'Aviation may see recovery in 2010'

That the global aviation industry is going through a severe turbulence is an understatement. Still it is flying, though low, and looking at clearing the long air pockets. Willie Walsh, CEO, British Airways (BA) explains challenges like consolidation, the recovery path and other issues to Satya Naagesh Ayyagary

Q. How do you see the global aviation business in the current economic environment and when do you see it recovering?
A. The year 2009 will be a difficult year for everyone. I hope to see a recovery in 2010. Liquidity will be a problem this year and access to finance from banks will be very difficult. In fact, the US will move out of recession in late 2009 and early 2010. As far as UK and Europe are concerned, we project a weak economic environment.

Q. The industry is going through a bust right now. Where do you see India in that context?
A. A little bit. I saw some figure recently that demand has come down by 20-25 per cent. I don't know how accurate that was. We have looked at India over the last few years and seen the growth in aviation has taken off. The concern that we and everybody had was of infrastructure struggling to keep up with the growth. May be this slight dip will give the infrastructure an opportunity. Now we got new airport here at Hyderabad, Bangalore and development at Delhi and Mumbai, which is very important. Its interesting times.

Q. The aviation industry around the world seems to be going on a consolidation mode. How does this bode for the industry?
A. The first large-scale consolidation was the merger of Delta Air Lines and Northwest Airlines last year to create the world's largest airline and that has been good. Similarly, the merger of Air France and KLM Royal Dutch Airlines in Europe too has been good. The next challenge is global consolidation.

Q. So it's the beginning of an era of the death of national flag carriers?
A. Today, in the era of liberalization, governments don't need to own airlines or invest in them. The system works better without the intervention. In fact, British Airways was privatised 22 years ago. It should be customerdriven and a genuinely deregulated airline industry works better.

Q. But we have seen the effects of completely market-driven, deregulated industry like banking and financial services wreak havoc, and ironically it's the same state whose regulation and intervention you don't want expected to and coming to bailout? A. The banking industry became complex and with the introduction of more complex products. On the contrary, the airline industry is simpler. It carries people from point A to point B and carries goods facilitating trade. I don't see any parallel between the banking and financial services industry and the airline industry.

Q. What has been the impact of unprecedented rise in crude prices last year on BA, and how is going to affect your turnover?
A. Our fuel bill in the first half of this year till end of September was 511 million pounds, a 52 per cent increase. Our fuel bill in 2007-08 was two billion pounds and this year it is going to be three billion pounds. Also, the complexity is the strengthening US dollar against the pound by 30 per cent. So, there are a number of moving parts. I don't think we have ever seen volatility like it 2008. Last year our turnover was about 9 billion pounds and we would post a little below that this year.