July/August 2008 From the Publisher: What, me? Worry?
By Donna Sanford
I don’t tend to be much of a worrier. Sure, I get stressed under pressure, but long-term worry isn’t really a part of my makeup. When the dot-com craze had analysts predicting our doom, I rolled my eyes. I found the first virtual shows that were going to “put us out of business” comical. When the American Society of Composers, Authors and Publishers (ASCAP) starting taking us all to court, I shrugged. When the IRS began demanding sales taxes from exhibitors, I shook my head.
Yes, these were all issues to be addressed, but in 25 years in this industry, nothing, in my opinion, has had the propensity to bring us to our knees like the current airline crisis.
Fitch Ratings, one of the major credit rating agencies, this month issued a dire report stating that multiple bankruptcies are “increasingly likely,” moving into 2009 — and not just among the smaller, poorly capitalized carriers. United, Delta, US Airways, Southwest and JetBlue are the carriers identified as those that will have difficulties generating enough revenue to cover rising fuel costs. (Only American Airlines and Continental were rated “stable.”)
And unlike the airline industry’s financial crisis that began post 9/11, which was primarily a revenue problem, skyrocketing fuel costs won’t be made up by layoffs, route reductions and extra fees. Fuel now makes up roughly 36 percent of airline operating costs, compared with just 14 percent five years ago.
What’s worse, prospects for restructuring in Chapter 11 are unlikely given the tightness in the global credit market and the lack of any real hope for future cash flow.
Blame whom you want — the airline industry itself, OPEC, oil companies, governments, regulators, unions, the TSA, air traffic controllers or all of the above — at the moment that isn’t the issue. The issue is what happens to us — arguably, the single largest business consumer of airline services — when one or two major carriers go under?
What happens to our attendance when ticket prices jump 50 percent? What happens to our exhibits when shipping fuel surcharges exceed all other costs of exhibiting? What happens to our destinations when direct flights only exist between a handful of major cities?
Is it the end of our industry? Of course not. But there aren’t any great short-term solutions here. And we’ve never been a particularly agile industry.
Hats off to the International Association of Exhibitions and Events (IAEE) for addressing the problem at a legislative level. There’s a September meeting on Capitol Hill, after which the association hopes to deliver action plans to members. I know I’m willing to do what I can to help because, frankly, I’m worried.
Donna Sanford, Publisher & Editor, dsanford@red7media.com
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