IATA warns of impact of EM currency crisis on airlines
IATA report forecasts 4.4% growth annually in air passenger journeys in Mideast
Dubai
The International Air Transport Association (IATA) warned on Wednesday about the impact of the recent currency crises in emerging markets on the aviation sector, which it described as “facing more adverse economic conditions.”
IATA, a trade association of the world’s airlines, said that rising fuel prices and strength in the US dollar are hurting carriers in some parts of the world, especially where local currencies have also depreciated.
Emerging markets including Turkey, India, Argentina, Indonesia, and South Africa, among others, recently saw their currencies plunge amid domestic political and monetary challenges and as the US dollar gained strength.
“In all markets, the costs are in US dollar, and the revenues are in their local currencies …” said Alexandre de Juniac, IATA’s director general and chief executive officer.
“To give you one example, in India, we see strong economic pressure on the [profit and loss] of all Indian airlines. As the Indian industry says, no one is making money currently in India, even the most successful airlines, due to the pressure [from] oil prices and the fact that the rupee has depreciated significantly,” he said.
And the challenges aren’t speficic to those countries. In the UAE, Emirates has repeatedly cited a stronger dollar as a challenge to its profitability.
De Juniac’s comments came during a media call to discuss IATA’s latest report, which forecasts the number of air passenger journeys to increase globally at an average rate of 3.5 per cent each year over the next 20 years.
In the Middle East specifically, the annual growth rate in air passenger journeys is expected to be 4.4 per cent. Meanwhile, the rate will be highest in Asia Pacific, at 4.8 per cent, followed by Africa at 4.6 per cent. Europe will see the slowest growth rate of 2 per cent, as per IATA’s forecasts.
However, that global average rate of 3.5 per cent could rise to as much as 5.5 per cent if protectionist policies are eased globally. The rate would slow down to 2.4 per cent if governments implement more protectionist policies.
Regardless of the exact figure, IATA warned that airports around the world do not have the necessary infrastructure to keep up with the expected growth, urging governments to step up their efforts to boost the infrastructure.