Airlines may lose $5.60 billion in 2010 despite demand revival: IATA

Freight volumes are up 3%, however, passenger yields are still 15% below peak levels and IATA expects losses for 2010 could be $5.60 billion

Airlines have started witnessing improvement in demand, but instead of profits they might register losses to the tune of $5.60 billion this year, the latest International Air Transport Association (IATA) report has said.

"The 3% increase in freight volumes from December to January is particularly encouraging. We can start to see the future with some cautious optimism. But better volumes do not necessarily mean better profits. Passenger yields are still 15% below peak levels and we expect 2010 losses to be at $5.60 billion," IATA director-general and chief executive Giovanni Bisignani said in a statement.

IATA has also said that demand for international scheduled air traffic has showed improvement in January this year. January passenger demand was up 6.4%, while a 1.2% increase in capacity pushed load factor to 75.9% compared to last year, it said.

International cargo demand showed a 28.3% improvement with a 3.7% increase in capacity, pushing load factor to 49.6%, which is a significant change from 40.1% recorded in January 2009.

The year-on-year increases reflect a steady improvement from the precipitous fall in demand that characterised the early part of 2009, rather than merely a dramatic improvement in the month this year, the report said.

However, demand must improve by a further 2% to return to the peak levels of early 2008, IATA said. But improvements are also geography-based, the report added.

The best signs of improvement have been seen in markets with strongest economic recovery like Asia, Latin America and the Middle East.

Asia-Pacific carriers experienced 6.5% increase in demand compared to the previous year. The region, which is leading the global economic recovery, has realised 31% demand improvement, while those in North America and Europe saw it increase by 2.1% and 3.1%, respectively.

Middle Eastern carriers grew throughout the recession with growth accelerating to 23.6% in January, IATA said.

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    Why the US trumps India in IT innovation

    With its rich pool of talent, technology ‘powerhouse’ India should be the IT incubator for the world. So why is the US still leading in enterprise and innovation?

    The Budget has been disappointing for the information technology (IT) industry. The much-needed Software Technology Parks of India (STPI) scheme has not been extended. There are also no schemes to encourage innovation in IT. The only silver lining has been the generous funding allocated to the unique identity (UID) project. This will surely help software and hardware companies to generate more revenue.

    For all the hype about India becoming a superpower in IT, the government consistently shows a lack of vision. Contrast this with the US. Even in such dire economic times, the US shows its mettle by investing for a bright future. The US govt is coming up with a new category of visas for founders of start-ups. The Bill has recently been introduced and is yet to pass.

    The proposed new visa norms go something like this: If one can get funding of $250,000 for one's start-up—with $100,000 from a qualified US angel investor or a venture capitalist (VC)—one is eligible for a two-year visa to grow one's start-up. At the end of two years, if the start-up is able to generate a $1 million in revenue or get additional $1 million in funding or create five full-time jobs (not including jobs for children or spouse), the founder becomes eligible to get a legal residence. Hats off to the US, the eternal place for enterprise and innovation.

    It is this spirit of the US that has cemented its place as the leader throughout the 20th century and now going into the 21st century, it is already laying the foundation for its continued leadership.

    Indians on the other hand are happy to be contractors for US firms. In fact, a growing country such as India should be the hub of entrepreneurship due to its growing market and the government should have had all kinds of schemes to foster high-tech entrepreneurship.

    But there is none. Let us remember one thing—of all the software which Indians use to make their outsourcing money, most have been invented in the US or European countries. Right from C, C++, Java, .Net, or the Internet or name any other innovative technology, nothing has come out of India. And I can assure you that if the government's current stand continues, none will come out in the future. We will have all kinds of excuses for being second grade. There is no dearth of excuses for inefficiency and incompetence in India.

    Is it any wonder then, that for the top brains of India, the US is still a magnet? For all the hoopla about Indian brains coming back, most of the people who come back are managers. Very few of the people who do high-tech innovation come back to India. And when they come back, they either go back after a while, or worse still, they end up working in more mundane but lucrative fields.

    A few weeks back, we had another unsavoury incident. Tata Consultancy Services, India's top outsourcing company, had its website hacked. A company that probably does security work for many clients could not keep its own website secure. The Tata Group is a great entity; I have high respect for them. I myself have worked for the Tata Group on several occasions. Nevertheless, I am disappointed here to see the state of security in one of India's premier companies.

    We don’t know what caused the security breach. Perhaps, a very rare vulnerability was exploited. I expected at least a press statement from the Tata Group. However, the lack of response from them somehow gives me the hunch that it could be plain negligence in keeping one's own website secure. Maybe I am wrong; it is still not late for the Tata Group to mend matters.

    Bottom-line, if we are not able to take measures to work on areas that could give us a leadership position, at least we should stop harping on how a great IT superpower we are. Remember that superpowers don’t get made overnight. The US has a big history of research in technology.

    The transistor which is the precursor of the electronics revolution was invented in the US in the 1950s. What has India to show for, in comparison?

    (Dr Samir Kelekar is founder-director of Teknotrends Software, Bengaluru.)

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    udit c

    1 decade ago

    It is next to impossible to innovate anything for a market on the other side of the planet, especially when there is no premium on innovation for the local markets.


