Press Release No.:
30 May 2005
FOR IMMEDIATE RELEASE 30 May 2005 (Tokyo) "The crisis in our industry continues. Our fuel bill this year will be US$ 83 billion—equal to the GNP of New Zealand and US$39 billion more than 2003. The Fifth horseman of the Apocalypse—the extraordinary price of fuel—is destroying our profitability. In 2004 alone airlines lost US$4.8 billion and we expect to lose another US$6 billion in 2005," said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA) at the opening of the IATA Annual General Meeting and World Air Transport Summit.
"While parts of the industry are profitable, the margins are not acceptable for a US$400 billion industry. Urgent action is needed," said Bisignani.
An Industry Revolution
"Everything changed with September 11th," said Bisignani. "Airline labour productivity increased by 34% since 2001. In 2005 alone, non-fuel unit costs will drop 4.5%. Airlines are re-inventing the industry," said Bisignani.
Leading a revolution in the way that people travel and ship is IATA's Simplifying the Business initiative. Converting the industry to 100% e-ticketing by 2007 is the first programme deadline. E-ticketing levels in IATA's settlement systems rose from 19% in June 2004 to 29% now. Bisignani announced partnerships with five global industry providers to ensure that all carriers have technical support. Bisignani also announced specific projects on Common Use Self-Service (CUSS) kiosks for check-in with four airports on three continents. And a partnership with the Civil Aviation Authority of China makes Simplifying the Business a national project. "Simplifying the Business is the future of our industry. Cost savings in excess of US$6.5 billion are possible," said Bisignani.
Governments: Agenda for Change
While airlines are changing fast, Bisignani said that "Governments have lost their way. They are not delivering the change that the industry, customers and the global economy demands."
"Governments are delivering half measures: Creating a mass transit system but taxing air transport like a luxury item; intensifying airline competition without regulating monopoly partners; preaching competition but subsidising competing modes of transport; freeing markets but micro-managing the business; and talking liberalisation, but keeping nationalistic ownership rules, " said Bisignani.
Bisignani presented governments with a five point Agenda for Change:
"Governments must stop treating air transport like a cash cow," said Bisignani. Taxes on a US$200 ticket average 26% in the US. "This is a US$15 billion rip-off. On top of that airlines and their customers pay US$5.6 billion annually for their own security. And to add insult to injury, rail competitors are subsidised by US$50 billion a year in Europe. And now Mr. Chirac and Mr. Schroeder want to make things worse," said Bisignani. European plans to raise US$7.8 billion for development assistance by taxing air transport is "about the dumbest possible way to help the developing world. Development is a serious issue that needs a serious solution," said Bisignani. Bisignani proposed alternatives including reducing European farm subsidies by 12% which would generate US$7.8 billion by itself. "The EU spends US$65 billion each year to depress world food prices at the expense of developing nation farmers. Development needs commitment, not politics. And air transport needs common sense, not more taxation," said Bisignani.
"Governments must ensure that monopoly suppliers get serious about cost efficiency," said Bisignani. Airlines pay US$42 billion each year—12% of costs—to airports and air navigation service providers. "We don't expect a free ride. But we do expect value for money. Cost efficiency is the new paradigm but incredible inefficiency remains. We have one major currency in Europe but 35 air traffic control organisations. Airlines will not foot the bill for this political nonsense,'' said Bisignani. Where partnerships are not possible with monopoly suppliers, Bisignani called on governments to appoint an independent regulator.
Governments must stop distorting competition. "Calling yourself 'low-cost' is no justification for preferential pricing or indirect subsidies. 'Low cost' is the reality of all airlines. We cannot accept that governments further distort competition with two sets of rules," said Bisignani.
"Governments must stop micro-managing the industry. The legacy of the last European Commission is US$7.6 billion of mis-regulation. If the Lisbon Agenda for competitiveness is not just an empty promise, we need to see some results. We reject regulations anywhere that do not promote growth," said Bisignani.
"Governments must give us the freedom to run our business like any other business. It's time to make progressive liberalisation a reality. