Booming air traffic has given rise to surge in profits across global air-carriers, however with their net margin being at just 4.7%, the scope for exuberance is limited.
On Monday, Alexandre de Juniac, the Chief Executive of International Air Transport Association (IATA) stated, growing cost of airport infrastructure poses increased risks to the global airline industry’s growth and profitability; the inadequacy of airport infrastructure is a phenomenon that is being witnessed almost everywhere in the world.
“We are headed for a crisis… Infrastructure in general is not being built fast enough to meet growing demand,” said de Juniac at a conference ahead of the Singapore Airshow.
One of the major reasons driving up costs is the privatization of airports across the world; it comes at a time when the industry needs more affordable infrastructural support systems to accommodate an increase in capacity.
“Our members are very frustrated with the current state of privatized airports. By all means invite private sector expertise to bring commercial discipline and a customer service focus to airport management. But our view is that the ownership is best left in public hands,” said de Juniac.
Citing the $19.8 billion (14 billion pounds ) investment Britain is set to make for a third runway at the Heathrow Airport, de Juniac stated it was crucial that costs are kept under control.
“We must pay attention to these costs from the beginning,” said de Juniac. “We would like to avoid big projects in which we see overruns because the infrastructure is fantastic but it is very costly.”
He went on to add that countries in the Asia Pacific region need to ramp up their efforts to address bottlenecks, especially in big cities such as Bangkok, Manila and Jakarta.
As per IATA forecasts, airline profits across the world are expected to rise to a combined $38.4 billion; net margins are however at a low of just 4.7% in comparison to other industries.
“Our exuberance is limited,” said de Juniac.