IATA News - June 2009

Numbers can tell powerful stories. US$10.4 billion (1)  is the amount we lost last year. The ground shifted and our industry was shaken. Skyrocketing oil prices dominated the first half of 2008. Global recession was the story of the second half.

2009 will also see massive shifts. We expect the industry fuel bill to fall by US$59 billion (2). But rising oil prices anticipating recovery are a great risk. Greedy speculation must not hold the global economy hostage. Failure to act by governments would be irresponsible. On top of this, an even bigger negative number is on the horizon: US$80 billion (3). That is the total revenue that will disappear with falling demand, collapsing yields, broken consumer confidence, and pandemic fears. The landscape is harsh. Airlines will lose US$9 billion (4) this year.

How long must we travel the desert of global recession? There is no modern precedent for today’s economic meltdown. Cargo remains a good leading indicator. Its 23% freefall in December (5) was a clear sign that the global economy was collapsing. It has been stable at that level for five months.

This may be the bottom but recovery is different. Banks are still not able to finance business. US$1 trillion (6) is still needed to re-capitalize. Our customers don’t have confidence. They need to reduce debt and that means less cash to spend. Business habits are changing and corporate travel budgets have been slashed. Video conferencing is now a stronger competitor.

Optimists see growth by the end of the year but pessimists view this as a mirage and expect an L-shaped recovery. I am a realist. I don’t see facts to support optimism.

Our industry is in survival mode. Whether this crisis is long or short, the world is changing. Even if we try to look beyond the crisis we must recognize that it will not be business as usual. Change is critical. We must use this crisis as an opportunity for governments, partners and airlines to build a stronger industry.

Protecting globalization

The first challenge is to protect the engine of prosperity, the global village that we helped to build. Since 1950, the world’s economy  grew six fold, but world trade is 22 times bigger (8) . This engine of growth increased incomes and reduced poverty. With global trade everybody wins. But the forces of de-globalization are gathering strength and governments are taking protectionist decisions. World trade is already suffering with a 15% downturn (9),  depressing economies everywhere. Replacing the global village with islands of isolation would be a step backwards. Protectionism is the enemy of global prosperity. In the 1930s (10), it prolonged the depression and it will not work today. To secure our future and build a strong global economy we must fight hard to keep the world trading.