Iata expects invasion of Iraq will cost airlines US$10b

PUBLISHED : Tuesday, 25 March, 2003, 12:00am
UPDATED : Tuesday, 25 March, 2003, 12:00am

The United States-led war against Iraq may cost the loss-making global airlines another US$10 billion and the rigid regulatory environment in which they operate is stopping carriers from adjusting to the industry's new demands, according to the International Air Transport Association (Iata).

The war came at a time when the airlines, having accumulated US$30 billion of losses since September 11, 2001, were struggling with their worst crisis, which might continue well into the summer season, Iata director-general Giovanni Bisignani said.

'At this point, the air-transport industry must look beyond the horizon and reinvent itself,' he told delegates at a weekend conference in Montreal.

'Our industry needs change,' he said, pointing out that government regulations worked against the needed changes.

The next few weeks might be the last chance to set the aviation industry on the right regulatory track, he said.

Iata, an association of almost 300 of the world's airlines, has identified three obstacles, or 'pillars of stagnation', to change: the bilateral system, national ownership rules and the attitude of competition authorities.

'Bilateralism should evolve into a regional system with the merger of the single markets,' Mr Bisignani said.

'While the North Atlantic could be the starting point in seeking a new way, we call on all like-minded governments to begin the modernisation of the bilateral system.

'Airlines should be free to merge and approach the international financial markets for capital. The wave of globalisation must eliminate national ownership limits wherever they represent an obstacle to development. These limits are denying airlines the freedom of action given to all other businesses.

'What other global business is more fragmented than air transport? We need the economies of scales that mergers or acquisitions can provide with the proper competition supervision.'