Comment: Banishing the blues

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IATA's 66th annual meeting, held in Berlin, proved the most optimistic in years as the industry - with the exception of Europe - storms out of recession. Not even another "green tax", this time from Germany, dulled the sense of relief that the worst is over

It is said that it's all in the timing. What, then, should the industry make of this announcement as IATA's annual meeting drew to a close on 8 June? Germany revealed it is going to slap a €1 billion ($1.2 billion) departure tax - branded as a green initiative - on travellers. Adding insult to injury, this came from the government of AGM host carrier Lufthansa.

AGM president and Lufthansa chief executive Wolfgang Mayrhuber, who had croaked his way through the previous day's proceedings with a bad throat, would have been forgiven for losing his voice in abject fury at this news. Later that afternoon he welcomed Chancellor Angela Merkel onto his airline's first Airbus A380 at the nearby Berlin Air Show: the temptation to ask her to pay for the privilege of an A380 tour must have been great.

lufthansa berlin poster billypix 
 Brighter days: Lufthansa billboard advertisement outside hotel hosting IATA AGM in Berlin. (©Billypix.com)
The German tax news added yet another wrinkle to an industry institution that offers the best annual sounding board for the mood of airline chief executives worldwide. Not surprisingly, that mood has been decidedly downbeat in the past two years.

The AGM in Istanbul in 2008 was infamous for oil prices racing past $130 a barrel. That was crisis time. A year later, this time in Malaysian capital Kuala Lumpur, the price of fuel was the least of anyone's worries. It was the global economic meltdown that was dominating conversation as demand fell through the floor.

What a difference a year makes. From gloomy forecasts of more losses in 2010, IATA director general Giovanni Bisignani revealed that the industry had quickly reversed course and a profit was in sight though airlines in Europe continue to face sleepless nights. In fact, the swing will be $5 billion, with the forecast profit now $2.5 billion, demonstrating the pace of the global traffic recovery.

In addition, the modest $2.5 billion net profit would have been larger, had the volcanic ash cloud not wiped $1.8 billion off industry revenues. The cloud and the German tax were virtually the only sour notes at the AGM. The only other contaminant on the horizon was the apple blossom that was lazily drifting down into the sauerkraut at the outside functions.

While the industry gears up for the steep recovery, the AGM served to highlight a range of familiar structural problems. As Bisignani said in his "Vision 2050" outline of what the industry could and should look like in 40 years, "today's industry structure will not deliver the profits we need".

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The current pace of recovery and improved financial outlook for the industry read here

Many tout consolidation as the answer, but just as many again doubt it will be. The inability for carriers to undertake cross-border investment and ownership is another long-discussed issue. "It eventually has to come, for sure, but it should be sooner," said Mayrhuber.

In a rare development, labour issues had a lot of floor time at IATA, showing how some senior players feel the time has come to show some tough love in this area. Frustration also showed through from those who want to gain traffic rights, but feel they are being blocked by the flag carriers of the countries they want to serve. This kind of influence is nothing new of course, but seeing the dirty washing being aired in public is.

A new chapter on such issues was not turned in Berlin, but a new page was with the announcement from Bisignani that he will retire next year. It is a testament to the charismatic Italian's eight-year reign, with him truly making IATA relevant again, that the names being touted as his replacement were of the highest industry stature.

So going back to that tax: Bisignani ruefully noted that while the 66th AGM had plenty of firsts, "we've never had a gift of a tax of $1 billion before". But this industry knows only too well not to expect favourable treatment from governments, so why should it have started in Berlin?