[Aviation Today June 20, 2014] European airlines are expected to realize a net profit of $2.8 billion this year with an average profit margin of just 1.3 percent, a figure that International Air Transportation Association (IATA) CEO Tony Tyler said makes European aviation "financially the weakest among the world's major regions." IATA's projected net profits result in European carriers making about $3.23 per passenger this year, which is less than a third of the $11.09 per passenger that their counterparts in North America are projected to earn for 2014.
IATA CEO Tony Tyler. Photo, courtesy of IATA.
Tyler's remarks came during a speech in Rome discussing the importance of Italy taking over the role of Presidency of the European Union with an opportunity to influence the policy regulating the region's commercial air transport market.
"Europe has an impressive air transport sector. The 200-plus airlines in the EU28 support 9.2 million European jobs and about $660 billion of Europe’s GDP. They connect a continent that accounts for 10 percent of the world’s population, is the largest single economy on the planet, and which is home to impressive world heritage sites," said Tyler. "So, how is it that Europe’s airlines are not more successful? I believe that it is because of the competitive disadvantages that Europe’s governments place in their way. The industry here is over-taxed, onerously regulated and suffers from a chronically mismanaged ATM system, insufficient airport capacity and overall costs for infrastructure that are too high."
Tyler added that the U.K.'s air passenger duty is the "poster child" for over taxation of the European aviation industry. The air passenger regulation nets almost $4.5 billion annually for the government of the United Kingdom. Overall, the European tax bill for airlines and their passengers will reach nearly $40 billion, which Tyler said is more than double what is paid in the Asia-Pacific region.
The IATA chief also pointed to the importance of delivering the Single European Sky (SES), which aims to modernize the segmented European Air Traffic Management (ATM) structure. Eurocontrol estimates that there will be a 12 percent shortfall in Europe's overall airport capacity by 2035 due to projected growth in air traffic volumes.
"Europe needs the SES. But member States — Italy included — are not delivering. They are pandering to local interests and sacrificing social and economic gains to the frustration of the European public. I cannot put this too strongly. The failure to implement SES is the biggest infrastructure issue that the aviation industry faces. The next six months will be critical in determining the adoption of the ‘SES2+ package’ — something that Europe urgently needs," said Tyler.