China optimistic about its aviation future


CHINA is optimistic about its aviation future even as the International Air Transport Association (Iata) for the third consecutive year slashed its annual profit forecast by at least half. This year’s profits are expected to fall from last year’s US$7.9 billion to US$3.0 billion. Iata chief Tony Tyler said: “The industry’s profitability is balancing on a knife edge.”

But China has reasons to smile. After all, Asia is the industry’s star player and China its main driver. Last year Chinese carriers contributed to half of the industry’s global profits. Going forward, China has announced plans for 70 new airports in the next three years and expansion of 100 existing airports – an unprecedented move on such a scale by any country.

Chinese carriers too are poised for expansion and growth, both domestically and internationally. Li Jiaxiang, director of the Civil Aviation Administration of China, said the country would add more than 300 aircraft a year from now until 2015. Air China for one, which has a fleet of 250 aircraft, will expand its fleet to 700 in five years.

Foreign carriers eyeing the Chinese pie too have reasons to smile. Qantas is launching Jetstar Hong Kong in a joint venture with China Eastern Airlines, and has not given up on an Asia-based premium airline to cater to China’s growing nouveau riche. Air Canada becomes the latest foreign airline to express interest in a budget carrier connecting North America and China and other Asian destinations, noting how Chinese carriers have also increased their presence in Canada.

It looks like 2012, which coincides with the propitious Year of the Dragon of the Lunar calendar, belongs to China, whose optimism provides a valuable lesson for the rest of the aviation world: the engine of growth must be sustained. Waiting helplessly for some more airlines to join busted European airlines Spanair and Malev may well turn out to be a self-fulfilling prophecy.

So said one of the speakers, Qatar Airways chief executive Akbar al-Baker, at the Iata summit:: “When we meet again next year there will be far fewer of you sitting there.”


Air France to axe 5,000 jobs

It is no coincidence that Air France has announced it will cut more than 5,000 jobs – about 10 per cent of its workforce – by end 2013 to reduce costs, on the heel of the grim message delivered by the International Air Transport Association (Iata) at its recent annual summit in Beijing that more airlines would go bust this year.

European carriers are most vulnerable in light of the continuing Eurozone crisis. Earlier in the year, Spanish carrier Spanair and Hungary’s Malev went bust.

Other airlines that have previously made similar moves include Qantas, whose restructuring of its maintenance and catering divisions will render 500 positions redundant, and the number could be higher.

It is interesting how Air France chief Alexandre de Juniac prefaced the move with the following statement: “Air France is facing a fundamental choice about its future. Our business plan has two ambitions: to ensure Air France returns to profitability and to better serve our customers.”

Staff retrenchment is a bitter pill to take, and in many countries this may meet with industrial unrest. So customers share in the attribution. How exactly will they benefit? It would be good to know.

Perhaps Mr de Juniac has a point there. While airlines should be managing their costs with discipline no lesser in good than in difficult times, the worst thing to happen is when they are clutching at straws, loyal customers are switching allegiance.