Around 40 airlines closed worldwide because of recession
The International Air Transport Association (IATA), the world trade body representing the airline industry, has some 230 airlines as members, having 93 per cent of scheduled international air traffic. Giovanni Bisignani, who joined the IATA as director general and CEO in 2002 and is credited with reshaping and refocussing the organisation, spoke to B S Arun of Deccan Herald in New Delhi recently.
The economic meltdown has taken a toll on Indian aviation industry. How badly is the industry across the world affected?
The revenues of the industry are going to decline from US$525 billion (last year) to $455 b in 2009. The industry is already reeling under a $200 b debt. Europe has suffered big losses to the tune of $3.8 b, Asia $3.6b and US $2.6 b. Our revised global financial forecast has predicted airline losses totalling $11 b in 2009. This is $2 b more than the previously projected $9 b loss due to rising fuel prices and exceptionally weak yields.
How long will it take for the recovery? Is the worst over?
After the 9/11 incident due to which the industry suffered losses of $20 b, it took three years for the sector to recover. Now the situation is worse. We don’t have a growing economy in most parts of the world. We feel the worst is over but it will take longer to recover, may be 3-4 years. The bottom line of this crisis is: the combined 2008-09 losses at $27.8 b is larger than the impact of 9/11.
How far has the industry taken the hit in India?
Indian carriers will lose $1.5 b in 2009, which includes Air India’s losses of over $1 b. India and China will see increase in losses.
What is the recessionary effect on passengers and cargo globally?
Passenger traffic is expected to decline by 4 per cent and cargo by 14 per cent for 2009. Yields are expected to fall by 12 per cent for passenger and 15 per cent for cargo. The fall in passenger yield is led by the 20 per cent drop in demand for premium travel. Cargo utilisation remains at less than 50 per cent despite the removal of 227 freighters from the global fleet. There is little hope for an early recovery in yields in either the passenger or cargo markets.
In addition to these, aviation turbine fuel prices are still ruling high adding to the costs. There is no justification for higher prices as oil prices have fallen. Worldwide, airlines have lost $11 b in fuel bill in 2009 and $16.8b in 2008.
How many airlines have been closed down because of losses due to recession?
At least 40 airlines have shut shop. They are distributed equally across continents.
What do you foresee for the industry in 2010?
IATA expects losses to continue into 2010 with the industry expected to report a $3.8 b net loss. Passenger demand is expected to contract by 8 per cent to 2.06 b travellers compared to 2.24 b in 2008.
What should the governments be doing in such crisis?
Governments need a wake-up call to create a policy framework that supports a competitive air transport sector capable of driving economic expansion. We don’t want bailouts. But we need governments to look more seriously at this sector by investing in efficient infrastructure; replacing the proliferation of environmental taxes with a global solution for the environment; and giving airlines normal commercial freedoms to merge where it makes sense and to access markets and global capital like any other business. We want to be treated as a normal industry.
What is your advice for India to come out of the mess?
India’s problems are high costs of infrastructure, fuel, high taxation at state and national level. This must come down.
IATA suggested recently that governments should ease flight operation rules such as air bilaterals.
Open sky is the rule of the game. Rules governing bilaterals between the two countries on air traffic should liberalise. There is no sense why we should go by a rule we framed in the 1945-46. It is not required now.
In one of your visits to India 2-3 years ago, you had decried the airport infrastructure. What is your view now? What about airport charges?
It has vastly improved. We would like to see more efficiency. As for the charges, they will now be looked into by the newly set-up Airport Economic Regulatory Authority. AERA should comprise of professionals.
Recently, an American carrier with military personnel was asked to land in Mumbai as it did not have permission to overfly India? What is your reaction to such acts of overflying without permission