Chris Jasper/RIO DE JANEIRO
International Air Transport Association (IATA) director-general Pierre Jeanniot has delivered a downbeat assessment of the airline industry's immediate prospects, while listing a series of challenges which give cause for concern as the industry enters the next century.
Speaking at the association's 55th annual general meeting in Rio de Janeiro, Jeanniot warned that the industry's profits were likely to be just $2.7 billion this year. This is the due to the net effect of a projected 5.5% capacity increase, 4.5% increase in traffic, 0.5% fall in yields and a 1% drop in unit costs. The downturn would represent a 13% decline on last year's net profit, after interest charges, of $3.1 billion, which was down 40% on 1997.
IATA figures show that industry turnover fell by 2.1% last year, to $142.7 billion, while other indicators were also negative - capacity increased by 5.2%, but traffic grew by just 2.2%. Yields fell by an estimated 4.2%, although unit costs were down by 5.7%.
Heavy industry losses in the early 1990s meant that, by the end of 1997, airlines were still $800 million in the red over an eight-year period. Last year's results mean that the industry has finally achieved a positive cumulative position for the decade.
"Unfortunately, the fundamentals are not expected to improve this year and the result might well be marginally worse than in 1998.It is still totally insufficient compared to long-term industry needs," warns Jeanniot.
A profitable 1999, however, would represent an unprecedented sixth successive year in the black for the industry. Jeanniot is upbeat about "signs of recovery in Asia", although he stresses that "the best way to protect profitability is to systematically avoid over-capacity."
Jeanniot listed five major challenges facing airlines at the turn of the millennium: the pressures of globalisation versus the need to retain individual identity; continuing inability to cope with world financial shocks; environmental pressures; the information technology revolution, and the need for infrastructure improvement and privatisation.
IATA, meanwhile, has entered a strategic alliance with the Flight Safety Foundation (FSF) with the aim of pooling safety expertise and eliminating duplication between the two. When the alliance is implemented at the end of this year, all IATA members will also become FSF members.
• IATA adopted three operational resolutions. The first was to apply pressure on the European Civil Aviation Conference states to commit funds to accelerate European air traffic control capacity growth; the second is to halve the air accident rate by 2004. Finally, IATA opposed the recent International Telecommunications Union decision that radio frequency spectrums previously allocated exclusively to aviation and rescue services are to be shared.
Source: Flight International
