IATA issues profit warning

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Rising fuel prices have prompted IATA to widen its 2005 loss forecast for the industry to $6 billion.

The new loss forecast – nearly 10% more than the $5.5 billion prediction made only in April – was revealed at IATA’s annual general meeting in Tokyo late in May. At the meeting, director general Giovanni Bisignani reiterated the need for structural change in the industry and stepped up calls for governments to “stop treating us like cash cows”.

“My concern is the bottom line,” Bisignani told delegates. “Losses between 2001 and 2004 exceeded $36 billion. And we will lose another $6 billion in 2005. Parts of the industry are profitable. But these margins are not acceptable for a $400 billion industry. Urgent action and change is needed.”

High fuel prices are “destroying our profitability”, according to Bisignani, and the total fuel bill for member airlines is now expected to reach $83 billion this year – much more than the $76 billion predicted only recently. “The crisis in our industry continues,” he says. “We cannot continue with airlines flying and everybody else making the money. This must change.”

Bisignani used his state-of-the-industry speech to repeat calls for major structural change, including efficiency gains by airlines and monopoly service suppliers such as airports and air traffic control organisations, and the easing of bilateral air service restrictions. He also said he would continue his campaign against what he sees as excessive taxation of the industry by governments.

“Development is a serious issue that needs a serious solution. But taxing airline travellers is about the dumbest way possible to achieve it,” he says. “Why? Because no industry has done more for development than air transport by linking nations and facilitating tourism. Development needs commitment, not politics. And air transport needs common sense, not more taxation. This must change.”

Bisignani also says governments must stop giving preferential treatment to some in the industry such as emerging low-cost airlines. “Fair competition is good for everyone. But calling yourself low cost is no justification for preferential pricing or indirect subsidies. Low cost is the goal, if not the reality, of everyone in this room. Challenging old business models and increased competition makes our industry stronger. But we cannot accept governments that further distort fair competition. This must change.”

NICHOLAS IONIDES TOKYO