2008 A Turbulent Flight

Nearly as perilous as Attempting to predict the future is trying to assess the year just ended. Events and images of the past 12 months are still vivid in the imagination and one is tempted to assign undue importance to occurrences that will ultimately subside to mere ripples in the sands of time. Even so, which other year has seen such a spectacular rise and equally precipitous fall in the price of oil? Which year has seen such dramatic drops in passenger numbers? Which year has seen so many airlines fold up across the world even as many others were pushed to the brink? The double whammy of rising prices and falling demand created what the IATA’s Giovanni Bisignani termed perfect storm conditions. Though the price of oil has dropped sharply off its peak of July, few are willing to predict a revival of passenger demand any time soon.

However, 2008 had begun on a bright note. In January, Virgin Galactic unveiled the final design of SpaceShipTwo, a sub-orbital spaceplane intended to give well-heeled tourists a two-and-a-half hour long out-of-this-world experience. Virgin Galactic is offering tickets aboard the spaceliner for an initial price of about $200,000 (Rs 95 lakh). As many as 200 potential passengers have already paid up and around 65,000 are eagerly awaiting their chance.

At the other end of the commercial aviation industry’s spectrum, the fledgling very light jet (VLJ) fell upon hard times. While Cessna progressed with deliveries of its Mustang VLJ and Embraer continued to accumulate orders for the Phenom 100 which recently received certification, other manufacturers didn’t fare so well. Adam Aircraft went bankrupt in February and air taxi company DayJet suspended operations in September. Perhaps the biggest blow was Eclipse Aviation’s bankruptcy in November.

Best & Worst Of Times
Does 2008 mark the beginning of the green age of the aviation industry? In March, Virgin Atlantic successfully tested a 20:80 mix of biofuel and Jet-A in one engine of a Boeing 747 on the London-Amsterdam route. Air New Zealand rounded off the year by successfully using a 50:50 blend of jatropha and Jet-A1 in one engine of a Boeing 747 in the vicinity of Auckland. Incidentally, India and Africa are shaping up as prime sources of jatropha.

In July, the European Parliament voted in favour of including aviation in the EU Emissions Trading System from 2012. Under the new scheme, greenhouse gas emissions from flights to, from and within the EU will be included in the system.

The big story of the year, of course, was the fuel price rise that triggered dramatic shrinkage of carriers, savage slashing of schedules, pink slips for employees, unexpected mergers, bankruptcies and failures and disgruntled passengers. The steep fall in price to less than a third of its peak by the end of the year brought some cheer. But global economic downturn put paid to any hopes of a recovery in passenger demand.

When In Crisis, Consolidate
A year ago did someone say that China and India had economies strong enough to weather a US recession? Not any longer. Both have suffered dramatically and their airlines are among the worst affected. Chinese airlines are in deep trouble and have demanded cash bailouts. They are likely to get them, but with strings attached—strings that are quite likely to lead to consolidation in 2009 or 2010. The Indian airline industry is in the same boat, although traffic has slumped for different reasons. Many airlines that were undercutting each other aggressively in the fight for market share, and growing rapidly in the process, used up their cash reserves. From mid-year, demand fell substantially and the same airlines were forced to increase fares, practically eliminating low cost travel. Consolidation offered the best survival strategy. A blockbuster alliance between Kingfisher Airlines and Jet Airways—bitter rivals thus far—was a sign that desperation was setting in.

Some airlines preparing to lay off employees by the thousands backtracked under government pressure. IATA projected a cumulative loss of $1.5 billion (Rs 7,248 crore) for Indian carriers this year. Yet, no airline in India declared bankruptcy, although 31 airlines folded up across the globe. Year end, most Indian carriers succumbed to government pressure and announced substantially reduced fares. The sharp fall in the price of aviation turbine fuel was one reason; the other was steady fall in passenger traffic. Only 30 lakh passengers flew in November 2008, an amazing decline from the 38 lakh who took to the skies in the same month the previous year.

On a brighter note, the first Indian civilian air show, India Aviation 2008—an International Exhibition and Conference on Civil Aviation—was held from October 15 to 18, 2008 in Hyderabad.