Airlines facing an extraordinary crisis

The world's airlines are facing an extraordinary crisis brought on by soaring fuel prices and slowing traffic growth that has the potential to transcend aviation and impact the global economy, IATA DG and CEO Giovanni Bisignani told the almost 900 delegates and media at the organization's 64th Annual General Meeting and World Air Transport Summit in Istanbul.

While celebrating the achievement of 100% e-ticketing with a downpour of shredded paper tickets over those in attendance, he warned that airlines will lose $2.3 billion this year if oil prices average $107 per barrel and $6.1 billion if oil stays at $135 for the rest of 2008. Two months ago IATA forecast an industry net profit of $4.5 billion (ATWOnline, April 2) based on an average price of $86 a barrel for Brent. This was reduced from a December forecast of $5 billion. The industry earned $5.6 billion in 2007, its first net profit since 2000.

Bisignani compared the airline industry to Sisyphus. After a long uphill journey a giant boulder of bad news is driving us back down, he said, citing the spreading impact of the US credit crunch for hurting traffic growth. At best we expect 3.9% [RPK growth] this year compared to 5.9% in 2007, he said. The industry's total 2008 fuel bill is expected to be $176 billion, $40 billion more than last year. Illustrating the toll the crisis is taking, IATA has suspended 24 airlines from its Billing and Settlement Plan since December. Historically the organization suspended an average of just 6-7 per year.

There are no easy answers, Bisignani said, stating, There is no fat left in airline budgets after six years of cost-cutting. In his well-known and effective oratorical style, the IATA boss said basta [that's enough] to the uncoordinated security mess that has cost carriers $30 billion since 2001 and caused passengers a lot of hassle, basta to monopoly suppliers and basta to the European Parliament's environmental madness (ATWOnline, May 28). Airlines are struggling for survival and massive changes are needed. Governments must stop crazy taxation, change the rules of the game and fix the infrastructure. Labor must understand that jobs disappear if costs don't come down, he declared.

In what he called the agenda for freedom, he urged governments to move beyond the bilateral system designed for another age. Without change, airlines cannot look beyond national borders to manage risk, access global capital or consolidate. To fight crises effectively, brands not flags must define our business, he said.

In the fourth quarter, IATA will organize an Agenda for Freedom Summit in Istanbul open to any country with the courage to change. Eleven countries already have agreed to participate, ATW Daily News reported.

Source: Transportweekly