Airline Industry Power Shifts Toward Middle East
By Jens Flottau, Adrian Schofield, Bradley Perrett
Source: Aviation Week & Space Technology
IATA Chief Economist Brian Pearce says, “overall performance is still pretty good, except in Europe.” Cash flows are close to mid-cycle levels and airlines have managed to keep load factors up. Pearce notes that carriers have also added capacity at a slower pace. But he is worried this might change soon with an expected up-tick in aircraft deliveries from Airbus and Boeing this year.
“The problem is that the rest of this year looks very uncertain,” Pearce says. “We expect further deterioration in Europe; the second half will be worse.” The IATA guidance assumes anything up to and including a Greek exit from the Eurozone, but nothing more dramatic. The guidance also assumes a weak U.S. economic recovery, no hard landing of the Chinese economy, no Iran conflict and an average oil price of $110 per barrel.
To bolster airlines' ability to capitalize on demand, meanwhile, IATA is proceeding with its initiative for airline distribution. Tyler says the global distribution systems “have not been able to facilitate innovation like we have seen in other industries.” Therefore product innovations “cannot break free of product descriptions limited to booking classes such as F, C or Y and their derivatives,” he says.
IATA is working on new distribution standards that better enable airline differentiation; the foundation standard, to be defined this year, will be the basis for a common interface between airlines, consumer applications, distributors, travel agents or even other airlines. The common interface is also intended to allow airlines to make offers tailored to individual consumers. The business case for the new system and a road map for its implementation are to be presented at the World Passenger Symposium 2012 in Abu Dhabi in October.
Separately, to save costs, IATA is consolidating its global operations, reducing the number of local offices to 45 from 59. The remaining offices will in turn take on a broader role and drive global campaigns on a local level. The IATA financial settlement system will be consolidated into five hubs: Miami, Amman, Beijing, Madrid and Singapore.