Airline Industry Needs Urgent Get Out

“We have lost more in one year than we have made in our entire history. This is an industry that is now in a deep hole. We must start looking for footholds and ways to climb quickly out of the financial abyss,” said IATA Director General & CEO Pierre J. Jeanniot, on the opening day of the Airline Financial Summit, New York City, 8 April.
Jeanniot referred to net losses of USD 12 billion on the international scheduled services of IATA Members in 2001.

Jeanniot continued, “We cannot blame all of our poor results on external factors. Even before September 11 this industry was ill prepared to weather successfully even a fairly mild regular economic cycle. And so now is a good time to review the size and appropriateness of the corporate overhead and to discard the inefficiencies which have been masked by the recent growth. It is a time to accelerate route restructuring programs, fleet simplification activities and examine re-financing options.”

“We need to listen more to company Chief Financial Officers and less to the marketing men. And in the search for lower unit costs, everything needs to be revisited and questioned again - with the two notable exceptions of safety and security.”

The Director General identified three further priorities for service improvement and industry rationalisation to complement a recovery in profitability:

- Improved security and customer-friendly airport processes: “positive profiling” in the application of heightened security can help keep business and other frequent fliers on a fast boarding track. This would include standardised application of biometrics. “It is interesting to note that the US, which was initially cool to profiling is now moving toward some sort of `trusted flyer` programme.”
- Fully adequate and cost-effective third party war risk insurance: ” Most governments have extended the period of their temporary cover to airlines, at least up to the time of the next ICAO council, which starts next week. But such cover should be replaced with a global system, run by a single company, raising finance through normal market channels, as proposed by ICAO`s Special Working Group.”
- Evolved industry regulation to permit efficient restructuring: “We may be now entering an era when more and more governments should become less concerned with the fate of their national carrier and more concerned with the question of whether their national economy has access to good air services, at competitive prices. But attitudes will be slow to change, unless the bilateral system and foreign ownership rules are themselves modified.”