Tourism and Air authority bosses square up to war

Facing increased uncertainty in the region two big hitters look forward.

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By  John Irish Published  March 25, 2003

With war in the Gulf under way, both the World Tourism Organisation (WTO) boss, Francisco Frangialli and International Air Transport Association (IATA) chief, Giovanni Bisignani yesterday (March 23) discussed the future of their respective industries.

Responding to the outbreak of war, in a letter sent to WTO members, Frangialli reiterated international tourism’s resilience should the war be drawn out.

“If the conflict remains short and contained, it is not out of the question for recovery to come during the second half of the year,” said Frangialli.

During the build up to the war, the region had already seen an increase in fuel prices for airlines, rising insurance premiums and fear among the travelling public. As the war takes shape, the uncertainty surrounding consumer psychology has inevitably discouraged bookings and delayed investment.

“We would have preferred something other than the worst possible solution - war. But there are two powerful reasons to remain reasonably hopeful for the recovery of tourism. As an industry, which ensures stability and promotes recovery, tourism has never suffered a deep and lasting recession. It has always bounced back and has always done so quickly,” explained Frangialli.

“Secondly, tourism has always come out of turbulent times in much better shape than it has gone into them. The economic and financial crises in Asia-Pacific and Russia in 1997-1998 were clear examples. These destinations came out of the recession stronger and more firmly on the road to sustainable development.”

Frangialli also claimed that the performance of the industry in recent months confirmed the WTO's previous market analyses, which highlighted that the need to travel, whether for business or leisure, was too deeply ingrained in society to be easily effaced. He added that the way tourism adjusted to crises by accelerating changes in consumer habits through new operators such as low cost airlines indicated that the industry was extremely flexible.

“It has led to restructuring and regrouping, the implementation of new technologies, the modernisation of marketing techniques, the strengthening of co-operation between the private and public sectors, to the benefit of all involved,” he said

He suggested that one positive factor to emerge out of the crisis was that “the eyes of many had been opened to the economic importance of tourism, helping gain the sector worldwide recognition.”

He stressed that international tourism was one of the world's top export categories, with receipts in 2001 of 464 billion dollars.

The WTO, in an effort to help member countries, intends to pay particular attention in coming weeks to those areas affected by terrorist acts and regions that are most vulnerable to a downturn in tourism such as the Middle East, North Africa and South Asia.

“During this difficult period for the Arab-Muslim world, it is important to be able to use tourism, as many of its governments wish to do, as an instrument of openness and as a channel of communication with the rest of the international community,” concluded Frangialli.

While the tourism industry regroups, the airline industry, which has suffered immeasurably over the last few years, was also taking stock of the situation.

Having accumulated over US $30 billion in losses since 9/11, and with aviation analysts predicting that the latest conflict could add an extra $10 billion of losses on international traffic by extending the current traffic slump into the summer, Giovanni Bisignani, director general of IATA looked at how the industry could rescue itself from falling deeper into the abyss.

“At this point, the air transport industry must look beyond the horizon and reinvent itself,” he said, speaking at the International Civil Aviation Organisation (IATO) ATC5 conference.” Our industry needs change. Government regulation keeps our industry from changing. This ICAO conference may well represent the last chance to set our industry on the right regulatory track.”

With many airlines rescheduling and cancelling flights across the world, the IATA’s chief outlined obstacles that kept the industry stagnant and prevented it from developing.

“Airlines should be free to merge and approach the international financial markets for capital. The wave of globalisation must eliminate national ownership limits wherever they represent an obstacle to development. These limits are denying airlines the freedom of action given to all other businesses,” said Bisignani.

Although he acknowledged that for many developing countries, a national airline could be considered an attribute of sovereignty and a necessary asset for its economic development, Bisignani pointed out that these states should not create obstacles for those who wished to liberalise further.

He insisted, however, that dogmatic competition policies combined with a lack of understanding of how air transport operated on the part of the competition authorities also restricted the airlines freedom to co-operate or to merge.

“What other global business is more fragmented than air transport? We need the economies of scales that mergers or acquisitions can provide with the proper competition supervision. The regulators must take up the challenge of change,” concluded Bisignani.

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