At the end of recession, life for airlines may have improved with 2.4 billion passengers, 43 million tonnes of cargo, 32 million jobs, just 1 accident for every 1.4 million flights, 2% of global carbon emissions, $545 billion in revenue, $54 billion in charges from monopoly providers, $217 billion in debt. This is global air transport today. But in spite of a happy looking air transport industry, the road ahead is bumpy or, like they say in airlines, you may encounter turbulence all the way. You need to keep your seatbelts fastened.
Giovanni Bisignani, Director General and CEO of IATA has warned that the industry still faces real downside risks: like excess capacity, spoiled labor force, uncontrollable costs, taxation and ever-increasing fuel costs. These risks are capable of spelling disaster for air transport business. These risks are briefly explained as under;
Excess capacity is one. The upturn will bring temptation. 1,340 aircraft will be delivered this year (15) and only 500 are for replacement. The discipline of chasing profits, not market share, is the only way to protect the bottom line.
Labor, out of touch with reality, is the next risk. Airlines cannot pay salary increases with our $47 billion in losses. Pilots and crew must come down to earth and strikes at this time are shortsighted nonsense. Labor needs to stop picketing and cooperate.
3. External Costs
Labor is not the only one with hands in airlines’ empty pockets. The $2.1 billion in cost savings that IATA achieved in 2009 disappeared with increases of $2.6 billion. This year’s IATA Wall of Shame starts with the 19 European ANSPs who increased costs by $413 million. It is clear that regulated performance targets must replace the cost recovery model. On the airports side, ACSA in South Africa is a national embarrassment, increasing its bill by $1.2 billion over the next five years. And this year airlines have a special place on the Wall for the Western GDSs. They are leeches charging at least $4 per transaction when China Travel Sky does it for just $1.20. On top of that, they sell you your data with a seven-digit price tag. That is pure profit. BASTA.
The fourth risk is taxation. Governments went $2.7 trillion in debt to bail out the bankers, stimulate economies and support currencies. Airlines and our passengers should not get the bill to clean up the mess. Any tax increases should be directed at the banks starting with their billion-dollar bonus pots .
The last risk is oil price volatility. From $40 per barrel in 2009, crude almost hit $90 per barrel earlier this year. Hedging is critical for airline business, but speculators are making huge profits. Governments must protect the economy from irresponsible profiteering.