NICHOLAS IONIDES / SHANGHAI
But incoming IATA director general pledges to tackle insurance issues and press for end to global ownership restrictions
Long-serving International Air Transport Association director general Pierre Jeanniot, who retired last week after nine years at the helm, has criticised airlines for being unprepared for the downturn that followed the September terrorist attacks in the USA.
In his final report on the state of the industry at IATA's annual general meeting in Shanghai, Jeanniot said airlines were adding too much capacity before 11 September without focusing adequately on controlling costs. "We simply cannot blame all our poor results on external factors," he said of the $12 billion losses estimated to have been suffered by airlines in the last financial year.
"In retrospect, and looking at the deteriorating situation even before 11 September, we would be forced to conclude that this industry was ill-prepared to successfully weather even a fairly mild, regular economic cycle. 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 overheads," he added.
Jeanniot said that "before 11 September, there was insufficient evidence that airlines were preparing for a downturn. We were giving clear indications that achieving market growth was more important than sustained profitability." He added that there are signs the "recession is ending and there will be some growth", although first-quarter financial figures are "not terribly encouraging".
IATA estimates member airlines will lose between $4 billion and $8 billion this year, Jeanniot said, adding that the industry's heavy discounting of fares after the attacks may have gone too far. "One truly wonders whether the full depth of the discounting that took place was really required and whether the degree of resulting market stimulation more than compensated for the amount of actual yield dilution," he added. "Improving the yield could well be the most difficult result to achieve for the balance of this year and well into the next."
Former Alitalia chief Giovanni Bisignani formally took over from Jeanniot on 5 June. He says one of his key tasks is to see IATA speed up processes to deal more quickly with issues affecting its members. "We have to react at least at the same speed as the airlines. Before, you had a certain amount of time to discuss issues and to execute, but now the world has changed."
He adds that IATA will continue to press for a global solution to insurance issues facing airlines, work to convince service providers to lower fees, and push for an easing of global ownership restrictions on airlines.
Source: Flight International