Johannesburg - Twin evils of a possible global recession and the volatile oil price are putting pressure on the airline industry, with key commentators billing this as "its worst crisis".
"Our industry is perhaps facing the worst crisis we have ever seen, thanks to brutally high fuel costs that will total $186bn this year, which is four times what it was in 2003," said International Air Transport Association's (Iata's) regional vice-president for Africa, Lance Brogden.
The high fuel bill was a direct consequence of a record oil price, which hit highs of more than $147 a barrel earlier in 2008.
But according to Brogden, even though the good news that the oil price has dropped to below $85 a barrel provides "some relief", the bad news is that it is a "tell-tale sign" of a slowing economy.
"The credit crunch is putting the brakes on economic expansion and traffic demand, so whatever operational savings airlines generate will likely be surpassed by revenue lost," he said. For the year to date, there has been a sharp drop-off in demand in the Africa region, with a 1.9 % drop in passenger demand and a 6.6% fall for cargo demand.
"For 2008 we expect losses [globally] of $5.2bn, of which $700m will be reported by Africa," he said. This compares with the $5.6bn profit those airlines had made in 2007.
"How to stop the bleeding"
At Iata's annual general meeting in June 2008, members agreed on an agenda for change in their Istanbul Declaration.
Some key points in the declaration are that airports and air navigation service providers must be more efficient. Governments must also stop "crazy" taxation, regulate monopoly suppliers effectively, fix infrastructure and give airlines the freedom to do business.
"Airlines are the meat in a very unsatisfying sandwich. The bilateral air transport agreement system, constructed 60 years ago, is the main reason which prevents airlines from acting like normal businesses," he said.
Airlines cannot serve markets until governments negotiate access, and they can't merge or consolidate across borders because of foreign ownership restrictions. "The goal is to allow airlines to operate like any other business."
"We are in crisis and it's time for all governments to get serious about regulating monopolies," he said.
In addition, Brogden said Iata was working on improving operations and infrastructure efficiency: "With a fuel bill of $186bn, every drop of fuel is critical to our financial survival and our environmental performance."
He said that Iata has set a target to improve fuel efficiency by 25% by 2020, and to have carbon-neutral growth leading to a carbon-free future.
"We are [already] delivering results," he said. In 2008 Iata will save $3bn in fuel and 10 million tonnes of carbon dioxide by shortening routes and improving operational procedures. Since it launched a fuel campaign in 2005, the association has saved $12bn and 57 million tonnes of carbon dioxide.
In 48 months, he said that Iata had delivered 100% electronic ticketing and $3bn of annual savings. "But there is still more money on that table, as bar-coded boarding passes also offer quick savings with minimal investment, saving over $5 per passenger."
Iata already has 176 airlines active on the bar-coding system, 13 of which are in sub-Saharan Africa.
- Fin24.com