The fragile state of the aviation industry marked the general backdrop of the 68th annual general meeting of the International Air Transport Association (IATA) as the head of the global airline body, Tony Tyler, acknowledged that the industry’s profitability is precariously balanced on a “knife’s edge.”

“If t he bottom line worsens by an equivalent of j ust 1% of revenue, our $3-billion profit very quickly becomes a $3-billion loss,” IATA DirectorGeneral and CEO Tony Tyler remarked at the annual conference.

Citing the example of a round trip from New York to Beijing costing seven cents a kilometre as opposed to 31 cents for a New York taxi ride with four people on board, Tyler drew attention to the intense price competition to deliver value, which has toughened further.

He pointed out that the high price of oil and the eurozone crisis were the most immediate and serious downside risks to the industry in 2012. IATA expects average oil price of $110/barrel for this year.

Calling the EU’s carbon tax a “polarising obstacle preventing real progress”, Tyler hinted that it has the potential of turning into a trade war. China and India are at the forefront in opposing the EU’s Emission Trading System (ETS) as they have forbidden their air carriers to participate in the scheme, touted as a measure to lessen the aviation industry’s carbon footprint. The two have also openly spoken about retaliatory taxes on European carriers if the EU decides to hold on to the ETS.

“Sustainability should unite the world with common purpose, not divide it with affronts to sovereignty that risk a trade war that nobody wants...Certainly no airlineEuropean or otherwise-should be a target for retaliation because European governments are acting extra-territorially,” Tyler added.

(ET Bureau)