Reshaping to build a stronger industry

The International Air Transport Association (IATA) called for a major resizing and reshaping of the entire air transport value chain as airlines battle the ongoing global economic crisis. Airlines are expected to post losses of US$9 billion this year with an unprecedented 15 percent revenue drop that will see industry revenues shrink by US$80 billion to US$448 billion.

“I am a realist and I don’t see facts to support optimism. The industry is in survival mode. Whether this crisis is long or short, the world is changing.

Travel budgets have been slashed and consumers will need to reduce their debt. It will not be business as usual in the post-crisis world. Governments, partners and airlines must use this crisis as an opportunity to build a stronger industry. That means resizing and reshaping,” said IATA’s Director General and CEO Giovanni Bisignani. He was addressing 500 of the industry’s top leaders in Kuala Lumpur at the 65th IATA Annual General Meeting and World Air Transport Summit.

IATA’s Simplifying the Business program has given the industry a head start on cost cutting. In 2008, US$4 billion in cost savings were achieved with 100 percent e-ticketing and the deployment of Common Use Self-Service (CUSS) kiosks.

“This was only the beginning. We have our eyes set on another US$10 billion in savings by improving baggage management, travel processes and with e-freight,” said Bisignani.

Bisignani said that the burden of change must be shared across the industry value chain. “Resizing and reshaping is not just a problem for airlines. Everyone in the value chain lives off our revenues. All must contribute to industry change,” said Bisignani.

Labour: “We cannot reshape without flexibility. This is not the time for salary increases. To protect jobs, we must modernize work practices and we must all do more with less,” said Bisignani.

Travel Agents: “The clock cannot be turned back. To survive in the global online market, travel agents need to reshape services and business models to provide greater value that travellers are willing to pay for,” said Bisignani.

Monopoly Suppliers: “Every supplier-monopolies included-must reshape products and services to reduce their costs and ours. When demand drops, they cannot simply divide the same costs among fewer customers,” said Bisignani.

An IATA Wall of Shame gave special mention to the most serious cases of infrastructure providers not keeping pace with the industry’s need for improved efficiency: BAA and the UK Civil Aviation Authority for agreeing to an 86 percent increase in London Heathrow charges for 2008-2013; Airports of Delhi and Mumbai for their 207 percent increase in charges; Quiport in Ecuador for increasing charges by 79 percent since 2005 to pre-finance a new airport that may never be built; Air Traffic and Navigation Services (ATNS) South Africa for proposing a 44 percent increase in charges in 2010/2011 and the EUROCONTROL States of Denmark, the Netherlands and Poland for proposing charges increases between 27 percent and 32 percent.