KUALA LUMPUR: Airline companies at the International Air Transport Association (IATA) AGM here yesterday were in no mood to talk about expansion of their fleet or routes.

The sombre reality of the situation was that the industry was in survival mode, as IATA director-general and chief executive officer Giovanni Bisignani reminded participants over and over again throughout the two-day conference.

The present economic crisis, said to be the worst-ever faced by the aviation industry, muted all talk about capacity expansion, which was a staple at previous AGMs.

“There’s very little bravado from the CEOs this time around,” said a two-decade-long veteran aviation reporter who has followed the IATA event religiously. “You know it’s tough when the usually optimistic guys are saying, ‘What now?’”

Even veteran leader of airline bellwethers such as British Airways (BA) expressed surprise at the stranglehold that the crisis is having on the industry.

“This is the most difficult period I’ve witnessed in my 30 years,” said Willie Walsh, BA’s chief executive.

“It’s a combination of factors that’s having such a negative effect. We’ve got weak economies, we’ve got low consumer confidence, we’ve still got volatility in oil prices and currencies, and we’ve got a banking system that still isn’t functional. All of these combined have made it very difficult for the airline business.”

Further evidence of the decline in industry fortunes could be seen from the drop in premium travel — 19% for the industry and 15% for BA — in the first quarter of this year, Walsh said.

In a bid to cut cost, BA is doing what most other airlines are doing — grounding planes, cutting capacity and possibly jobs. This comes after the company reported its worst financial results ever, a loss of £375 million (RM2.14 billion) for FY09 ended March 31.

If there is a silver lining for at least the domestic industry, it is that like most industries, the airline business is also expecting Asia to lead the recovery charge.

Newly appointed IATA chairman for 2009, Tony Tyler, who is also Cathay Pacific’s CEO, told The Edge Financial Daily that he expected Asia to make a big rebound, although his company was presently going through the same trials and tribulations as the others.

He said the focus for him as IATA’s new chair would be to ensure that aviation would not be victimised when it came to discussions on the environment.

“I think the most important thing we can do is to concentrate on the conference in Copenhagen towards the end of the year and make sure that aviation gets a good deal,” he said, referring to the United Nations environment summit.

IATA’s director for government and industry affairs, Carlos Tanner, echoed Bisignani’s call for liberalisation of the aviation industry to enable airlines to remain profitable.

“This is an industry that has not recovered its capital and the bilateral treaties amongst governments are limiting the airlines’ access to global equity markets,” Tanner said. Bisignani had said that liberalising key routes today would create 24 million jobs and US$490 billion (RM1.73 trillion) in economic activity.

To a question from a reporter on whether low-cost carriers posed a threat to conventional airlines owing to the crisis, Malaysia Airlines’ managing director Datuk Seri Idris Jala said in the case of Malaysia, the market was big enough to sustain both MAS and AirAsia.

“In the last couple of years, we have had AirAsia in our market. They’ve been able to grow, we have been able to prosper, too,” he said. “The last two years have been the best for MAS in our 60-year history.”

“They’ve grown — good luck to (Datuk Seri) Tony (Fernandes) — but we have also prospered. I’ve always said to him there are opportunities for us to work together but when it comes down to customers we have to compete healthily, which is good for customers.”

KLIA voted best airport
Meanwhile, the Kuala Lumpur International Airport (KLIA), owned and operated by Malaysia Airports Holdings Bhd (MAHB), has been voted the best airport for its leadership in service levels, industry and environmental initiatives and cost efficiency.

“Sustained by strong commercial revenues, MAHB has maintained some of the lowest aeronautical charges in the world. MAHB has responded to the global economic meltdown with a 50% discount on landing charges for two years,” Bisignani said.

Airline CEOs were similarly in praise of MAHB for the measure, with BA’s Walsh and Qantas Airways’ newly appointed Alan Joyce saying that they would be interested in flying back to Kuala Lumpur.

However, both maintained that any expansion of their flight routes into KLIA would only occur when the economy improved.

“It’s one of the destinations on our agenda but in the current environment, we won’t be expanding,” Walsh said.

IATA has identified airport levies as one of the primary woes for airline companies especially in the current situation. It has come up with a “Wall of Shame” detailing some of the “worst offenders” — airports which have raised their charges in a challenging economic climate.

The list includes English regulators, which had allowed London’s Heathrow airport to raise its charges by 86% between 2008 and 2013 and the Delhi and Mumbai airports in India for their 207% increase.

This article appeared in The Edge Financial Daily, June 10, 2009.