An IATA study about airline profitability provides the bleak numbers to confirm what we already knew: Although some individual airlines are the exception to the rule, if you have money to invest, choose another industry.
The 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.
The intent of the study, IATA says, is to provide a baseline to explore new answers for the way forward, but unfortunately there isn’t much in the way of ground-breaking thinking in the report.
Nor does the runway ahead look especially optimistic.
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.