The world economy, high oil prices and recovering airline yields are among factors that are promoting a variable outlook in employment prospects, reports Charles Williams
Industry and economic experts gave mixed reports on the future state of the market at the Flight International Recruitment Forum at Le Bourget on Tuesday, which means a variable outlook in the jobs market over the coming years.
Economist Bryan Finn, director of business economics, said the world economy would start to slow down in 2005-06 to growth of around 3.5% - "a lowish level, but not disastrous" - and would then start to recover to around 4.5% by 2008.
"High oil prices are also having a big impact on the market at the moment," he said, "but I don't expect that to be a long-term problem. I would certainly expect the world economy to bounce back by 2008."
Finn highlighted the decline of the US economy relative to the rest of the world over the last few years. "The US economy is much more susceptible to shocks," he said. "Since 2000, it has been underperforming relative to the world economy.
"The US is usually considered to be the locomotive behind the world economy, but recently this has not been the case."
China has performed the best over the last few years, displaying huge growth rates and currently growing at a rate of 9-10% a year.
"On the other hand, the Euro zone is doing very poorly indeed," said Finn. "It has flatlined for the last few quarters, while the other major economies start to recover."
Recent figures show a sharp contrast between the old economies of continental Europe and the new, fast-growing economies of India, Pakistan, China and to some extent Russia.
Finn noted the massive impact the spiralling cost of oil has had on the world economy, with prices per barrel as high as $50-55, rather than the $15-30 of previous years.
"The key to a predicted recovery is the presumption that oil prices will slow down in the next year to around $45 a barrel," said Finn. "Clearly if it goes up to $70-80 a barrel, it will have a big impact on the world economy."
Airline Business editor Kevin O'Toole addressed the forum on the specific challenges faced by the aviation industry in the overall global climate.
O'Toole said that, while traffic recovery is back to its peak for the first time since 2000, there has not been a commensurate recovery in yield for the airlines. In company with increased cost pressure and some unsustainable losses for the industry as a whole, some tough decisions need to be made in the near future.
Although traffic recovery is now at 2000 levels, traffic is not evenly distributed by region or type. US traffic growth in 2004 was at 10%, Europe at 9% and Asia Pacific at 18.6%, although that growth is the evidence of a post-SARS recovery and is likely to subside somewhat.
Growth also markedly differs by type of carrier, with low-cost and regional carriers both showing more than 20% growth.
"Majors and flag-carriers are not achieving even half of those levels on the whole, except in Asia-Pacific," said O'Toole.
The rise of the low-cost carriers (LCCs) can be illustrated by the fact that the low-cost market represents 25% of intra-Europe and US domestic capacity this summer, while Ryanair and Easyjet are now not far away from having as big a market share as mainstream Lufthansa.
There is a note of caution, however - "we would expect yields to follow traffic into recovery," said O'Toole, "but they haven't. They have suffered a 20% decline since 9/11. This has been driven in the US and Europe by pressure from the LCCs, who haven't allowed the yields to recover."
Cost pressures are a key problem, especially rising fuel prices. Non-fuel costs, however, are down around 2.5-3% a year.
"That is one of the best cost-cutting exercises the industry has ever done," said O'Toole, "but the industry made a net loss of $4-5 billion in 2004, although that is an improvement, and that is likely to be $6 billion this year, which is rather sad."
O'Toole believes that airlines' response to these issues has to focus on cost reduction.
Tactics available to airlines that are likely to impact on recruitment and employees include dealing with labour concessions. "The US is in need of radical reform in this area," said O'Toole. "Labour deals struck by United and Delta during the boom have been real problems for them, for example.
"We are now seeing US majors looking to resolve pensions issues and this is going to become real for pilots and engineers in the US.
"The pattern of giving concessions now and getting it back in five years time is not going to work, because there isn't going to be a 'five years time' for some of these airlines. There will have to be some hard discussions."
The future will also see a renewed focus on airlines trying to raise utilisation and productivity of all of their assets, including aircraft and employees.
Quality an issue for employers:Flight survey
Lack of quality candidates is one of the most serious problems affecting recruitment, says a Flight International survey of employers.
Fifty-six per cent of respondents cited an absence of good-quality candidates as the top factor affecting their recruitment of staff, above increased competition for staff. Jobs are available, the survey indicates, but companies feel that the best candidates tend to be employed elsewhere already. Eighty-nine per cent of those surveyed said that over the last year the number of positions they were recruiting for had increased, but 75 per cent said they felt the availability of suitable candidates had decreased over the year.
When asked what factors would have the most significant effect on the future success of their company, answers from the respondents included: resilience and 'can-do' attitude of staff; retention of top performers; cheap labour; lack of industry training; and the working time directive.
Source: Flight Daily News
