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Joseph Lo

The International Air Transport Association (Iata), the governing body of the world's airline industry, has warned of tough times ahead with losses reaching more than US$6 billion this year.

Speaking at the opening of Iata's annual general meeting in Shanghai, director-general Pierre Jeanniot said international air traffic had begun to grow again following last year's unprecedented downturn.

Mr Jeanniot said the best result for the industry this year would be cutting in half the US$12 billion aggregate loss its members reported last year.

However, even that assumed airlines had the will to continue taking aggressive action, he added.

'In retrospect . . . we would be forced to conclude that [the airline industry] is ill-prepared to successfully weather even a fairly mild, regular economic cycle.'

Mr Jeanniot questioned whether the full depth of discounting in the wake of last year's terrorist attacks was necessary.

'If we are able to generate another US$10 more per passenger . . . we would go a long way toward wiping out last year's loss.'

However, he acknowledged that Iata-wide fare rises were unlikely to happen.

Continental Airlines last week raised domestic economy-class fares in an attempt to improve yields, but other carriers have been slow to follow suit.

Mr Jeanniot said that even had the terrorist attacks not taken place, the airline industry would have struggled to be profitable last year as the global economic environment soured following the collapse of the Internet bubble.

Before September 11, Iata had estimated that the combined losses of its members in international operations would be between US$1 billion and US$2 billion for the year.

He pointed to overly aggressive expansion in capacity as one of the main reasons for the industry's falling profits.

'When a business is concentrating on market growth, the focus is seldom on costs. And unfortunately, growth can mask for some time any increases in operating inefficiencies and the creeping expansion of overhead.'

He said there was insufficient evidence that airlines were preparing for a downturn before September 11.

'The best we can hope for is to cut last year's losses in half, and that will require us to adhere to some fairly challenging estimates of traffic, capacity, yield and unit cost.'

Mr Jeanniot said the coming year was an opportunity for major airlines to place the painful experiences of last year behind them and re-start the second century of aviation.

International air traffic fell 5.7 per cent last year.  Losses on international routes wiped out almost as much profit as airlines had made in the previous four years combined.

Mr Jeanniot is expected to retire after a decade at the helm of Iata following the three days of meetings in Shanghai.

Giovanni Bisignani, a former Alitalia chief executive, is expected to be announced as his replacement today.



Iata warns losses could hit US$6b