    1 decade ago

    Sameer, you have made many valid points -
    didnt IT mature and become a great industry in india independent of govt support?
    So as a matter of interest, why are we still dependent on and give excuse that govt is not supporting ... can we use private means.... the reason why an indian in technology does not come back is money, standard of life and kind of work - i am sure in india, we can provide alll the three! so why depend on govt? we love blaming govt for everything

    Kingshuk Mukherjee

    1 decade ago

    I must say Dr. Samir Kelekar has hit the bull's eye on this subject. Despite our so-called IT super-power status all we Indians can do is what can be said in Marathi " Dusraynchi Bhandi Ghasne" or " Washing the dirty vessels of others - read Americans and Europeans. There is not ONE Indian company that is even close to achieving any software or hardware product that is a market leader globally or is of significant use in commercial applications. Some like "iFlex " solutions was in fact incubated by CItibank and later taken over another US software giant -Oracle. However I am optimistic that the scenario is changing very fast and it only a matter of time before one Indian company does some creative "Disruptive Innovation" that will take the world by storm. Some trivia for readers - Mr. Shiv Nadar (Chairman - HCL group) claims that his company HCL was the " First in the world to introduce the "PC" and not Apple as claimed by by Mr. Steve Jobs and Mr. Steve Wozniak, the duo who began Apple Computer in 1976.


    1 decade ago

    perfectly said


    1 decade ago

    Yes, it is disappointing to see not many IPs coming out of India. In US, the tie-up between university and industry is very synchronised and tight. Also US government spends milliosn over basic science research like NSF etc. I guess it is industry who have to take lead for innovations. I would say substantial part of Indian IT industry today prefer to work on the bottom of value pyramid. Which is more transactional, better managed by processes and is less riskier. I agree government should come up with the incentives to promote innovation. I would like to mention there are efforts like Prof. Anil gupta of IIM Ahmadabad who have take n huge steps to promote innovation at grass root level.

    Watch out for 17,000 on the sensex

    Strong manufacturing and export data helped Indian markets to surge

    Indian markets began the week on a strong note, following a surge in manufacturing activity in the month of February and rise in exports for the third consecutive month in January. The market gained momentum after a surge in Tata Motors on reports that the company had reported strong vehicle sales in February. At the end of the day, the Sensex shot up 343 points from Friday’s close to 16,773, while the Nifty closed at 5,017, up 95 points. Tomorrow we expect the market to stay up.

    At the end of the day, Reliance Industries Limited (RIL) rose 1% on reports of a possible acquisition of Canada’s Value Creation.

    Tata Motors rose 12% after the company reported that its total vehicle sales rose 58.46% to 69,427 units in February 2010 over February 2009.

    Welspun Gujarat Stahl Rohren gained 3%, after the company bagged overseas orders aggregating Rs600 crore for supplying pipes and plates.

    Shree Ashtavinayak Cine Vision declined 5%, after Dhilin H Mehta, chairman & managing director and also a promoter of the company, pledged additional 3.80 crore shares representing 4.81% stake of the firm.

    Everest Kanto Cylinder gained 3%, after the company won three orders aggregating $27 million to export CNG cylinders.

    EdServ Softsystems rose 5% after the company acquired Chennai-based e-learning firm, SmartLearn WebTV.

    Glenmark Generics Inc, a subsidiary of Glenmark Generics, has received ANDA approval from the United States Food and Drug Administration for Ropinirole Hydrochloride and will immediately commence marketing and distribution of the approved product. Glenmark Pharmaceuticals gained 2%.

    Reliance Media World’s radio division Big 92.7 FM has entered into a partnership with OnMobile Global, to launch a radio experience on the mobile platform. The stock shot up 4%.

    As per reports, prime minister Manmohan Singh on Monday ruled out rolling back a price hike in retail fuel prices despite pressure from his main allies, saying that populist policies would hurt the economy in the long term. He also tried to calm the fears of fuel price hike stoking inflation by saying that the direct effect on the Wholesale Price Index (WPI) will be no more than 0.4%.

    During trading hours, global ratings agency Moody’s Investor's Service said that the latest Budget represents a strong intention to renew fiscal discipline, which coupled with a fuel price increase announced last week are positive for its sovereign rating on India. Moody’s rates India’s local currency sovereign rating as ‘Ba2’ and assigned a positive outlook in December 2009.

    The manufacturing industry in February 2010 grew at its fastest pace in 20 months, expanding for the third month, thanks to expanding output and new orders, a survey showed. The HSBC Markit Purchasing Managers' Index, based on a survey of 500 companies, rose to 58.5 in February, its strongest reading since June 2008, from 57.7 in January. A reading above 50 means activity is expanding.

    Exports rose an annual 11.5% in January 2010 to $14.3 billion, the third consecutive rise after 13 straight months of decline, the government said. Imports rose 35.5% from a year earlier to $24.7 billion. The trade deficit stood at $10.4 billion in January compared with $5.4 billion a year earlier. Exports for April-January, the first 10 months of the 2009-10 fiscal year, were down 17.8% at $131.9 billion from the same period in the previous year.

    During the day, Asia’s key benchmark indices in Indonesia, South Korea, Singapore, Japan and Taiwan rose between 0.2%-1.29%. However, indices in China and Hong Kong fell between 0.48%-0.72%. According to reports, the Purchasing Managers’ Index (PMI) derived from a survey conducted by the China Federation of Logistics and Purchasing for the National Bureau of Statistics (NBS) fell to 52 in February from 55.8 in January.

    As per media reports, the Australian central bank raised its cash rate another quarter of a percentage point to 4%.

    On Monday, 1 March 2010, the Dow Jones Industrial Average gained 79 points while the S&P 500 and the Nasdaq Composite were up 11 points and 35 points respectively.

    The ISM reported that the manufacturing sector continued to grow in February 2010, even though it fell to 56.5 from 58.4 in January, as the gauge remained over 50. On the consumer front, personal spending rose 0.5% in January, even though income gained only 0.1%. Spending on both durable and non-durable goods was strong.

    According to the US commerce department, the fourth-quarter gross domestic product of the US grew at a 5.9% annual rate, rather than the 5.7% pace it estimated last month.

    In premarket trading, the Dow was trading 44 points higher. 

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