Singapore: Tough times are ahead for global aviation despite a return to profit last year, with many airlines mired in debt, rising fuel bills and fears of a looming US recession, industry officials said on Monday.
The global aviation industry returned to profitability in 2007, but earnings of $5.6 billion (Rs22,232 crore) were only less than 2% of $490 billion in revenue, said International Air Transport Association (Iata) chief Giovanni Bisignani.
“Tough times will continue... Airlines may be out of intensive care, but the industry is still sick,” he warned in a speech at an aviation conference being held as part of the Singapore Airshow.
Iata director general and CEO Giovanni Bisignani
“Airlines are in $190 billion of debt. Oil is pushing $100 a barrel, accounting for 30% of operating costs or a total bill of $149 billion.”
“The revenue cycle peaked in 2006 and the negative impact of the credit crunch is still being calculated,” he said, referring to the global financial market turmoil triggered by massive defaults on risky US home loans.
Global aviation suffered following the 11 September 2001 attacks in the US. Iata estimated overall losses for the global industry at $40 billion.
Despite the gloomy global picture, Asia’s aviation industry can fare better, thanks to rapidly expanding markets in China and India, Bisignani said. Asia is “home to some of the industry’s strongest carriers, and best and newest airport infrastructure,” he added.
But while the region is “full of promise”, there were also “some very big challenges,” Bisignani said.
He sounded warning bells on the emerging challenge from West Asia, which he said is spending $38 billion on airports and other aviation infrastructure.
Dubai, an emerging financial centre, serves 159 destinations—37% more than Changi (airport in Singapore). Dubai is also developing the Jebel Ali airport that will serve 120 million passengers a year, he said.
“In total, West Asia is spending $38 billion on infrastructure. So, the competitive challenge will be broad and it will not only be competition for market share and infrastructure.”