IATA World Tour 2008 Event Round Up

Turbulence ahead

The IATA World Tour 2008 that arrived in Mumbai to discuss issues pertaining to Indian aviation, left with many questions but few answers. By Chetan Kapoor

(L-R) Rob Eagles, director, Safety, Operations and Infrastructure, Asia Pacific, IATA; Tulsi Mirchandaney, managing director, Blue Dart Aviation; P S Nair, CEO, GMR Hyderabad International Airport and P K Gupta, executive director - sales and marketing (passenger), Air India

(L-R) Gordon Griffiths, assistant director, Airport Development, IATA with R C Chitkara, executive director, Planning, Airports Authority of India

Sunil Chopra, acting director, IDFS Africa, IATA presenting an address on cargo market inadequacies

(L-R) R Sivakumar, VP, Revenue Management, Jet Airways; Andres Uribe, product manager, Network and Route Planning, IATA and Markus Müller, assistant manager, Business Insight, IATA

After hosting road shows in Dubai, Japan and Macau, the International Air Transport Association (IATA) World Tour 2008 arrived in Mumbai to address relevant and important issues in the aviation industry across the passenger, cargo and airports segments.

Rob Eagles, director (Safety, Operations and Infrastructure), Asia Pacific, IATA kick-started the conference with a disturbing statement: "The international passenger traffic grew by 7.4 per cent in 2007 as compared to 5.7 per cent in 2006 and airlines have enjoyed an average load factor of 77 per cent in addition to the international freight growing by four per cent in 2007, yet the airlines have faced losses due to higher fuel and other operating costs. Banks and financial institutions have started enforcing tighter credit conditions thereby affecting business growth and customer confidence." While the present fuel costs hover at US$ 135 per barrel, IATA believes that a one dollar rise in the ATF cost can lead to the industry paying an additional US$ 1.6 billion. However, while the rise in the fuel price is cushioned by the weakening dollar, the industry also predicts that in the future, the cost of a barrel may rise up to as much as US$ 200, which will no doubt further deteriorate the troubled sector.

More so, IATA has a bleak outlook for 2008 as the industry is courting a loss worth US$ 2.3 billion. "We are set to witness a perfect storm, a short-term turbulence," mentioned Eagles.

The Indian diaries

According to IATA, it is the Asia Pacific region (excluding Japan) that is continuing to show aviation growth in 2008-09. Also, overall the global delivery cycle is accelerating but supply is not matching the demand. Adds Eagles, "Aircraft delivery cycle is generally out of step with the traffic growth. In 1991 and 2001 we had increased deliveries. The question to ask is whether we would witness the same in 2010." P K Gupta, executive director - sales and marketing (passenger), Air India remarked, "Over the last six months, 24 airlines have gone bust globally and the cost of US$ 140 per barrel is reshaping the industry. There is a strong capacity growth in the domestic Indian market but inflation and the slowing economy is reducing the passenger growth. Discounted prices, heavy taxation and lack of infrastructure have further had a deteriorating impact on airlines' revenues."

In order to overcome infrastructure issues, Tulsi Mirchandaney, managing director, Blue Dart Aviation appealed for multi-modal airports which will also assist the cargo airlines. She said, "India is a consumer's market and where there is consumption, there is production. We need to have multi-modal airports to ease the distribution process so that the customers see value in freighters. Infrastructure is a basic foundation for this business with warehouses, air-side and city-side access. While Nagpur is projected to be an ideal cargo hub for the country, one needs to know if it is profitable to operate from there."

P S Nair, CEO, GMR Hyderabad International Airport agrees, "Infrastructure development holds the key and will change rapidly with the use of technology, and the third party will facilitate more investment wherein the airlines will pay for service delivery. Besides, one has to set standards to avoid delays caused by the increased traffic and IATA needs to look at better coordination while communicating between the aircraft and the airport on an airport-by-airport and sector-by-sector basis."

"The APAC region can do better than the rest of the world in terms of demand and profitability. We are working with all levels of the Indian government to improve the standards and airport infrastructure here," Eagles mentioned on the sidelines. In the age of increasing costs, the airlines have to look into their operating costs and more so when it is outsourced - ground handling, ITes, etc. Suggests Raj Sivakumar, vice president - Revenue Management, Jet Airways, "Airlines are increasingly looking at being part of an alliance or consolidating as combined volumes extract cost savings, while simultaneously approaching the suppliers since there exist monopolies or oligopolies in the business of distribution, catering and airport handling." He further mentioned that supply and demand, with respect to price has to make the industry viable, so as to make the customer ultimately realise the value at a certain price.

Markus Müller, assistant manager, Business Insight, IATA agrees. He says, "We must encourage the customer to pay more to improve our offerings and not always concentrate on costs; there needs to be strategies for pricing in India. In fact, many airlines don't know why a particular passenger chose the airline - meals, in-flight entertainment, price, schedule, loyalty programs, etc."

While the aviation industry is going through a rough cloud, the Mumbai leg of the world tour focussed strongly on the operational aspect and overlooked much information and discussion on offline distribution - an issue troubling the IATA-accredited travel agents, who were in attendance. The reasons could be many, but amongst the primary ones would be the airlines' initiative to cut distribution costs, in favour of developing a strong, robust online platform.