A new IATA “study, “Profitability and the air transport value chain,” traces the slim pickings in airline industry return on capital invested, which was just 3.8% annually from 1996 to 2004, and a slightly higher 4.1% on average from 2004 to 2011.
That compares with the 7.5% return on capital annually that investors would expected to have seen when investing in businesses of similar risk outside the airline industry, IATA states.
With the somewhat improved fiscal picture in the airline industry only providing enough resources for airlines generally to service their debt, this leaves the airline industry with few places to turn to raise the estimated $4-$5 trillion that it would take over the next two decades to meet the growing demands of global connectivity, according to the study…
As for the inklings of a solution, IATA calls for new partnerships to enable collaboration among airlines and other industry sectors, less taxation, and “smart regulation,” which basically means less regulation of “cross-border” mergers.
In other words, there should be fewer roadblocks to an airline like Virgin Atlantic investing in and controlling Virgin America, for example, or one of the growing Gulf airlines such as Emirates or Etihad taking control of a U.S., European or Asian carrier.”
Do you agree with the bleak picture being painted by the IATA study? If so, what do you think the airline industry needs to do to overcome these problems?
Read the full article at Airline industry is a lousy and over-regulated business, IATA says – Skift.