Aviation needs greater resilience – Iata must tackle this, among several key challenges, at this week’s AGM – Commentary
June 6, 2011
AS SOME 700 global aviation leaders gather this week at Marina Bay Sands for the 67th International Air Transport Association (Iata) Annual General Meeting and World Air Transport Summit, they will be doing so as dark clouds appear to be gathering over their industry.
A combination of rising fuel prices, unexpected political unrest, and natural calamities and weather disruptions are raising unit costs and starting to squeeze yields.
Just three months ago, Iata had forecast that the global aviation industry would make US$8.6 billion in profits. That figure was revised downward from the US$9.1 billion it had projected last December. Last year, the industry made some US$16 billion in profit.
But with fuel prices rising some 25 per cent this year, and demand being knocked by unexpected events, the operating environment is not looking as cheery as it did six months ago.
The global aviation industry lost two percentage points of demand as a result of the earthquake and tsunami in Japan, and the political unrest in the Middle East and North Africa. The US$40 per barrel (pbl) surge in the price of fuel has already added another US$64 billion to airlines’ fuel bill this year, not including the cost of hedging. Meanwhile, recent rumblings of another Icelandic volcano bring back memories of April 2010, when airlines collectively lost US$1.8 billion in revenue within a span of four weeks. And come 2012, aviation will be faced with a new tax as Europe’s greenhouse gas emissions trading scheme (the EU ETS) kicks in.
Meanwhile, air freight volumes have been in slow decline for a year, with freight load factors slipping significantly. Freighter utilisation has slipped 8 per cent since the third quarter of last year.
Iata’s full-service member airlines also face another challenge.
The taxes and surcharges they charge to recoup part of their rising fuel bill make their tickets more expensive and less competitive compared to low-cost carrier (LCC) upstarts. And now, especially in Asia, competition on short- haul routes is being extended to long-haul legs with the likes of Jetstar, Air AsiaX and, soon, Singapore Airlines’ budget long-haul carrier, taking to the skies.
By VEN SREENIVASAN – SENIOR CORRESPONDENT