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Vision and Collaboration is the Key to Making Our Vibrant Industry Sustainable

Issue 24 - 2024
Vision and Collaboration is the Key to Making Our Vibrant Industry Sustainable

Marie Owens Thomsen, Senior Vice President, Sustainability, and Chief Economist, IATA

The aviation industry has shown phenomenal resilience in its recovery from the Pandemic. The question must now be: “where do we go from here?” With the public’s appetite for travel undimmed, airlines have been adding capacity and restoring services. Supply chain concerns are holding back some airlines from exploiting potential opportunities – Boeing’s well-publicised troubles, along with other supply chain concerns, are certainly curtailing growth – but airlines still have expansion options, and in the meantime, capacity discipline will help to restore load factors to pre-pandemic highs. 

All this bodes well for the near-term outlook for the industry. Profits are slowly growing again, despite higher costs across the board. That is very welcome and indeed necessary considering the amount of debt that airlines had to take on during the pandemic. It is also important to remember that while the profitability trend is on an upward curve, it is still not strong enough to cover the cost of capital. The industry is uniquely fragile in its value chain, and also uniquely impacted by the rising costs related to the energy transition. This needs to be addressed holistically to allow the industry to achieve both financial and environmental sustainability.

Our commitment to reach net-zero CO2 by 2050 depends on a wholesale transformation of our energy supply, as well as continuing technology and operational efforts across the air travel system. These will not come cheap. 

The energy transition from traditional jet fuel to Sustainable Aviation Fuels (SAF) offers the bulk of our opportunity to cut emissions this side of 2050. SAF is building from a low base. In 2024 we expect 0.5% of airlines’ fuel to be supplied in the form of SAF, and next year it should cross the 1% threshold. In million tonnes, production needs to rise from 0.5 Mt in 2023 to 500 Mt in 2050 – an increase by a factor of 1’000. While challenging, it is possible, and it is also necessary. We must achieve sustainable aviation so that we can continue to provide people with all that air transportation makes possible.

What aviation enables seems more important than ever in today’s world. I believe air connectivity has a vital role to play not just economically, but also socially. We are seeing a planet that is very divided and polarized, with many countries turning their attention inward, resulting in more protectionism and unilateralism. As an economist, I cannot welcome such steps. It seems self-evident from history that the more we cooperate, and the more we are ready to accept new ideas, and the more we open ourselves up to competition, the greater the welfare gains for all. The airline industry itself is proof of this. Airline deregulation has given passengers more choice than could have been dreamed of a generation or two ago. But that required governments with a vision, working together and with the industry, to bring it about.

I began this article posing the question “where do we go from here”? The answer, I believe, is in a partnership with governments to safeguard our vibrant, competitive aviation industry while incentivizing the most rapid energy transition possible for aviation to meet its sustainability commitments. The same process of international cooperation and global standards that has made air travel continually safer and more efficient, can also make it sustainable. Unilateral, piecemeal approaches will not work. A collective vision and radical collaboration are the keys to our sustainable future. 

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