Al-Ahram Weekly Online   24 - 30 December 2009
Issue No. 978
Sky High
Published in Cairo by AL-AHRAM established in 1875

No holiday cheer

Journalists from all over the world gathered 14-15 December in Geneva to attend the Global Media Day where they were briefed on the 2010 forecasts and challenges to air transport industry. Amirah Ibrahim joined them at the event where the media got the chance to visit the Solar Impulse project and talk to the inventors

Click to view caption
Chairman Bisignani
IATA expert briefed the media from Copenhagen by satallite

AVIATION experts gathered to brief the media on face-to- face meetingon the 2010 challenges and forecasts of the industry. , The news was not good.

While asserting that the industry downturn has bottomed out with load factors returning to pre-recession levels and yields experiencing a timid recovery, the IATA is less positive about prospects for 2010.

It revised its forecasts for 2010 to an expected $5.6 billion global net loss, amid rising fuel costs and declining yields. This figure is larger than the previously forecast loss of $3.8 billion. The IATA forecasts an $11 billion net loss for 2009.

"We are ending an annus horribilis that brings to a close 10 challenging years of aviation, the decennis horribilis. Between 2000 and 2009, airlines lost $49.1 billion, which is an average of $5 billion per year," said IATA Director General Giovanni Bisignani at the Global Media Day. "The worst is likely behind us," he added.

According to Bisignani, demand will likely continue to improve and airlines are expected to drive down non-fuel units costs by 1.3 per cent. "But fuel cost is rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with $5.6 billion in losses," he said.

Following a decline of 4.1 per cent in 2009, passenger traffic is expected to grow by 4.5 percent in 2010, which is stronger than the previously forecast 3.2 per cent in September.

A total of 2.28 billion people are expected to fly in 2010, bringing the total passenger numbers, back in line with the peak recorded in 2007.

Latin American carriers will be the only profitable regional grouping in both 2009 and 2010, with net earnings of about $100 million each year. Airlines in more mature markets will post the highest losses as travel is reduced by high levels of consumer debt and unemployment. The Middle East will see losses shrink from $1.2 billion this year to $300 million in 2010.

Bisignani warned that after two years of 'exceptional' low fare levels, consumers and corporate travel buyers will expect travel to remain cheap. In 2009, passenger yields plummeted 15 per cent and the IATA forecasts no real improvement next year owing to excess capacity and reduced corporate travel budgets. An additional 1,300 aircraft due for delivery in 2010 will contribute to 2.8 per cent global capacity growth.

As for cargo demand, he said it is expected to grow by seven per cent to 37.7 million tons in 2010. This is stronger than the previous forecast of five per cent in September, following a 13 per cent decline in 2009.

Bisignani highlighted four areas where the IATA came to set its 2010 priorities: safety, environment, simplifying the business and financial operations. The four areas were extensively covered by IATA experts over a full day’s briefing which also covered air traffic management, industry costs, industry trends, global economic outlook and security.

As of the end of November, the industry's accident rate has never been lower. "So far this year, we have had one accident for every 1.75 million flights. Yet the total fatalities increased from 502 in 2008 to 680 in 2009 due to three catastrophic accidents," explained Guenther Matschnigg, IATA safety, operation and infrastructure head. "If you were to fly once per day, it would take 4,807 years for an individual to be involved in an accident," he added.

IATA has some regional challenges. The accident rate in Africa is 12 times the global average, and in the Middle East and North Africa it is five times the global average.

According to Matschnigg, IATA's safety strategy is implemented through its six-point safety programme which focuses on all aspects that impact operational safety. "In 2010, the IATA will continue to work with its member airlines, airports, and air navigation service providers to align its strategy and develop solutions to meet the needs of the industry," he explained. He referred to the Fatigue Risk Management System which is used to manage flight crew fatigue.

"We work to introduce new initiatives like flight data analysis (FDX) and a global safety information centre which will enable airlines to benchmark their safety performance with other operators around the world."

Members of the global media were surprised to meet up with one IATA lecturer vias satellite. Paul Steele, director of aviation environment spoke to us from the Bella Centre in Copenhagen at the COP15 climate change negotiations. The IATA was the only organisation invited to the Copenhagen event.

"The challenge for aviation is that our emissions have historically been growing, although the downturn has caused emissions to fall over the past couple of years," Steele explained through the wide screen. He added that aviation emissions had fallen from 671 mt in 2007 to 666 mt in 2008. "We forecast this year a fall by 6.5 per cent; of which 4.8 per cent will be due to the downturn and 1.8 per cent to greater industry efficiency."

According to Steele, the IATA has illustrated a four-pillar strategy for aviation to face the challenges: invest in new technology, fly more efficiency, build and use efficient infrastructure and use effective economic measures.

"The biggest contributor to emissions reduction is fleet replacement. By 2020, the industry will purchase 5,500 new planes, constituting 27 per cent of fleet."

On the other hand, ownership restrictions in the bilateral system prevent consolidation across political borders. "Last month, the IATA Agenda for Freedom took an important step forward when seven governments and the European Commission signed a multilateral statement of policy principles, focused on liberalising ownership, market access and pricing," explained Carlos Grau Tanner, director of government and industry affairs.

"We are trying to deal in a pragmatic way with the barriers that the old bilateral system had created for our business," he added.

"The Chicago Convention is not the problem, but the economic model contained in bilateral agreements is outdated, erecting two sets of barriers. The first are barriers to accessing international capital. The second is a restriction on accessing one’s market by limiting the number of operators, flights, points served, seats sold, etc," Tanner added. "At this moment, the critical focus is on ownership, not market access. Consolidation to date has occurred within political borders with complex structures."

In total in 2009, IATA expects expect to save its members $1.7 billion in charges for airports, air traffic management and fuel. "Despite progress, we took $1.9 billion in cost increases, of which 90 per cent are from airports. So the battle continues," concluded Bisignani.

"It is 30 per cent cheaper to fly today than a decade ago. But the hand of government still prevents airlines from operating as normal business. A few weeks ago, the European Court of Justice extended financial compensation to include delays, with potential annual cost of 5 billion euros." he concluded.

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