Worst is yet to Come for Aviation Industry

The worst is yet to come for the aviation industry as continuing global economic slowdown threatens to destroy travel demand. According to IATA Director General and CEO, Giovanni Bisignani, the state of the aviation industry remains grim as high oil prices and falling demand poisons profitability.

Despite the latest relief in oil price hikes, the average price per barrel is still USD 113, over USD 40 the average price per barrel in 2007, pushing the industry fuel bill up to an expected USD 186 billion for 2008. Recently, the International Air Transport Association (IATA) revised its earlier aviation industry forecast downward to a final year loss of USD 5.2 billion. Weakening demand within the relatively strong Asia Pacific region is another concern of IATA. As such the association has also revised its forecast of passenger numbers set to travel this year from 3.9% down to 3.2%.

Fast forward to 2009, IATA anticipates the current economic issues will continue to affect and further weaken the growth of passenger numbers at 2.9 %. Losses to numbers are expected in the range of USD 4.1 billion though IATA expects a slight improvement of USD 1 billion in the coming year.

The crisis is re-shaping the industry in more severe ways as more airlines go out of action than after the 9/11 disaster. The situation emphasizes the need for greater commercial freedom, which includes the choice of having foreign ownership to broaden market access. The industry needs a strong dose of liberalization to cure its structural flaws that have become more evident by the spike in oil prices. Liberalization will enable the aviation industry to do business like any other business in order to be successful, to continue to provide jobs for millions of people, and support economic activities worth USD 3.5 trillion, says Bisignani.

Source: Travel Daily News at www.traveldailynews.com