IATA chief says airlines’ profitability may depend on restructuring

The airline industry will need consolidation to be profitable in future, but backward-looking regulation is preventing this, said the director general of the International Air Transport Association.

Pierre J. Jeanniot said the increasingly frail profitability of the air transport industry is also caused by competitive pressure on yields, the large cost increases imposed by higher fuel prices over the past two years and the slow impact of the e-commerce revolution on airlines’ marketing costs.

“The fundamental laws of economics have not changed – and our industry should better manage itself accordingly,” said Jeanniot, in a speech at the opening of the Airline Financial Summit 2001 on April 5.

“But there are more fundamental problems. Increased consolidation is required but is being held back by out-dated bilateral treaty provisions and archaic foreign ownership rules. These anachronisms are preventing a more efficient and consistently profitable structure to emerge.”

Jeanniot said that while some airlines have been privatised, many airports and most air traffic control facilities remain as government monopolies, with perennial inefficiencies and capacity shortages.

“In some parts of the world, airports that have been privatised have been regarded as licenses to print money, in the absence of independent watchdog authorities,” he said.