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Will the aviation sector recover in 2009?
January 02, 2009
Despite every effort from global airlines to cut capacity, reduce flights, watch every penny and come up with ingenious ways to raise ancillary revenues, close to 26 airlines went under or suspended operations in the course of the year. As the chief of IATA Giovanni Bisignani aptly put it: The industry is in intensive care, with total global losses for the year pegged at $5 billion.
The month of November brought further gloom to an already grim picture. International passenger traffic fell by 4.5 per cent and international cargo by a steep 13.5 per cent, the sharpest fall since 9/11. International capacity dropped by 1 per cent.
In India, the carnage was complete. Almost all the carriers registered jaw-dropping losses (barring, apparently, Paramount whose numbers are not public so we can only take their word for it).
The low-fare breed of carriers all but disappeared. Though the airlines continued to call themselves low-fare or low-cost carriers (LCCs), low fares for all practical purposes became a thing of the past (even as this column was being written, Indian announced year-end cuts in fares, but how real and sustained they are remains to be seen).
So, can we say Thank God it's 2009? If one goes by IATA's prediction, the pain should be halved in this year (global losses are projected at $2.5 billion for the year, down from $5 billion in 2008).
But the expectations for India and the Asia Pacific fail to bring the much-awaited cheer associated with a new year. If IATA's predictions are anything to go by, Asia-Pacific carriers are expected to see losses more than double from the $500 million in 2008 to $1.1 billion in 2009! The situation is expected to worsen with a drop in global cargo on account of the global recession.
The domestic Indian scenario isn't looking too bright either. Yes, fares may drop temporarily but taxes and surcharges remain high, taking away the joy of lower basic fares.
The collective groans of the industry have galvanised the government into some action to alter a skewed tax regime, a process that must reach its logical conclusion. If that happens, the aviation industry loses its favourite whipping boy and can no longer blame all its ills on the governments policies.
Then, the airlines will be forced to tighten their own seatbelts, be paranoid about cutting costs (more than one aviation expert has pointed out that in the present environment, you wont be flying long if your costs are high) and be more realistic with their expansions and hiring.
As for passengers, let's just keep our fingers crossed that better sense prevails before some of the good of the last two or three years comes undone.
Fewer airlines means less choice available those who remember the era when one was at the mercy of the state-run carriers, don't want to land there again.Click here to search for lowest airfares!
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