There have been some optimistic outlooks regarding the global economy recently, including some speculation that the worst of the financial crisis is behind us. These are welcomed statements amid all the economic gloom of the past year.
But we all know that talk is cheap. If these forecasts are in fact accurate, just how long will it take to actually see the improvements in the industry’s bottom line?
According to IATA, it will take at least a few years for revenue to return. In its latest 2009 forecast, the estimated loss increased from the association’s earlier estimate of a $9-billion loss to an $11-billion loss for the global airline industry. Regionally, North American carriers are expected to lose $2.6 billion. The association named falling passenger and cargo demand, declining yield and higher anticipated fuel prices as the reason behind the climbing losses.
And it has projected a $3.8-billion net loss for the industry in 2010.
But news hasn’t been all bad: IATA announced that passenger and freight volumes have improved over some statistics from earlier in the year. Yet, the association projected that revenue would not return to 2008 levels until 2012 at the earliest.
So, while there are signs of recovery, the progress will be slow. That means the industry must maintain a cost-conscious mindset and a healthy amount of perseverance to ride out the rest of the economic storm.
As Giovanni Bisignani, IATA’s director general and CEO, warns in the latest forecast, “Conserving cash, careful capacity management and cutting costs are the keys to survival. The global economic storm may be abating, but airlines have not yet found safe harbor. The crisis continues.”
And the association has called on other industry partners to assist.
“This is not an airline-only crisis. There is less cash coming into the industry and the entire value chain must be prepared for change. All our business partners — including airports, air navigation service providers, global distribution systems — must be prepared to cut costs and improve efficiencies. Some airports have delivered cost reductions, but not in line with the magnitude of the changes to the industry cash flow,” Bisignani says in the statement.
This issue’s cover story concentrates on some airports’ efforts to cut costs by operating ground handling services as a means to retain or attract air service. It has been a growing concept over the last few years — and one that has attracted some criticism.
I would like to hear your opinion on the subject. What do you think should be done to further cut costs? Either by the airlines, who have already slashed capacity and increased fees, or by their industry partners, such as airports? I’m eager to hear your thoughts.
