International Air Transport Association (IATA) director-general Giovanni Bisignani said on Monday 17 September that the high price of crude oil and the crunch in the international credit markets are serious causes of concern for airlines in 2008.
Bisignani said that airlines are expected to post a net profit of $5.6 billion in 2007, which amounts to around 1 per cent of revenues. In June, IATA had forecast a profit of $5.1 billion for the year.
The industry's profit forecast for 2008 has been lowered to $7.8 billion, down from the $9.6 billion projected last June.
Bisignani said one of the big problems in the coming year would be oil prices and the credit crunch. If it resulted in a loss of consumer confidence, there could be a sharply negative impact on demand. He said that the US Federal Reserve's decision on interest rates - the Fed meets on Tuesday - will have an impact on oil prices.
But, the IATA chief added, there was some positive news from airlines. He said that the restructuring of the airline industry in the US in particular and over North America in general had started to yield profits. He also called it a "wake-up call" for trade unions, which are engaged in negotiations with some American airlines.
The IATA chief's message comes on the eve of the 36th session of the International Civil Aviation Organisation (ICAO), which is to be held from 18 to 28 September. The ICAO's 180 member nations will meet in Montreal.
Bisignani urged governments to show leadership in three critical areas - safety, security and the environment. He said the industry has an outstanding safety record; the accident rate has been cut in half over the last 10 years, but safety standards still have be improved in certain areas, like Africa, Latin America, Indonesia, Russia and Brazil.
On the question of security, Bisignani noted that airlines are much more secure today than they were in 2001. But, he said, "The system is still a $5.6 billion uncoordinated mess." The figure refers to the amount that airlines and passengers pay each year for security. He said there was no standardisation, and that each airline and government had a different set of rules.
One of the major issues to be addressed at the ICAO session is the question of aircraft emissions and the environment. Rejecting unilateral measures like Europe's move to include aviation in its emissions trading scheme, Bisignani said the issue was one all governments needed to address, as environment was a global problem, which needed a global solution.
Unilateral measures can start political, diplomatic and legal battles between states, and the environment will suffer, he warned. The IATA head challenged governments to set targets aimed at saving 120 million tonnes of carbon emissions annually, through more efficient infrastructure and better operations. He also called for measures to support greener aircraft and eco-friendly fuel, with positive economic incentives like tax breaks.