Airline Execs Told to Expect More Economic Turbulence

Airlines with international operations will struggle to maintain even minimum profit levels this year with a sluggish world economy, high fuel costs and widespread pay demands, the head of the industry’s global body said Monday.

Pierre Jeanniot was speaking at a news conference after telling the International Air Transport Assn.’s annual general meeting that its 274 members made a small profit of $2.8 billion last year on international services, slightly up on 1999 but well under 2% of their overall revenues.

“We are in a very difficult situation and right now I think that if we finish 2001 with the same profit level we would frankly be doing quite well. But there is a big uncertainty on that number right now,” he said.

Earlier Jeanniot told the gathering of top airline executives that civil aviation would have to slash costs and increase efficiency if it were to boost funds for essential modernization while meeting demands from investors for higher returns and from the public for more and better services.

“We need to foster a much more financially responsible management style with great focus on the bottom line,” said the director-general of Geneva- and Montreal-based IATA.

To meet forecast growth in consumer demand “will mean very large expenditure on research and development, aircraft manufacturing, airports and ATC [air traffic control] systems,” he added.

The IATA annual report showed that despite a huge rise in fuel costs, 2000 had been a better year for the industry than 1999, when overall profits after interest payments on loans were $2.4 billion.

Last year was the seventh year running that IATA members, many of them smaller national flag-carriers with limited business and high running costs, had chalked up an overall profit after years of red ink during the recession of the early 1990s.