Airlines are grappling with a skewed value chain globally and historically, the profit margin has never crossed 5 per cent, according to IATA Chief Economist Marie Owens Thomsen. Also, she expressed hope that any efforts to address making the airline value chain less skewed will surely be an example for other countries. India is one of the world’s fastest growing civil aviation market.
At an interaction in the national capital this week, Thomsen said the skewed value chain for the global airlines industry is also a result of legacy policies. Thomsen is the Chief Economist & Senior Vice President Sustainability at the International Airport Transport Association (IATA), a grouping of over 350 airlines. “Nobody sat down from the beginning and said, I’m going to create a super skewed value chain and make sure that the airlines never
Make any money. “I don’t think anybody had that intent. But unfortunately, that’s sort of where we’ve ended up. And our industry globally has never made a profit margin in excess of 5 per cent,†she said.
While noting that all participants in the value chain make more money than the airlines, she mentioned about the oligopolistic pricing power among the aircraft manufacturers and the outsized market power of oil companies.
“... Then downstream, you know, notably here in India, maybe a very price competitive environment... Our customers choose their airlines primarily on price. So the airlines are left completely squeezed between these two with very few ways out,†she said.
Further, Thomsen said that if the Indian government tries to do everything to create a less skewed value chain, and that becomes possible, then that would surely be an example to follow for every other country.
For 2025, IATA has projected airlines to report a net profit of USD 36 billion and a profit margin of 3.7 per cent.
