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Aviation History
1991
1991 - 2870.PDF
IATA CONFERENCE IATA anticipates 1991 turndown Economic recession and the Gulf conflict are expected to result in a 1.7% downturn in total international airline pas senger numbers this year, com pared with 1990, according to IATA. Next year should see a return to growth, with passenger numbers in this sector expected to be 9.4% higher. This year's projected down turn should be treated cau tiously, since the full impact of the Gulf situation is only now becoming apparent, says IATA. The forecast passenger growth rate will diminish after next year, being worth 7% in 1993 and a slightly lower figure for the following two years. Average growth in freight traf fic is likely to be 6% during 1991-5. • Losses could total $3.7 billion BY IAN GOOLD IN NAIROBI Delegates attending the 47th International Air Transport Association (IATA) annual gen eral meeting in Nairobi may have wondered which of two meetings at the Kenyatta Inter national Conference Centre to attend — IATA's, or a religious conference, a banner at the en trance of which proclaimed: "Signs of the End to Come". So bad has 1991 been for the air-transport industry that IATA will not attempt to put a figure on the airlines' overall loss this year, although IATA director- general Dr Gunter Eser says that "...as we move to the end of the year, the industry is bleeding to death". Measuring upturn 'not easy', says BA The return of business pas sengers since the downturn in traffic in mid-1990 is "...not easy to measure", according to British Airways chief executive Sir Colin Marshall. The most recent airline statis tics are being compared with those for the third quarter of 1990, which "...already reflected the Gulf situation and the onset of recession in the UK and the USA", Marshall said at the Nai robi meeting. Passenger traffic on super sonic Concorde services is "above 1990 levels", but that is not reflected in high yield on subsonic routes. The airline claims that 70- 80% of its business clients are "...cost-cutting themselves". Marshall does not agree that the future business traffic pic ture is grim, saying: "I do not see that". It is the "natural reac tion to recession". BA has been hit on its two biggest markets — the UK and the USA — but "...I don't believe that traffic will not return", he adds. He refuses to be drawn on alliance discussions with other airlines, claiming that BA is "...constantly being approached" by other operators and "...we look at all approaches and have entered discussions many times". Marshall concludes that BA can have no alliance without proper terms. The airline "...has no intention of getting into an uneconomic deal, particularly any requiring investment". D Concorde traffic noses upward, but picture is grim for sub-sonic airliners IATA member airlines are ex pected to have lost $3.7 billion on scheduled services alone — equalling 4% of revenue — as suming that interest charges do not rise over those for last year. In 1990, the airlines' overall loss on all activities was some $5.1 billion, according to incoming 1ATA managing director Dr Ed ward Spry. One of the reasons IATA will not estimate losses this year is that it does not know "how badly" airlines have fared in areas of associated operations such as hotels. Airline economics have never been worse, according to Eser. "It is now worse than at any time in the 46-year history of modern international civil avia tion," he says. Last year, he forecast a net loss of $2 billion which became $2.7 billion on international scheduled services alone. "That kind of performance, repeated a few times, would mean the death of the industry," warns Eser. Although airlines began 1990 expecting 6-7% traffic (revenue passenger kilometres) growth, Eser points out that labour, fuel, interest and insurance-costs clouds were already gathering. The increase in capacity as large numbers of new aircraft were delivered began to outstrip traf fic growth, putting pressure on yields. Despite IATA's "strongest pro tests to the war-risk insurance market" increased premiums at the end of 1990, as the Gulf crisis looked more certain to become war, cost airlines an extra $200 million. Fuel-price increases had al ready cost the airlines an addi tional $200 million, to which were added labour costs up 11% and interest charges some 39% up in 1990. Interest cost airlines $3.2 bil lion in 1990, a "leftover from better days in the mid-1980s", according to Eser, "...when air lines were highly geared on their balance sheets". The costs are also "...a penalty for current losses and reflect high interest rates", says Eser, Eser makes gloomy predictions adding: "That interest burden turned a modest profit into a large net loss". IATA predicts that 1991 is likely to see a fall in passenger numbers of around 2% over last year, with freight traffic flat. Total capacity, however, has probably fallen by no more than 1%. Average yields are expected to have risen by 6%, but unit costs by 5%, resulting in a sec ond consecutive year of record loss, reports Eser. The IATA director-general is not convinced that the true situ ation among the airlines is fully understood. "Perhaps only 20 carriers can meet their operating costs, replace their assets and finance growth," Eser says, ask ing rhetorically what other oper ators will do. "Who cares about this? Charging authorities who ex ploit a monopoly and care only about short-term revenue? In surers who exploit a short-term political situation? Governments who insist on competition, call for lower prices and remove revenue sources?" Without care from such places, Eser sees no viable industry "in a few years' time". He gains some solace from history, saying: "We work in an industry which has shown an ability to climb back from reces sion". Eser forecasts passenger traffic growth averaging 7% a year in 1992-5 and freight growth of 7.5% annually. • 16 FLIGHT INTERNATIONAL 6 - 12 November, 1991
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