IATA Opinion: Marie Owens Thomsen, Chief Economist at IATA

Highlighting aviation's role in the global economy is now the job of IATA's new Chief Economist, Marie Owens Thomsen. Confronting new challenges is paramount to help the industry evolve its business models and drive profi ts.

Throughout economic history, trade, mobility, and connectivity have been fundamental drivers of a sustainable and inclusive global economy with improved economic outcomes for all.

The advent of civil aviation played a key role in the spectacular progress the world experienced in the 20th century. Now, we are confronting two systemic and unprecedented challenges: climate change and the COVID-19 pandemic. We have seen the damage done to connectivity, supply chains, and inclusivity. I can only conclude that our collective future economic success depends upon allowing aviation to realize its full potential.

One major consequence of the pandemic is that world debt has risen to historic highs. Governments’ fi nances will continue to be strained by the need to build greater resilience in our economies and to fi nance the transition to a sustainable growth model. This is likely to lead to higher taxes.

We are already experiencing spikes in prices, and this will probably be an intermittent feature of our economy going forward. Commodity prices and notably those necessary for the energy transition will grind higher. Nominal interest rates will have to rise, though real interest rates can be expected to remain low for a prolonged period, as was the case after the Second World War, a period similarly characterized by high levels of debt.

The 21st century is facing unprecedented and turbulent global challenges. The blue skies we can perceive on the horizon relate to energy transition and the lure of energy abundance. We have arguably gone as far as we can today in our energy-constrained world. Just imagine what we could achieve if energy were sustainable, abundant, cheap, and accessible to all.

The most fundamental challenge for airlines and the industry is to evolve the structure of the sector and the individual business models to allow its members to deliver regular profi ts.

It is astonishing that we have a systemically important sector, aviation, in our global economy that is organized in such a way as to make this very diffi cult. Clearly, business models are already evolving. Airports are turning into retail venues, airlines lease rather than own aircraft, and airlines’ loyalty programs are akin to fi nancial institutions. Our aim in IATA Economics is to shed light on all these, and more, such fundamental developments.

Our most popular output are the passenger and cargo forecasts. Airlines’ fi nancial performance is also a staple output. We will strive to add depth and breadth to these over time, to provide insights into our industry not only through the business cycle but also including the longer-term structural issues aff ecting the sector and its role in the global economy.