A Structural Adjustment

The industry is structurally out of balance. The precipitous fall in yields will likely never be fully recovered. It is difficult to see how this can be balanced on the cost-side of the equation. After almost a decade of cost cutting, non-fuel unit cost reductions will be incremental at best. And the risk of rising fuel costs will be constant.

There will be some individual airline success stories. But without relaying the foundations of the industry to facilitate structural change, covering the cost of capital for this hyper-fragmented industry will remain a dream at best, said Bisignani.

In November, seven countries (Chile, Malaysia, Panama, Singapore, Switzerland, the UAE and the US) signed a multilateral Statement of Policy Principles that was also endorsed by the European Commission.

These principles represent a commitment by the signatories to modernize the industry and make cross border consolidation possible. They are premised on a level playing field which is a responsibility of governments.

Consolidation is the great hope for the industry. The round of consolidation experienced since this horrible decade began is a step in the right direction. But it has been confined within political borders as a result of ownership restrictions in the archaic bilateral system. The industry cannot afford the mounting losses of the status quo.

The next decade must facilitate consolidation, said Bisignani.<Korea Shipping Gazette>