Sunday, June 7, 2009

On a Wing and a Prayer

KUALA LUMPUR, MALAYSIA - There is a bright green arrow on the ceiling of my room at Traders Hotel; it points to Mecca, so that devout Muslims in this overwhelmingly Muslim country know which direction to face when praying. Airline executives may wish to pray now, too, as their industry's finances continue in free-fall; if only they knew which direction to turn.

That's the emphatically downbeat sentiment right now on the opening day of 65th annual general meeting of the International Air Transport Association, the trade organization for 226 of world's commercial airlines. IATA's numbers-crunchers, unveiling their research here at the confab in Malaysia's capital and largest city, predict airlines will lose $9 billion US this year, nearly double the loss expected just six months ago. That's down from the $10.4 billion US airlines lost in 2008, but it's scant comfort for executives of the world's struggling carriers - and their millions of passengers.

Why should you care? Simply this: If the numbers continue to be bad for much longer, travelers are looking at fewer flights, more-crowded flights, cutbacks of amenities, older airplanes staying longer in the sky, and delays of long-planned cabin and service upgrades. Airlines have to make money to spend money. Right now, most are counting heavy losses.

Giovanni Bisignani, IATA's smart, peppery director general and CEO, couldn't have been more blunt in his annual state of the industry speech in Kuala Lumpur this morning. "Optimists see growth by the end of the year, but pessimists view this as a mirage and expect an L-shaped recovery,'' Bisignani said to hundreds of assembled airline executives, vendors and suppliers and world media. "I am a realist. I don't see facts to support optimism.''

"After Sept. 11, 2001, revenues fell by 7 percent,'' Bisignani said. "This time we face a 15 percent drop with a global recession.''

Airline CEOs were similarly downbeat. At a oneworld alliance press conference this morning - called in part to promote the application for anti-trust immunity in the U.S. and EU for members such as American Airlines and British Airlines, who want to work more closely on lucrative trans-Atlantic routes - airline honchos' faces were long.

Oneword managing partner John McCulloch said alliance members are concentrating this year on paring their costs. He didn't specify how that will be done, but the implications are not encouraging for consumers who value comfort and convenience in travel.

"It will be a very difficult time for some time to come, I believe,'' Cathay Pacific Airways CEO Tony Tyler sighed. There was more of the same from British Air's CEO, Willie Walsh: "Everyone is facing a weak economic environment and weak consumer confidence,'' Walsh said.

So, where do we go from here?

We'll learn more about that as the meeting unfolds. I'll be posting throughout, with an emphasis on what's new and what airline corporate flight plans will mean for travelers.

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