Airlines 'will'survive' despite 'failed business model'

Addressing an aviation forum in Sydney last week, the president of the Australian chapter of the Royal Aeronautical Society, Andrew Drysdale, expressed confidence that the industry would meet its growth projections over the coming decades, despite the challenges.

"Essentially, so far as the airlines are concerned, investors are placing their faith in a failed business model," Drysdale told his audience. "But it is an industry that is critical to the world's economic well-being...

"So the airlines will survive. They will evolve, merge, change, some will cost their shareholders and governments enormous amounts of money. But they will survive."

Drawing on data from a variety of sources, Drysdale went on to highlight some of drivers:

* There will be 3.3 billion people flying annually by 2014 – that’s 800 million more passengers per year than are flying today and in just three years time.

* That number will rise to a forecast 16 billion passengers by 2050.

* If Aviation was a country it would rank 21^st in the world in terms of GDP, generating $425 billion in GDP per year, considerably larger than some members of the G20 and an economy the same size as that of Switzerland.

* In the next few years this industry will need an average of 23,000 additional pilots and 32,500 technicians every year!

* This industry has over $500 billion dollars of investors money tied up – not even earning the return you would get by placing it in a bank where you would have got at least $20 billion per year more – and it’s been like that for 40 years.

* We’ve seen more than 1300 new airlines start-up over the past 40 years, an average of over 30 per year – and yet 32 airlines collapsed last year.

* Sixty-five million Chinese travelled overseas last year; and in three years from now they will be adding an extra 181 million domestic passengers and 33 million more international travellers.

* And the number of Chinese passengers carried by the end of this decade is expected to triple to 700 million per year.

* However, over the last 40 years the average net margin for the industry has been 0.1 per cent - we've made no money in 40 years.

* Yet this industry has over $500 billion of investor money tied up, not even earning bank interest.

* Yes the airlines are in crisis mode,  but they’re always in crisis mode – that’s just how it is.

* But the industry is a catalyst for the halo of industries surrounding the airlines that do make money – including airports, manufacturers and the tourism industry.

"In my opinion, the airlines are completely capable of continuing to grow at a rate of six to seven per cent per annum to meet the market demand, which will be at least that amount."