rush Transcript

Karen Walker:

Hello everyone and welcome to Window Seat, our Aviation Week Network Air Transport podcast. I'm ATW and Group Air Transport Editor-in-Chief, Karen Walker. Welcome on board. And this week I'm in Dubai with my colleagues across the Aviation Week network where we're covering the 80th AGM of the International Air Transport Association or IATA. So, I am delighted to be joined by Aviation Week commercial director, Jens Flottau, CAPA senior analyst Americas, Lori Ranson, Routes editor-in-chief, David Casey and ATW senior editor Asia and China, Chuanren Chen. So great to be with you all guys and great to be here in Dubai. As I said, this is where the AGM is being held this year and it's being hosted therefore by Emirates Airline and Tim Clark, their president. I'm going to start with you, Jens. You and I have done so many of these things, haven't we? Covered so many of these AGMs around the world. Can you just share with us your quick thoughts on key themes, key thoughts of how this one has gone?

Jens Flottau:

Yeah, sure, Karen. Well, it's—bottom line—it really feels quite normal, apart from the fact that you basically cannot leave the hotel because it's too hot outside. But that's another story. Normal, by that I mean if you look at profits, for example, the industry is doing well, but it's not doing great. Margins are okay, but not great. In many regions of the world the steep recovery phase seems to be over. Asia-Pacific is still a different story.

So, it is getting more normal. That is also true for other issues that have taken center stage in recent years. Sustainability, for example, used to be a huge, huge, huge topic at the past few AGMs where, particularly in Boston, when IATA came up with the net-zero target for 2050, every conversation was about that. Huge panels, contentious discussions: Can we get there? Can we not get there? Is it too ambitious, and so on. It felt like here, yeah, people talked about it, people said, “Yeah, it's going to be hard,” but they'll meet it. But it was almost one of several issues that was being discussed along with airport charges and something. So again, getting back to normal. Yeah, that's my impression.

Karen Walker:

And you're right, both Willie Walsh, the IATA director general, and then their chief economist, Marie Owens Thomsen, did give the revised figures for profitability for 2024 as they expected. And on the one hand, the numbers sound big—that the airlines all are expected to post record $1 trillion or thereabouts in terms of revenue. But as always, as you say, back to normal, as always, the margins will be really, really slim. In other words, how much profit these airlines will make remains very, very small. But that was the case before the pandemic, and I think we should pick up a little bit on some of that sustainability talk. I agree with you. There was a bit of a difference of mood there, so we'll talk about that in a minute.

Chuanren, you keep a special eye on the Asian and Chinese carriers. At some of these events, particularly recently, we've not seen that much presence from the Chinese carriers, in particular. We know everything that's been going on in China. It's come later out of the COVID thing. What were your impressions in terms of their presence this year?

Chen Chuanren:

Thank you, Karen. Certainly a lot has changed since 2023, and given that now China has fully reopened, we have seen the entire Chinese aviation community in IATA this time around huge delegations. The big three have groups of five and tens escorting their chairmen and CEOs, but as usual, they're media-shy. But that's another story altogether. Personally, I like to highlight that COMAC is here with a pretty big team. A number of commercial directors are here, of course, likely to engage potential customers for their narrowbody aircraft.

Unfortunately, there are a number of senior CEOs who are not here. Garuda, Singapore Airlines—understandably why, personally—and the new Japan Airlines [CEO Mitsuko Tottori], a female CEO cannot be here as well. But it would be interesting to see her take on the aviation industry in Asia.

Network wise, I just want to highlight that Fiji Airways has joined [the oneworld Alliance], which is pretty not surprising, but at least it's something for us to write about from a network point of view, I think.

Karen Walker:

Okay, yep. And Lori, CAPA also held its roundtable bringing into several airline and airport executives, top executives to that. So, you held that on Sunday. I was there and I felt that there was a pretty positive mood there, even amongst the Latin American carriers that also have had a rough time through the COVID pandemic, but I felt a lot of positivity there. What were your thoughts?

Lori Ranson:

Yeah, the Latin carriers definitely continue to rebound, but in terms of returning to normal, I will just say that their margins are going to be pretty thin again this year. And some of that is driven by what we know as familiar: taxes, fees, currency fluctuations, fuel costs. IATA VP of Americas Peter Cerda gave a presentation and one thing that he pointed out that I find really interesting is what's overlooked is taxes and fees can constitute half of a flight cost in Latin America. And that's a burden that's really not shared by other modes of transportation, like buses. And arguably maybe air travel is a lot safer than buses. So familiar challenges remain for the carriers, but they're rebounding, and the mood is pretty positive against that backdrop of trying to convince governments to change how they view the industry in Latin America.

Karen Walker:

Yeah, so I think what was interesting there was that from that part of the world, the whole sustainability thing was talked about, but it was talked [about] sort of in a “We'll get there and we're still entitled to grow” [way.] There was a lot of that sort of conversation this year, "We're still entitled to grow." It's not a case of sort of don't fly, “We will not just fly, but we will grow.” And as you say, the conversation was much more from that part of the world about taxation and the things that are stopping them from growing. David, I know you focus a lot on the airports and networks, but you’re also here again, covering generally what was going on. So, did you have any particular thoughts?

