Airlines to Lose Massively; IATA Calls for Major Reshaping of Industry

The International Air Transport Association (IATA) warns that the aviation industry faces a global loss of USD 9 billion for 2009. According to its revised outlook, this loss is nearly double the USD 4.7 billion estimate predicted in the month of March. IATA reports that indeed this is among the most difficult situation that the industry has ever faced. Comparatively, after the terrorist attack of September 11, 2001, revenues fell by 7%. It took three years to recover lost ground, even on the back of a strong economy. The loss estimate for 2008 was also revised to USD 10.4 billion replacing the previous estimate of USD 8.5 billion.

The outlook report that this year carriers in all regions are expected to report losses including North America (- USD 1.0 bln), Europe (- USD 1.8 bln), Asia-Pacific (- USD 3.3 bln), Middle East (- USD 1.5 bln), Latin America (- USD 900 mln), and Africa (- USD 500 mln). IATA notes that the gloomy outlook was mainly due to the recession, which has caused steep drops in air cargo demand, low passenger demand, and large falls in yields. Proposed strategies to avert this crisis outline the need for governments to adopt liberal air policies in order to save the aviation industry. This, according to Giovanni Bisignani, IATA’s Director General and CEO, will require airlines to have the same commercial freedoms that every other industry takes for granted, notably access to global markets and capital.

Given that airlines will this year be caught in a ‘perfect storm’ of USD 9 billion losses and an unprecedented 15% revenue drop that will see industry revenues decrease by USD 80 billion to USD 448 billion, IATA calls for a major resizing and reshaping of the entire air transport value chain. Addressing the industry’s top leaders gathered in Kuala Lumpur for the 65th IATA Annual General Meeting and World Air Transport Summit, the CEO notes that travel budgets are being slashed and consequently consumers will need to reduce their debt. As a means of building a stronger industry through resizing and reshaping, governments, partners, and airlines can use this crisis as an opportunity, advises the CEO.

As a head start to cost cutting, IATA’s Simplifying the Business program provides the lead. Indeed last year, 100% e-ticketing and the deployment of Common Use Self-Service (CUSS) kiosks helped achieve USD 4 billion in cost savings as a beginning with further targets set on another USD 10 billion in savings by improving baggage management, travel processes and with e-freight.

To be effective, the burden of change must be shared across the industry value chain. This is proposed to be undertaken through a number of measures, which IATA outlines will range from modernizing work practices to accessing global capital. IATA seeks to continue pushing for similar global progress with its Agenda for Freedom—a group of 15 key government players in aviation policy. The group expects to deliver an important policy tool with governments signing a Multilateral Statement of Policy Principles. Indeed governments and partners must understand the struggles of the industry in order to survive in the current economic environment and where challenges must be turned into opportunities that are safe, eco-friendly, and profitable.

Source: e-Travel Blackboard at www.etravelblackboard.com