When Miami Could have a Direct Flight to Asia and 6 Other Revelations from IATA’s Conference in Miami

May 3, 2017

SFBJMiami hosted the Wings of Change conference for the first time at the Ritz Carlton Coconut Grove on May 2, bringing together hundreds of aviation and aerospace experts from around the world.

This is one of the largest and fastest-growing industries in Miami-Dade County, with a 23 percent increase since 2011 to 24,646 jobs and 483 companies, according to the Beacon Council. Broward and Palm Beach counties also have large aviation industries.

The event was sponsored by the International Air Transport Association (IATA) and the Beacon Council. Alex de Gunten, the chairman of the Beacon Council’s aviation committee and the business development officer at HEICO, said the county’s economic development agency plans to lure more aviation events because the networking that takes place helps grow the industry and inspire future participants. About 20 students from local universities attended.

Peter Cerda, the regional VP of the Americas for IATA working out of its Miami office, said the next Wings of Change conference would be in Santiago, Chile in April 2018, but he would like to rotate it between Miami and South America every other year.

Here are seven important things learned at the conference:

1. Changes coming to MIA

The 109 airlines that service Miami International Airport is more than any other airport in the United States. It is second in the nation in international flights and first in international cargo. There are plans to grow its market share even more.

Emilio T. Gonzalez, CEO of the Miami-Dade Aviation Department, talked about the growth initiatives at MIA. He’s continuing to speak with East Asian carriers to establish the first direct flight from Miami to the region. He noted that South Florida is the largest U.S. metro without direct traffic to East Asia, although it is also the furthest away.

Gonzalez expects to have a direct flight to East Asia in the next 24 months or so. It may not be to China, he added. Many of the Chinese investors who visit Miami have their own private jets. Tokyo is the closest major airport in East Asia to Miami, he said.

Any East Asian air carrier that is skeptical about the success of a route to Miami should look at the new Miami to Qatar service, Gonzalez said. Those flights have some of the largest passenger load factors at MIA, and first class tickets go for $15,000. The airport in Qatar feeds 40 other routes in the Middle East, so it has become a regional connector to Miami.

“The first Asian carrier that flies here is going to make a small bundle,” Gonzalez said.

MIA also plans to completely redo the cargo side, creating a more functional space for the efficient movement of goods, Gonzalez said. They will call it Cargo City.

Joe Napoli, chief of staff and senior policy advisor for Miami-Dade Aviation, said the airport has applied for free trade zone status. This would allow cargo companies to warehouse products at MIA for long periods of time without paying customs.

2. Airline profits expected to remain solid in North America

Cerda said revenue and profitability have mostly improved at North American airlines over the past 10 years. The issue for investors is that they could generate stronger profit margins in other industries, so it remains a challenge for airline companies to lure new capital, he said.

Globally, IATA estimated $29.8 billion in profit and a 4.1 percent net margins for the airlines in 2017. North America (the U.S. and Canada) were expected to generate most of that profit at $18.1 billion, although that would be down slightly from 2016.

The story wasn’t so good for Latin American airlines, the major international market for MIA. IATA forecast a profit of $200 million for them in 2017, a decline of one-third from 2016. That would mean a net profit margin of just 0.7 percent.

Many Latin American carriers have a high cost of doing business and high taxation, Cerda said. Economic problems in Brazil have hurt carriers all over the region. Venezuela has handcuffed the airline industry by refusing to release funds in that country to airlines, Cerda said.

Fewer flights in Latin America often means fewer connections to South Florida airports.

More than anything, regulation of air carriers in Latin America has limited growth, Cerda said. He referred to consumer airline rules recently passed in Mexico.

“Governments in Latin America are more involved in the day-to-day operations of airlines,” Cerda said. “We want to be regulated more in safety … In consumer protection, they are passing rules that will confuse the consumer and that will raise prices and put the country at competitive disadvantage.”

3. Good start to 2017 for air traffic

Air traffic has been growing so far in 2017, although not as strongly in the Western Hemisphere, said Brian Pearce, chief economist at IATA.

Globally, passenger traffic has increase 7 percent year-to-date, Pearce said. But growth was just 1.7 percent in North America and 3.9 percent in Latin America, while Asia Pacific and the Middle East led the way for growth.

People in North America have shown confidence in the economy, but it hasn’t been easy to facilitate the into taking more trips, Pearce said. He’s concerned about the anti-globalization political movement gaining momentum.

“We may be moving into a world with closing borders and nationalistic tendencies,” Pearce said. “We are an industry that thrives on open borders. We are hand in hand with globalization.”

William Talbert III, president and CEO of the Greater Miami Convention and Visitors Bureau, is concerned that restriction on international travel could impact air traffic, which accounts for 96 percent of visitors to the county. There has been talk in Congress about more restrictions to the visa waiver program and he hopes that doesn’t happen. He hopes that Congress instead increases funding for the international passenger entry process so visitors don’t have to wait in such long lines.

