North American air industry the weakest link in global market

Earlier this week, the annual Airline Quality Ratings report showed that most U.S. airlines are failing at customer service. Now it appears that the North American air travel industry is also the weakest financial link in the global airline market.

For the first time since 9/11, the airline industry is expected to be profitable worldwide, said Giovanni Bisignani, CEO of the International Air Transport Association (IATA), in a lecture yesterday. The IATA is forecasting a $3.8 billion profit for 2007, following six rough years and more than $40 billion in losses across the industry. The North American airline industry won’t have anything to do with the turnaround, however, and is fact expected to lose $600 million this year, mostly due to restructuring costs. In contrast, European airlines are expected to make $2.4 billion and Asia and Pacific airlines $1.7 billion.

Asia, not North America or Europe, said Bisignani, is poised to become the leader in the industry. In his speech, Bisignani urged Asian aviation leaders to adopt more of the cost cutting measures Western carriers have used, such as e-ticketing, but also warned against some pitfalls the Western market has fallen into.

“While the recent U.S. and Europe open skies agreement was a step in the right direction, it fell short of the fundamental change that the industry needs,” said Bisignani. “They have lost the vision that made them natural industry leaders. It’s Asia’s turn.”

For American travelers, the news that the U.S. airline industry is failing comes as no surprise. With this and other signs of Asia’s growing economic power, we can only hope that U.S. political and business leaders decide to make changes necessary to keep from falling even further behind.