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Press Release No.: 6

Date: 16 March 2005

 

(Brussels) "The annual cost that the European Commission (EC) inflicts on aviation is EUR 5.9 billion. This is the legacy of neglect left by the previous Commission and it is an enormous burden on the competitiveness of Europe's airlines," said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA) in a speech to the European Aviation Club. "If we don't have urgent action to restore a balanced playing field, the European industry will be damaged, not by competition, but by inefficient European systems," said Bisignani.

The EUR 5.9 billion cost burden is composed of:

    • EUR 600 million for new regulations on compensation for denied boarding, cancellations and delays
    • EUR 1.9 billion for failing to take responsibility for war risk insurance and security issues
    • EUR 3.4 billion for inefficient infrastructure and regulation

Governments must balance the costs of regulations in line with benefits. Bisignani urged the Commission to apply the principles of the its Strategic Outlook to any regulations. "All regulations should pass a jobs test. And let's also ask: Are they necessary? Are they simple and effective? And what impact will they have on competitiveness? This common-sense approach will support the competitiveness and economic expansion that Europe so badly needs," said Bisignani.

Bisignani laid down four specific areas for the Commission to address urgently:

1. Implement an effective Single European Sky:

Delays in Europe have an annual cost of US$1.5 billion and 15 million minutes of unnecessary flight. "The Single European Sky is not a panacea, but it would make routes more efficient, reduce delays and improve environmental performance. We must turn this 15-year story of failure into a success," said Bisignani.

2. Effective Regulation of Monopoly Suppliers:

"Governments fostered competition but forgot to regulate monopoly suppliers. Europe's regulators are phantoms," said Bisignani. In their place, IATA is challenging Air Navigation Service Providers to achieve a 20% efficiency gain by matching the best-in-class performance of their European colleagues. "We see airports increasing charges as yields are falling. The Commission must do better with a robust regulatory system that challenges our monopoly suppliers to be more efficient," said Bisignani.

3. Equal Treatment of Air and Rail:

"The Commission was right to eliminate subsidies for airlines in Europe. So we cannot be silent when governments heavily subsidize other modes of transport," said Bisignani. An IATA commissioned study revealed that while Germany makes a net profit on aviation of EUR 11 per 1,000 passenger kilometres, it subsidizes rail by EUR 51 for the same distance. In France the profit on aviation is EUR 67 while the subsidy to rail is EUR 78. "Airlines pay when they park, fly or take-off. Why do we have to pay for competitors as well? The sum of rail subsidization in Europe is US$50 billion per year. We can do better to level the playing field," said Bisignani.

4. Free the Industry from Outdated Regulation:

"We must modernize the 60 year-old Chicago Convention. We support a vision of progressive liberalization that governments agreed to at ICAO's Fifth Air Transport Conference in 2003. But I do not see any real results in Europe. I hope that the Commission will make an agreement on an Open Aviation Area with the US a priority. Why should outdated bilateral agreements determine what commercial services are offered to travellers?" said Bisignani.

"We have been disappointed in the half measures of the past: Intensifying competition without effective regulation of monopoly suppliers; penalizing airlines for delays but failing to effectively implement the single sky and regulating without understanding," said Bisignani.

"Europe's network airlines are competing in a global market without subsidies. Restructuring, consolidation and careful cost management help them cope with extraordinary challenges like the cost of fuel. But they have a limited future if European policy does not support a competitive industry. I am confident that the new Commission with Mr. Barrot at the head of Transport and Energy will do better to understand the leadership and change that air transport needs in Europe and globally," said Bisignani.

Notes for editors:

  1. Full text of Bisignani's remarks are available here.
  2. ICAO is the International Civil Aviation Organization
  3. Reference for the EC's Strategic Objectives is as follows: Commission of the European Communities, Strategic Objectives, 2005-2009, Europe 2010, A Partnership for European Renewal, 26.1.2005. COM (2005) 12 final. Page 5.

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