“We need to have a message to the world that we want visitors to come. The exact opposite message is out there,” Talbert said. “Safety and security and customer satisfaction are not mutually exclusive. We can have all of those.”

Angela Gittens, director general of Airports Council International (ACI) World, is concerned about overly restrictive security measures, such as the ban on electronic devices by the U.S. on some international flights. She wished the government would have consulted with her organization first and found a solution with less of an impact on customers.

4. Airports could struggle to handle passenger growth

Half empty planes have been hard to find. In fact, many flights are booked to capacity, even over capacity.

Indeed, passenger traffic has been growing at a steady rate and is expected to continue doing so. IATA forecast annual passenger growth of 2.8 percent over 20 years in North America, plus 3.8 percent growth in Latin America, and 2.5 percent in Europe. Taken cumulatively, that’s a gigantic increase, practically doubling air traffic in Latin America alone.

Cerda said many U.S. airports are in sore need of infrastructure improvements. MIA has been improved, but LaGuardia Airport in New York needs major work, he said. The air traffic control system could also use improvement, and Cerda advocated for a proposal to turn it over from the FAA to a private organization.

“Today flying in the U.S. has become a headache,” Cerda said. “When flying to New York, expect long delays on the ground because the air space is saturated.”

Gonzalez said MIA probably has 20 years left until it reaches total capacity for passenger traffic. If it needed to relieve congestion, it would first look to shift flights to one of the county’s general aviation airports, he said.

Fort Lauderdale-Hollywood International Airport just completed a new runway to handle future growth.

Dale Kirby, VP of airport sales for aviation technology firm SITA, said advances in technology will help airports better manager larger passenger counts. His company is doing proof of concept trials for “single token” check-in, moving towards a future when passengers can board a flight without reaching for their wallets over and over. to show various documents. Sven Lepschy, VP of electronic luggage tag maker RIMOWA, expects that check-in will eventually biometric. But the barrier is that some countries, such as Indian and China, won’t move off of paper tickets, Lepschy said.

5. Latin American cargo growth will benefit MIA

The growth of cargo from Latin America to MIA, where it’s often distributed to other regions, should be solid.

Shipments of perishable goods like seafood, fruits, berries and flowers from Latin America northbound increased in 2016 and that should continue in 2017, said Todd Grubb, head of cold chain strategy for American Airlines. Romaine Seguin, president of the Americas for UPS International, said the first quarter was very strong, especially Valentines Day shipments of flowers from Latin America through MIA, and she expects better than average growth this year.

The main challenge has been the reluctance of many governments in Latin America to move off of paper and adopt electronic cargo billing and automated coding systems, the executives said.

Cargo growth at MIA was up only 1 percent but the airport has a plan for faster growth, Napoli said. Its designation by IATA as a pharmaceutical freight hub should encourage more pharma shipments as regulation increases as to how drugs are handled in transport, he said. He expects shipments of pharma to explode in the next 20 to 30 years as older populations around the world will need access to medications.

6. Tax cuts would bring aviation jobs

Lowering the corporate tax rate in the U.S. would bring more aviation jobs, assuming it’s paid for the right way, aviation executives said.

Airbus America President Barry Eccleston said the 35 percent tax rate in the U.S. is not competitive globally. The European company has still started manufacturing in the U.S.

“A lower rate would encourage us and other companies to make investments in the U.S.,” Eccleston said.

The proposal by U.S. Rep Paul Ryan (R-Wisconsin) to cut the corporate tax rate to 20 percent would be great, but paying for it with a border adjustment tax on imports would not be favorable to Eccleston. The Trump Administration’s proposed reduction to 15 percent would be very good, but that depends on how it is paid for.

Eccleston noted that about 17 percent of U.S. exports are made in factories owned by foreign companies, so attracting foreign investment to the country is crucial.

Nicholas E. Calio, president and CEO, Airlines for America, said he’s confident that the Trump Administration will make good on the president’s promise to reduce regulations for the airline industry. The president has set up regulatory review committees and it supportive of air traffic control reform.

7. Industry focused on growing female leadership

The airline industry has traditionally been a male-dominated industry, but that is changing. Still, no major U.S. airline has ever had a female CEO.

Donna Hrinak, Boeing’s president of Latin America, said she was recruited into the industry without any aviation experience. Boeing believed in her because of her leadership in consumer goods with PepsiCo and Kraft Foods and her serving as U.S. ambassador to four Latin American countries.

There haven’t been many female aviation executives because managers tend to hire people who look like them, Hrinak said. As more women enter the field and gain decision-making power, that should change, she said.

Alina Nassar, president elect International Aviation Womens Association, said flexibility of work hours is especially important for attracting women into the industry. Many woman have been penalized for taking maternity leave because when they resume their careers, they often take positions with lower pay, she said.

Embry-Riddle Aeronautical University used to be nearly all male students and now it’s 20 percent female, said Chancellor John Watret. The university has a 94 percent job placement rate after one year of graduation.

“It’s getting young people to understand the opportunities that are out there,” Watret said.

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