If anyone was in any doubt that the airline industry is in for its toughest ride in recent history, aviation guru Peter Harbison (pictured left) made sure those doubts were erased at the CAPA (Centre for Asia Pacific Aviation) Aviation Outlook 2008 in Singapore last month.

“This is not just another downturn,” he said. “This is a watershed not only for the industry but the global economy.

“The way organisations are managed and attitude towards regulation will change. There is not one airline in the industry that’s confident it will still be around next year.”

The executive director of CAPA cited a litany of woes. Demand has dropped and will remain down for next year; premium yields have been hurt; capital values on aircraft are substantially down (he called this the hidden threat); and currency instability continues.

China’s aviation industry, to whom the industry was looking for leadership and liberalisation, is in serious financial trouble. “Another restriction is inevitable,” said Harbison. “Hopefully, we won’t see a backward move to regulation.”

India’s airlines, facing US$2 billion losses, are in crisis and are consolidating.

Middle East is still expanding with four wide-bodied aircraft being delivered a month for the next 18 months. “But there’s high debt leverage and growth is starting to falter. There are some signs of weakening but we remain hopeful,” said Harbison.

South-east Asia was faring reasonably well “but this could be an illusion”.

He warned of two dark years ahead. “We will emerge with a very different industry.”

He predicted more new models, more government involvement – “we have seen it happen with banks and car manufacturers”, more regulation and more consolidation.

“With luck and some good judgement, we will come through with a sustainable model.”

Harbison said, “Most airlines don’t fully appreciate the threat and I think a lot of governments are also not aware of it too.

“That awareness has to happen fast. It can be fixed but it has to be diagnosed first. Significant innovation is needed.”