The pricing structure of world airlines will have to change significantly over the next few years to meet massive financing needs for capital equipment, an industry conference was told here Tuesday.
Estimating that the world airline industry will need to order some 9,000 aircraft over the next 15 years at a cost of $600 billion, Paolo Conti, senior director, traffic, International Air Transport Association, declared bluntly: ''Where the hell is the money going to come from?"Mr. Conti and other participants at the 5th IATA forecasting and economics seminar agreed that an industry already struggling for survival is facing a serious financing crunch.
They also agreed the industry will experience a weak recovery next year.
"The industry is currently unable to arrange financing by any conventional means, and leasing is not the answer," Mr. Conti said.
"The pricing structure of the airlines is getting more and more unhealthy," he said, adding that "one day the business traveler may tell the airlines he has had enough."
Referring to the leisure market, Mr. Conti said in an interview afterward, ''The industry is just going to have to charge more for the product."
Raymond Neidl, industry analyst with the New York investment bank Dillon Read & Co., said the investment community is presently "very leery" about the transportation industry, especially air carriers.
He warned that consolidating the U.S. air industry to only three carriers would threaten competition "and the status of the industry as an unregulated business."
Under such a scenario, "a strike at one carrier would severely cripple the whole passenger transportation system."
"Unlike steel or autos, airlines cannot stockpile inventory for a strike since airplane seats are a perishable commodity that spoils as soon as the plane takes off."
"As a result," Mr. Neidl went on, "there would be increasing pressure for government intervention and increased price and labor regulations or possibly even re-regulation of the industry."
However, the analyst considered that five or six full-service carriers could survive in the United States. "Besides American, Delta and United, I believe USAir, Northwest and possibly Continental could round out this system."
Dave Swierenga, assistant vice president, Air Transport Association of America, which represents 22 carriers in the United States and Canada, said a relatively small economic recovery in 1992 will spark an airline traffic increase of only 6 percent.
"The big question mark is whether the industry will generate enough profits to sustain huge capital investment programs," he said.
Mr. Swierenga calculated the U.S. air industry's capital spending needs at $200 billion over the next decade.
According to Mr. Swierenga, the U.S. air carrier industry will record a $1.3 billion net loss in 1991, followed by a $300 million net profit in 1992.
"A key of 1992 will be what happens to capacity. With a recovering economy, there will be some recovery in traffic and yields."
Mr. Swierenga indicated that the industry's profit performance could end being better than presently anticipated, depending on the evolution of capacity.