David Casey:

Yeah, thanks, Karen. I was actually at the session Lori was just talking about on the Latin American market, and I think one thing that was interesting that Peter flagged as well is just the influence that governments are going to have this year. I think IATA said that there's 4.2 billion people that are going to the polls in 70 countries this year. And he was just highlighting the massive switches that we're going to see in some of those markets and how that's going to affect the industry.

So, I think you only have to look at a market, maybe Argentina, which seems to swing from liberalization to protectionism within, almost overnight. So, I think as he flagged, policy—and this time next year we could be having a very different landscape and some very different conversations about how open some markets are. And I think that's one of the interesting takes that I saw this year as well. IATA director general Willie Walsh highlighted that in his speech yesterday. I think he warned about governments, as he said, going rogue, and he cited the Amsterdam Schiphol example, which obviously, due to pressure last year, the government dropped the plans, but they have been recently revised and he also mentioned about [how] this could happen as well in Belgium. So, I think just the overall influence of governments on the industry was one thing that I took from some of the sessions.

Karen Walker:

Yeah, I agree with you on that, definitely we heard that. There was also a mention of the supply chain situation as well in several of the conversations. That's not surprising when you look at everything that's going on there. These things, they get sponsors from the supply chain, and we all know what's been going on with Boeing. Boeing is here. Perhaps Boeing has a presence, but I know that there were a lot of behind-the-scenes conversations going on between executives, not just with Boeing, but the likes of Pratt and Whitney and the other engine manufacturers.

Some of the talk, Jens, I think was a sort of, it just almost seemed to me this year like a resigned acceptance that it's going to be at least 2025, maybe 2026, before all that gets sorted out and people get back to getting the aircraft engines and parts that they need. What were your thoughts on that, Jens?

Jens Flottau:

Yeah, it's exactly right. I mean people are frustrated. They say that, but they've kind of also accepted that there's nothing they can really do about it right now. But the issues have a real impact on the industry. Emirates, for example, said they're going through this 3 billion [AED] retrofit program for about 200 aircraft. The old 777s, the A380 fleet. And part of it's because the 777Xs are so late. So, they were going to arrive five years ago, and they would've introduced a new product on the aircraft. And, of course, if you see the current business-class product—for example, on the 777 at Emirates—that's no longer competitive. Others are the same: Lufthansa flying around with business-class seats that are the standard of the early 2010s, and other carriers that are more lucky have had the chance to upgrade earlier. So, there are competitive dynamics in play that those carriers obviously are not happy about.

If you look at deliveries this year, IATA expects them to be down 11% over what they expected only six months ago. So, it almost seems that things got worse rather than better, but the outcry isn't as loud as it used to be. Of course, there's people like Lufthansa CEO Carsten Spohr who says it's actually not that bad that we don't get the aircraft. I mean, yes, the product is not competitive, but also capacity is down, so fares are up. So, it's not just negative, but bottom line is, it's pretty bad.

My last point on the OEM side is what I've observed here [which] is that people seem to still be rushing to orders. I do think that from what I've heard here, we will see a substantial amount of big orders this year, maybe some of them being announced at Farnborough. People have got the impression that—particularly on the widebody side—if they don't lock in orders now, they'll have to wait forever to get new equipment. So, it's always people here try[ing] to talk about it. So that increases the pressure even further to do something now. So, in spite of all of this, it seems like 2024 will actually be quite a good year for the OEMs in terms of selling aircraft.

Karen Walker:

And it's not just the OEMs selling them, but you're seeing the leasing companies are placing plenty of aircraft if they've got them—if they can get them. There's still demand there for the leased aircraft, too. So, a lot of those representatives here as well.

Jens Flottau:

And some of them have decided to go into an interesting play. They haven't placed some of their earliest slots yet. So, there are aircraft available in 2025, 2026, but they're going to be hugely expensive. So, let's see who's paying what for them.

Karen Walker:

Yes, because, as the chief economist pointed out, this is still an industry that's deeply in debt and interest rates are high and it's a commodity in short supply. So, all of that thing, as you say, puts a premium price on those, which is good for if you are holding onto those aircraft and engines and putting them out there, but not so good for the customer.

So yeah, that was an interesting point. I think all of us here were at the event last year in Istanbul, this time last year, and I got the impression at that one that there was quite a bit of concern and negativity about the sustainability targets, particularly the net-zero 2050 target that IATA itself set, as you said, Jens, back in 2021, and that there was quite a bit of grumbling about how in heck we're going to do that? I didn't get so much the impression of that at this one. There was either no discussion or it was more [that] it almost felt like they'd been rallied to sort of, if you talk sustainability, talk positive, say we don't know exactly how we're going to get there, but we will get there. There will be sustainable aviation fuel, or SAF, eventually. The problem is it's going to be very expensive. Chuanren, it also seems to me that that's changed particularly in Asia, that whole attitude to SAF, et cetera?

