"Airline industry expects to turn profit"

Friday, March 9, 2007

Airline industry expects to turn profit
By JAMES WALLACE
The Seattle (WA) Post-Intelligencer


The airline industry will turn the corner and show a small global profit of
$2.5 billion this year, a top industry executive said Friday in Seattle.

"Airlines have done an amazing job at lowering costs and reinventing
themselves, but challenges remain," said Giovanni Bisignani, inspector
general of the International Air Transport Association, which represents
about 250 of the world's biggest international airlines.

He said new jets such as Boeing's 787 Dreamliner and the Airbus A380 will
help airlines be more profitable because the planes are much more
fuel-efficient than current jetliners.

"The theme for 2007 and beyond will be efficiency, efficiency and more
efficiency," he said in a speech to the Seattle Trade Development Alliance. 

Since 2000 the airline industry has lost more than $40 billion.

That $2.5 billion projected profit by the airline industry this year amounts
to only 0.5 percent return on revenue. It's "peanuts," Bisignani said.

He singled out three areas where change is most critical: Air traffic
management, security and liberalization.

"U.S. air traffic management is efficient, but it is bursting at the seams,"
Bisignani said. "It is important to invest in next-generation air traffic
control systems or we will not be able to handle future growth."

He said the cost burden must be shared equally and fairly by all users of
the system -- including business aviation.

On security, Bisignani said the industry is much more secure now than in
2001. 

"But we have forgotten the passenger along the way. And governments are
still passing the buck. Airlines and their customers are paying $5.6 billion
each year for added security measures since 9/11. Governments must take on
this cost."

Last week, the United States and the European Union concluded a draft
agreement on liberalization, known as "open skies."

"It's a step in the right direction, but we have missed an opportunity to
fundamentally change the industry," Bisignani said. 

In 2006, Boeing and IATA conducted a joint study on liberalization. 

"If we liberalized 320 restrictive bilateral air service agreements, we
would increase traffic by 60 percent, create 24 million new jobs and add
$490 billion to global GDP," Bisignani said. "Boeing forecasts a demand for
27,210 aircraft in the next 20 years. If airlines cannot operate with normal
commercial freedoms, I do not believe that we can absorb that many aircraft
economically."

But U.S. labor leaders, including the Air Line Pilots Association, the
Association of Flight Attendants-CWA and the International Association of
Machinists and Aerospace Workers, have come out strongly against the draft
agreement.

"This agreement is not in the best interests of U.S. aviation workers or our
economy," the labor groups said last week in a joint statement.

"While the proposed agreement has serious ramifications which must yet be
thoroughly understood, the Bush administration has apparently committed to
allowing greater foreign ownership of U.S. airlines," the statement said.

"And we are particularly concerned about a franchising provision that would
allow foreign investors to control the operational decisions of our
airlines."

Bisignani also spoke about the international debate on climate change, which
is partly focused on aviation. 

"Unfortunately, politicians, particularly in Europe, are turning
misinformation into misregulation," he said.

The United Nations, he said, attributes 2 percent of carbon emissions to
aviation. 

"But efficiency gains are improving our performance. New aircraft currently
on order will improve fuel efficiency 25 percent by 2020," he said.

"No matter how you look at it, air transport is a small part of climate
change. But that is not an excuse to do nothing. Air transport -- like all
industries -- must be committed to environmental responsibility."

Continued improvements in air traffic management will help, Bisignani said.

The United Nations, he said, has identified 12 percent inefficiency in air
traffic management globally. 

"That means that we are burning $13.5 billion in unneeded fuel, which
generated 73 million tonnes of carbon emissions."

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