While the yearly gathering last week of the International Air Transport Association (IATA) in Beijing, China drew delegates from different airlines around the world, in the next 12 months attendees in the next summit could be down.
American Airlines planes sit at their gates while others taxi for arrival and departure at O'Hare International airport in Chicago November 29, 2011.
IATA President Tony Tyler did not gave a hint which air carriers would no longer be around in 2013, but he acknowledged that competition in the global aviation industry is becoming tighter and even the larger airlines run the risk of folding up.
The conference this year saw the absence of two long-time members of IATA - Malev, the flag carrier of Hungary for 56 years, and Spainair, which is the fourth largest air carrier in Spain and closed in January.
Industry observers are now monitoring Qantas, Australia's flag carrier whose shares plummeted to a record-low below A$1 after the company issued a profit warning due to the weakness of its international operations.
Besides its labour problems and soaring jet fuel bills which other air carriers also suffer from, Qantas's losing international operations is due to stiff competition from Middle Eastern carriers such as Emirates and Etihad which are getting into Qantas' long-haul routes. As a result, only 20 per cent of Australians use Qantas when they fly overseas.
Analysts said that after Qantas shares plummeted to an all-time low after it forecast its first annual loss in 17 years, the air carrier's shares are now undervalued by up to $3 billion.
Analysts added that Qantas is so undervalued that it would attract bidders which led the air carrier to hire Macquarie Group to turn away unwanted private-equity bids. Now valued at 0.47 times its net tangible assets, the Qantas valuation is lower than any other air carrier in the industrialised world with over $1 billion in market capitalization, except for Air France-KLM.
Escalating fuel bill had also eaten into profitability of airlines. Jet fuel now accounts for about one-third of airline operating costs from 13 per cent 10 years ago. As a result, IATA forecasts the entire global aviation industry would have a profit of only $3 billion for revenues of over $600 billion. The bulk of that profit, however, would be enjoyed by few carriers that service China and other countries in the Asia-Pacific region.
Qantas Chief Executive Alan Joyce, now the new chairman of IATA, agreed that there are too many airlines for a shrinking market and the air carriers are fragmented. He believed it would be good to have more consolidations in the global aviation industry. International Airlines Group Chief Executive Willie Walsh agreed with Mr Joyce's analysis.
"Many will disappear. And you won't see new airlines appear. The barriers to entry are much higher now," The Guardian quoted Mr Walsh.
Mr Joyce said Qantas has not yet been approached formally by private-equity groups, but insisted, "Fair value for Qantas shares is a lot higher than it is today.... Our shareholders know we are on the right path."
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