Chen Chuanren:

Yes, actually, I think since last year in AAPA, the Association of Asia-Pacific Airlines' AGM, the allies that have committed to have a target of 5% self-uptake by 2030, if my memory serves me right, but from there you have seen governments taking proactive steps. Singapore [Airlines] has also put together a number of measures to ensure that's happening, including a SAF levy for customers. That has, of course, different takes from different airlines, but at least it is something that the government is trying to do. Singapore Airlines, of course, has also committed currently about 1,000 tons of SAF uptake, which will commence by end of this year. So, it's baby steps, but at least that's a bit of a gravity towards the right way, isn't it?

Similarly, Garuda, Indonesia, the biggest palm oil producer in the world, has committed to produce palm oil SAF. That is a very contentious issue in the West, I think. But a number of regulators and governments have said [they will] approach these from a scientific manner, and we'll see what the rest of the market will say.

Karen Walker:

So, there is, again, more of a resigned, “This is going to be tough, it's going to be expensive, but we're going to do it,” this year. Let me just quickly go past each of you, and as I say, all of us have sort of been to several of these. I sometimes wonder, do they really all need to get together, these executives from airlines all around the world and have this almost public discussion each year, and does something come out of it? I mean, if you go back to 2021, that is when you could say, well, something came out of it, a commitment to net-zero by 2050. I've not really seen anything like that happen at this event so far, but correct me, if I'm wrong. But do you think this is important, Jens, to hold this AGM?

Jens Flottau:

For us, it is important, simply because it's convenient. People are walking past us, we can ask them for quick interviews or longer interviews. So, for us, yes it is. I think for them, I mean I guess you have to consider them to be kind of a little bit of an industry club, of course. And I can imagine that psychologically for them, it is important to just get together with their peers and to exchange their concerns, and so on.

I mean, just on the sustainability issue, I think the one angle that potentially was new this year is yes, we've seen all these mandates come in and last year they complained big time about the fossil fuel industry not investing because fossil fuels are much more profitable than SAF, of course. And this year, I think the new angle could have been that, or was that they are calling governments to action now and saying, “Okay, if you impose these mandates on us and there is no SAF, then there's something else you have to do. You have to act to ensure that we actually can buy this stuff.” So, yes, and obviously for getting messages across, it's important. Yeah, I think, it's important.

Karen Walker:

Good point. It's a collective voice that they have an opportunity to really sort of highlight those things that need to happen. David, your thoughts—was it a productive meeting?

David Casey:

Yeah, just to echo what Jens said. I mean in terms of being a journalist and being here, having all the access to the CEOs is fantastic. I suppose one thing, just to touch on the sustainability topic that Jens just mentioned there about the pressure on the governments. I think it's interesting to hear from some of the airline CEOs talk more about how the message isn't cutting through and what they aim to do in terms of conveying what is actually going on in their industry. Because obviously, the industry stepped up, it's investing in lots of initiatives, but I think one CEO was actually off the record, so he actually said the communication should not be about apologizing. It's about saying, look at the opportunity we can bring to hundreds of millions of people. And I think that's a really important thing to get out. And hopefully, having all the CEOs together, the industry does need to come together and work on that messaging. Then we might start to see it cutting through.

Karen Walker:

Which is really IATA's role, isn't it? It's to speak on behalf of all of these airlines. They can all go to their own countries, their own governments, their own regional associations, but IATA can represent them on the world stage in those sorts of things. Last thoughts, Lori?

Lori Ranson:

Yeah, I think it's valuable for the CEOs to get together to talk about policy, also, to get together with their partners, their codeshare partners, their alliance partners. That probably doesn't happen very often, so it's a good opportunity for them to have some face time with their business partners. I agree with what both Jens and David said about sustainability. What sticks in my head, what I've heard is if you're going to mandate, you need to cooperate. So, governments need to, if you're going to put sticks out there, you definitely need to help carriers meet these targets that you set for them. And I also agree that the industry still doesn't get a positive message out regarding what it's doing now to become more sustainable. And I think that's going to be a big challenge going forward.

Karen Walker:

Yeah, and as you mentioned, they also had the three global alliances, SkyTeam, oneworld and Star here. So, I think they find that very useful that they're all here anyway, and then they use that so these days, not just sort of connect in person like that level, but now also talk about how they address those sorts of issues. Well, thank you very much everyone. Jens, Lori, Chuanren, David, as always, it's great for us to connect in person at these sorts of events, and many of us will be meeting again pretty soon at the Farnborough Air Show just south of London. We'll see how that one goes, too. It's a very different sort of show, but that'll be [the] next connection time. But great to be working with you here. Thank you also to our producers, Cory Hitt and Guy Ferneyhough, and of course, a very big thank you to our listeners. As always, please make sure you don't miss our weekly recordings by signing up via Apple Podcasts or wherever you like to listen. So, until next time, this is Karen Walker disembarking from Window Seat.