Flying in still-troubled skies
GENEVA, SWITZERLAND – Tony Tyler, former chief executive of Cathay Pacific, will succeed Giovanni Bisignani as Iata’s (International Air Transport Association) director general and CEO, effective 1 July 2011, the organization’s member companies voted 7 June.
Tyler steps into a job that won’t get any easier this year, with Iata also announcing this week that it is sharply cutting its forecast for airline profits for 2011 to $4 billion, a 54 percent fall compared with the $8.6 billion profit forecast in March.
Tom Tyler, Iata's new CEO
Giovanni Bisigniani, outgoing head of Iata
It will be a 78 percent drop compared with the $18 billion net profit (revised from $16 billion) recorded in 2010, Iata noted in a statement Monday. “On expected revenues of $598 billion, a $4 billion profit equates to a 0.7% margin.”
Natural disasters, oil prices, unrest creating “unprecedented shocks”
Bisignani handed out the glum assessment. “Natural disasters in Japan, unrest in the Middle East and North Africa, plus the sharp rise in oil prices have slashed industry profit expectations to $4 billion this year. That we are making any money at all in a year with this combination of unprecedented shocks is a result of a very fragile balance. The efficiency gains of the last decade and the strengthening global economic environment are balancing the high price of fuel. But with a dismal 0.7 percent margin, there is little buffer left against further shocks,” the outgoing director says.
Airline profit factors not the same as in 2008
The gloomy picture is not, however, a repeat of 2008, when the global economic crisis caused major problems for the airlines. A number of factors have changed significantly.
- Fuel is again a factor but the price spike, with an expected high of $115 a barrel this year, is different. Oil inventories are low, but there is ” substantial spare OPEC and refinery capacity, which was not the case three years ago. Second, the monetary expansion that fuelled a surge in financial investments in commodities is ending, which will remove a major upward pressure on fuel prices.”
- Passenger and cargo demand are both on the rise, thanks to higher GDP (gross domestic product), both the increases are smaller than earlier projected, and the “price-sensitive leisure” travellers market fell by 3-4 percent in the first five months of the year as fuel prices rose
- Passenger load factors were “hovering around 77 percent” by April, “more than a full percentage point below the 78.4 percent achieved for international traffic in 2010″, with capacity growing (5.8 percent) faster than demand (4.7 percent)
- Global economic growth is the key risk factor: “High energy prices will certainly have a slowing impact on economic growth. However, the impact will be mitigated by two factors. First, while high oil prices previously triggered recessions, today’s economies (which generate a unit of GDP using just half the energy required in the mid-1970s) are less sensitive. Second, the corporate sector is cash-rich, business confidence is high, and world trade continues to expand at around 9 percent annually. The International Monetary Fund and others have raised global growth projections, which would indicate a recovery in demand growth to the historical 5.6 percent level for the second half of 2011. IATA’s forecast for continued, albeit lower, airline profits despite $110 a barrel oil prices, is dependant on a strong economy to generate sufficient revenues to partially offset higher fuel costs.
Zurich, Switzerland (GenevaLunch) – Swiss was the best-performing of Lufthansa Group’s carriers in 2010, Air Transport World reports 21 March. The airline group 17 March published its annual report for 2010, showing Swiss in a much stronger position than in 2009.
It carried 14 million passengers, the highest number in its history and had a load capacity of 82.4, above the industry average: Europe averaged 79. in 2010 and North America 82.2, according to Iata (industry association) figures.
Financially, Swiss had profits of of €298 million, up from €93m in 2009. Revenues rose 25 percent to €3.46 billion. The figures exclude Edelweiss.
The company has increased traffic by about 50 percent a year for the past five years, since its partnership with Lufthansa, and it has hired 1,000 new staff.
The strong 2010 performance “is due largely to effective cost management, but also to strong demand and the upswing in intercontinental and freight business, as well as strong sales in the domestic Swiss market”, the company said in a message to shareholders.
The Swiss economy outperformed Europe in 2010.
Hiking in the Swiss Alps, among the vines near Salgesch/Salquenen in Valais
Bern, Switzerland (GenevaLunch) – The Swiss Federal Council has approved a four-point plan to strengthen the tourism industry in Switzerland in order to increase revenue and create more jobs. The Alpine regions are a large part of the new focus.
Tourism accounts for 3 percent of Switzerland’s economic activity and 4.2 percent of the workforce, or the equivalent of 151,000 fulltime jobs.
The finance ministry, Seco, has been given the task of developing specific programmes to carry out the strategy, with the first programmes ready for 2012.
The strategy centres around four areas:
- to increase market share in the Alpine region, taking into account sustainable development
- create high quality jobs
- increase the added value for regions
- framework for tourism firms needs to be improved and the tourism offer in general made more attractive.
Inter-Europe air traffic remains weak
Worldwide improvement is concentrated in Asia, Latin America
Brands, not flags, must guide the industry to profitability, says Iata head
Geneva, Switzerland (GenevaLunch) – The airline industry is expected to have an overall loss of $9.4 billion for 2009, according to Iata, the Geneva-based air transport industry organization, which released new figures Thursday 11 March. The loss is lower than Iata’s December projected figure of $11b. “More significantly, we now forecast smaller losses in 2010 of $2.8b, compared to our previous forecast of $5.6b.”
The improvement is due to year-end growth in traffic that carried on into January, but it was much led by Asia and Latin America, with the US and Europe far more sluggish.
