Walsh holds nothing back in parting speech at IATA AGM

Willie Walsh, Director General of the International Air Transport Association (IATA), held nothing back in his parting speech at the airline association’s AGM in Rio de Janeiro last weekend, lambasting aerospace manufacturers and engine makers, legislators, notably the European Union (EU), and airports, who he believes to be partly responsible for the current woes facing the sector.

His comments are not only relevant to airlines’ passenger services but also to cargo as more than 50% of traffic volumes are carried in the bellyholds of pax aircraft.

‘Skyrocketing’ Jet Fuel, ‘Profitability Halved’

“Once again, we meet in challenging and unpredictable times,” he began. “No sooner did we put COVID behind us than we faced aerospace supply chain failures, war in Ukraine, geopolitical tensions, and tectonic shifts in trade policies. And when war broke out in the Middle East in March, oil prices jumped, and jet fuel prices skyrocketed.”

As a result, IATA is expecting average jet fuel prices to be 70% higher year-on-year, which will add $100 billion to airlines’ collective fuel bill this year.

“The positive however, is that demand is holding up. But growth will inevitably be slower, 2.1% for the passenger business and 0.7% for cargo, noted Walsh, who will step down from his role in early August to take the reins at Indian airline Indigo.

“Considering all this, we expect profitability to halve from 2025. Net profits will fall from $45 billion to $23 billion in 2026, and net margins from 4.2% to 2.0%. It’s a tough year for all airlines, especially those whose balance sheets had not yet recovered from COVID. And, of course, for those operating in the Gulf. The big unknown is how long travelers and shippers can tolerate the higher costs of connectivity.”

Supply Chain Issues

Walsh went on to underline that airlines face higher fuel costs with fleets that are less efficient than planned and said this was because the aerospace supply chain continued its failure to deliver aircraft and engines as promised.

“The aircraft order backlog is over 18,000. And the average fleet age has reached a record 15.2 years. Moreover, being short over 5,000 more fuel-efficient replacement aircraft that we had counted on means missed efficiency gains, not to mention higher lease rates and increased maintenance costs. In total, supply chain failures cost airlines at least $11 billion in 2025. Today’s higher fuel prices will only make that worse.”

Continuing his fierce criticism of engine makers, he pointed to most engine manufacturers’ profits increasing double-digit.

“I cannot share my reaction to this paradox in polite company, so I leave you to draw your own conclusions. But then again, when have you guys ever been polite? So, let me tell you what I think. My message to the engine OEMs is simple – stop gouging us and get back to making great engines that work and that last. Allowing these failures to extend into the next decade is totally unacceptable to the customers.”

Infrastructure and ATM

Turning to infrastructure, the former CEO of the IAG Group of airlines (led by British Airways and Iberia) estimated that nearly 400 airports need slot coordination as a result of there not being enough capacity to meet demand at all hours.

“And legacy air traffic management systems (ATM) struggle to handle volumes efficiently. Delays result, with a burden on productivity and competitiveness. Solving the infrastructure problem is a priority.”

He highlighted the challenge of “getting more value” from air traffic management; Europe’s “fragmented inefficiency” continued while “decades of under-investment in the U.S. system have left it best described as nostalgic—certainly not modern.”

Airports: Mixed Picture

As for airports, the situation was “fragmented” although some governments are keen on the benefits of aviation and are building to facilitate growth in the long-term, good examples being Ho Chi Minh City, in Vietnam, Singapore and Sydney.

However, he was critical of the concession structure and fees at airports in Manila, Lisbon and Mexico City.

Walsh was particularly scathing of London Heathrow, where “a floundering UK government is desperate for the growth that a third runway will catalyze. But the government’s haste is not paying sufficient attention to basic economics. And the only motivator for Heathrow’s shareholders and management is its own enrichment. We should be worried.”

Pressure on 2050 Net-Zero Target

On sustainability, Walsh recalled that five years ago, airlines committed to net zero carbon emissions by 2050. Under ICAO’s leadership, governments followed with the Long-Term Aspirational Goal or LTAG.

“Others joined in – airports, air navigation service providers and the manufacturers. Even our fuel suppliers. Everybody said they would do their part. Some oil companies were even more ambitious, committing to net zero by 2050 or sooner. None said later. But looking at where we are today, the unspoken later may be the truth that unfolds.”

He said two fundamental components of the net zero roadmap were under threat; firstly, CORSIA- the “ground-breaking” first and global sectoral agreement to manage carbon emissions, created by governments and supported wholeheartedly by the industry supported wholeheartedly, is being undermined. Secondly, SAF production was not growing fast enough.

Walsh criticized the EU for taking “pot shots” at CORSIA, “presumably to favor its EU ETS. There is nothing to be gained by the EU repeating an embarrassing failure that we all remember. The EU was instrumental in CORSIA. Its current efforts to undermine CORSIA must be called out for what they are – disingenuous and unacceptable.”

'Where’s the Actual SAF?'

As for SAF, airlines have sent “unambiguous demand signals” for the sustainable aviation fuel, with over 180 purchase agreements signed since 2021. A SAF registry, matchmaker, and accounting principles are in place to support the development of a global SAF market.

“But where’s the actual SAF? This year’s production will reach 2.4 million tonnes. That will only cover 0.8% of airline fuel needs. The goal is 65% or 500 million tonnes by 2050. The gap is wide and not closing fast enough.”

Sadly, most governments have “put the horse before the cart” with mandates - a phased approach to incorporating SAF into aviation fuel at EU airports, starting with a minimum 2% in 2025 with a final goal of 70% blend by 2050, he observed.

“These pushed prices up but did not create supply,” he said, describing SAF mandates as “a spectacular failure.”

He added: “Seemingly oblivious to these developments, governments, through ICAO, set a 5% emission reduction target through SAF by 2030. To be blunt, there is no path to meet that outcome. There is still hope for 2050—but that’s fading fast.

“We need an urgent dialogue to determine a realistic timeline given the current state of affairs. That dialogue must be action-oriented—to agree who can and will do what, and by when.”

Maybe the conclusion will be that 2050 is still possible, he mused.

However, the more likely outcome is a new timeline that “hits a sweet spot—realistic within the broader context of the global energy transition and sufficiently near-term to meet the urgencies of climate change and energy security.”