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Istanbul: If oil stays at $135 for the rest of the year, the global airline industry will incur losses of $6.1 billion, IATA director-general Giovanni Bisignani said yesterday.
At his State of the Air Transport Industry address at the 64th Annual General Meeting at Istanbul, Bisignani said this would be a body blow to an industry that registered a net profit of $5.6 billion in 2007. Even at a consensus estimate of $107 a barrel, the airline industry stares at a fuel bill of $176 billion, $40 billion more than in 2007. This would see the industry making a loss of $2.3 billion in 2008.
With operating costs going up by $1.6 billion for every dollar increase in the price of oil, IATA is focusing on other ways to keep the industry profitable. Hence, it came as no surprise that Bisignani came down severely on governments and monopoly suppliers hampering the growth of the airline industry with 'crazy' taxation and mindless regulation.
"Basta!" (stop in Italian) was Bisignani's message as he singled out the European Parliament's emissions trading proposal and the UK's Civil Aviation Authority (CAA) for some harsh words. Bisignani presented the CAA with the Worst Regulator Award for making a 'mess' at Heathrow and planning to increase charges by up to 86 per cent in the next five years. "Unlike safety, security is an uncoordinated mess," said Bisignani, noting that airlines and their customers have paid over $30 billion for security measures since 2001. "Fear drives decisions," he said. "Passengers face a maze of duplication, bureaucracy and hassle."
Bisignani announced that the IATA Operational Safety Audit (IOSA) is now a condition of IATA membership for all airlines. The IATA has earmarked $8.2 billion on safety programmes and flight data analysis. It is also spending $22 million to pay for member audits.
Bisignani rued the fact that the world's most global industry is also the most fragmented with over a thousand airlines competing for a share of the market.
"In the last 60 years airlines made $11 trillion in revenues but posted net profits of only $32 billion, an average profit margin of just 0.3 per cent. Today, the industry is $190 billion in debt," he said.
Labour crisis
The shortage of skilled labour is an issue airlines will have to address quickly. "18,000 aircraft will be delivered over the next ten years. To fly them we must train 19,000 pilots each year, but current capacity is only 15,000," said Bisignani.
Bisignani proposed an agenda for freedom to replace restrictive bilateral agreements. "We fight crisis after crisis with our hands tied because flags, not brands define our business," he said.
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