Growth in passenger demand, world airlines 2006-2009 (Iata)
Click on image to view larger
“We can be optimistic but with due caution,” Giovanni Bisignani, CEO and director-general says. “Important risks remain. Oil is a wild-card, over-capacity is still a danger, and costs must be kept under control – throughout the value chain and with labour.”
Asian and Latin American carriers posted international passenger demand gains of 6.5 percent and 11.0 percent respectively in January. North America and Europe lagged, with international passenger demand gains of 2.1 and 3.1 percent.
Tips for visitors
- pick up the official visitors’ guide in English prepared by Illustré magazine, by far the easiest way to find your way around, and well written
- go to the bank beforehand, as there are only two ATMs inside the hall and they tend to be busy; bring change, as there is just one change machine, near the entrance
- wifi: yes, Palexpo has it, but with a pre-paid card for one hour to three days, on sale at door E13
- children, dog and smoking: no smoking inside the building and six designated areas just outside; no dogs except guide dogs; children 2-5 years can be left at the nursery for CHF5/hour for three hours
- click on images below to view larger
Geneva, Switzerland (GenevaLunch) – The born-again car industry is hoping to get out of the red by shifting most of us into the green. There are two kinds of cars at the 2010 Geneva Motor Show: those for consumers who care about the environment and their pocketbooks, and those who lust after big hunky gorgeous fast cars. Switzerland’s Illustré magazine, which prepares the official visitor’s guide writes aptly that “there will always be extremists: hardline opponents of he automobile on the one hand, and absolute car fanatics on the other. But increasingly, passion and reason are coming together.”
Swiss unemployment stable in fourth quarter, 2010 outlook brighter
More people working in Swiss healthcare
Neuchatel, Switzerland (GenevaLunch) - The Lake Geneva region showed the strongest growth in employment in the fourth quarter of 2009, up 1.1 percent. Zurich was the only other area to show growth, 0,9 percent. Overall, Swiss unemployment remained stable, with a slight slip of 0.3 percent compared to the same period in 2008.
Fourth quarter figures for Swiss unemployment published Thursday morning 25 February show with significant differences between industry, where the number of jobless continues to rise, and the services sector, where the jobless rate is falling. The outlook for 2010 appears to be brighter, according to Federal Statistical Office forecasts, with an increase in the number of jobs available. For the first time in five quarters, industry looks set to increase the number of jobs open, after seasonal worker adjustments to the figures.
The number of people actively working rose by 0.3 percent in 2009, thanks to women, whose presence in the workforce increased by 0.8 percent, while the number of men working fell by 0.1 percent.
Geneva, Switzerland (GenevaLunch) - The hottest change in the airline industry is the rapid move to BCBP, bar code boarding passes, whose use has nearly doubled in the past year. By the end of 2010 airports should have 100 percent BCBP coverage, meaning that airlines should be able to adopt this service if they want to, allowing anyone with any type of mobile phone to check in by showing the bar code from his or her phone: the end of the paper check-ins. The change is a particular boon for people who are traveling and who don’t have easy access to printers, possibly most airline passengers. Currently, 115 airlines use this and another 23 plan to.
Iata, at its annual media conference in Geneva Tuesday 15 December outlines some of the other improvements passengers will see in coming months, with the goal of moving people through airports faster.
Giovanni Bisignani, Iata
Cointrin Airport, Geneva
Geneva, Switzerland (GenevaLunch) – The world’s airlines are expected to lose $5.6 billion in 2010, nearly twice earlier forecasts of $3.8b. The losses will come on the heels of an “Annus Horribilis” in 2009 where losses will likely be $11b for the industry worldwide, IATA (International Air and Transport Association) announced Tuesday 15 December. Between 2000 and 2009 airlines lost $49.1b, a Decennis Horribilis, according to Giovanni Bisignani, the industry group’s director general and CEO.
Bisignani, at the group’s annual press conference in Geneva, pleaded for less government regulation and a more competitive environment to ensure that the industry does not suffer another decade with this level of losses. “Government regulation is keeping the airline industry financially crippled,” he noted. “It is 30 percent cheaper to fly today than a decade ago. This is a very competitive industry but governments still refuse to let airlines operate competititively.”
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Update 17:35 Geneva, Switzerland (GenevaLunch) – Several key indicators from Geneva’s cantonal employment office show that the canton’s economy slowed down significantly in the first three months of 2009 compared to last year. Industry, especially banking and hotels, has been particularly hard hit. But the watch industry promises to expand slightly in the second quarter. The cantonal office in May noted that unemployment rose 14.5 percent year on year to April 2009, although that compares to a nation-wide increase of more than 35 percent for the same period. Cantonal authorities hope for a rebound towards the end of the year.
Venezuela’s President Hugo Chavez extended his government’s control over the petroleum industry Friday by sending military vehicles to seize the assets of 60 oil industry service providers. The state oil company PDVSA owes foreign oil companies billions of dollars, but has cash flow problems due to the slump in oil prices. Reuters, BBC, El Nacional (Spa)
Italian carmaker Fiat has plans to buy American automaker GM and, with its recent agreement to purchase Chrysler, create the second largest car manufacturing company in the world, after Toyota. CNN, Financial Times
Updated 12:30 Bern, Switzerland (GenevaLunch) – Preliminary figures for Swiss gross domestic product (GDP) growth in 2008 show 1.6% growth (at constant previous year prices) and 3.9% at current prices, based on averages of the four quarters. The estimated figures were released 3 March with Bern’s fourth quarter GDP report. But Q4 figures showed a fall, the second quarterly slip in a row, technically putting Switzerland into a recession (TSR, Fre).
