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Interview: Giovanni Bisignani
Dir-Gen, International Air Transport (IATA) tells us about how higher oil prices and instability in regions such as the Middle East could tip profits downwards.
March 6, 2011 4:07 by Samuel Potter
How has IATA’s business been shaping up recently?
Overall the situation looks good. Air traffic is likely to increase by five percent and capacity will rise by six percent. The Middle East will be the fastest-growing area with 11 percent growth, followed by Asia-Pacific and Latin America. But what I see as a big risk is the price of fuel. Our forecast is on the assumption that the oil price would remain $84-$85 a barrel on average. Higher oil prices will affect our industry badly because an increase of $1 per barrel means expenses rising by $1.6 billion – this could spoil a good story.
At Davos the atmosphere was quite optimistic, but if I look at the airlines industry, we have lost $50 billion in the past 10 years. Last year we saw a good result and the margin was 2.7 percent. This year it will be 1.5 percent. In order to survive the crisis of 2009, our member airlines had to increase their debt by more than $30 billion, so that means in this situation our total debt stands roughly at $210 billion.
We are making some money, but margins are very low and the industry is fragile, as there is a ways a risk of emergency situations such as wars and volcano eruption in Iceland. The industry will suffer further if there are any emergency situations this year.
What are the other challenges besides the rise in oil price?
A big challenge is the news coming out of North Africa. Tunisia is a small country as far as air traffic is concerned, but Egypt is one of the biggest markets in the region and developments there are a big concern for us.
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