September 11, 2001 : Attack on America
ILO Meeting to Focus on Turmoil in Airline Industry; January 18, 2002

ILO meeting to focus on turmoil in airline industry
Friday 18 January 2002

GENEVA (ILO News) -- Representatives of workers, employers and governments will sit down at the International Labour Organization's Geneva headquarters 21-25 January to search for solutions to the crisis that has racked world airlines since the events of 11 September last year.

A report -- prepared for the five-day "Tripartite Meeting on Civil Aviation: Social and Safety Consequences of the Crisis Subsequent to 11 September 2001" predicts that the fallout from the attacks in the United States, originally felt more by the major carriers of Europe and North America, increasingly will be felt by airline companies in Africa, Asia and Latin America.

The ILO report declares that: "One of the consequences of the present crisis is that a number of airlines around the world will find themselves in financial difficulties. Some will be forced to cease operations and be placed in liquidation, others may be re-nationalized or receive subsidies. The end result will be a move in the direction of industry consolidation that will present challenges for governments, users and airlines alike."

The report warns that the consequences of layoffs among airline staff are likely to spread to other segments of the labour market. For every direct flight job lost, at least four jobs are lost on the ground in airports (in such areas as catering, baggage, maintenance and airport security) and approximately three jobs around the perimeter of airports (in hotels, transport and support services for airlines and passengers).

"Air cargo carriers," the report says, "have been hard hit and the air cargo industry, like other segments of the industry, has no clear picture of its near and longer term future." The slump in air cargo for Asia dropped by 35 per cent, in the United States by 21 per cent and in Europe by 11 per cent.

Equipment manufacturing for the airline industry will continue to suffer as increasing numbers of airplanes are taken out of service, the cash value of existing aircraft diminishes and orders for new aircraft are delayed or cancelled, the report says.

In the United States, around 800 aircraft were grounded last year, adding to the approximately 1,200 already stored prior to the September 11 attacks.

Aircraft values are estimated to be 15 per cent below previous levels, with wide-bodied aircraft affected even worse. The two biggest aircraft manufacturers (Boeing and Airbus Industrie) reduced production schedules for this year and announced workforce reductions. Producers of smaller aircraft and jets, such as Cessna and Raytheon, also announced production cuts and layoffs.

Manufacturers of communications, ground-support and in-flight entertainment systems will have been hit by cancellations and deferrals of fleet expansion plans.

Experts differ as to when a turnaround in industry fortunes will occur. Some market segments (such as low-cost carriers in Europe and intra-regional carriers in Asia) are surviving well and even growing in the current climate, but these are exceptions.

The ILO report notes that "traffic forecasts for short-term growth are all negative" and it assumes that "the full rebound will take place in 2003, some 18-24 months after the disaster impact." Other factors likely to delay recovery include recessionary conditions worldwide, a sharp increases in insurance costs, increased security costs and lingering passenger concerns over safety.

In light of the severity of the situation and its potentially dire consequences for the air-transport workforce the meeting -- part of the ILO's Sectoral Activities Programme -- has drawn upwards of 150 participants from the original 60 envisaged. They include representatives of major airlines and observers from relevant international organizations and concerned non-governmental organizations.

The meeting will allow governments, employers and workers to discuss the consequences of the crisis facing the airline industry and to provide guidance to governments, employers' and workers' organizations at the national level and to the ILO on ways to address them.

Among the major, long-term items to be discussed will be the regulatory framework governing the airline industry and the broad array of obstacles in the path of any consolidation of troubled airlines. According to the ILO report "the regime governing the airline industry has only begun to adapt to the new imperatives of globalization" -- with the result that "tension is building up between existing rules and the demands of globalization."

Most airlines are still based on national ownership and a system of designated flag carriers and a major trend in the industry has been the formation of alliances between competing airlines in order to respond to the changing needs of customers and forces of globalization.

Five major alliances stand out as the core groupings today: One World; Star; Wings; Sky Team and Qualiflyer. Though these can be described as "global alliances" the ILO report says that "they remain fragile creations subject to competing attractions and economic forces."

The creation of global airline businesses comparable to those in other sectors of the economy continues to be blocked by national ownership and effective control provisions in bilateral agreements, according to the ILO report.

While many industry experts are convinced that state subsidies and re-nationalization are not the answer, governments have to be assured that even without a national airline, airline services can be guaranteed. Policies to promote mergers, takeovers and consolidation within the industry also encounter opposition from trade unions and others concerned with questions of public interest and public services, the report says.

Other topics likely to be debated at the ILO meeting include security concerns, the employment effects of the current downturn, including the social consequences of restructuring and the provision of social plans for workers who lose their jobs and the promotion of social dialogue.

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