Turbulence for global aviation

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 United States recession, industry officials said on Monday.

The global aviation industry returned to profitability in 2007 but earnings of $5,6-billion were only less than 2% of $4900-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.

“Airlines are in $190-billion of debt. Oil is pushing $100 per 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 September 11 2001 attacks in the United States in which militants used hijacked passenger planes as airborne weapons.

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 the Middle East, which he said is spending $38-billion on airports and other aviation infrastructure.

“Just look at Dubai. With nearly 35-million passengers, it now handles nearly as much traffic as Changi [Airport in Singapore],” he told delegates, which included regional transport ministers and airline chief executives.

Dubai, an emerging financial centre in the Gulf region, serves 159 destinations — 37% more than Changi. Dubai is also developing Jebel Ali airport that will serve 120-million passengers a year, he said.

“In total, the Middle East 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.” – AFP

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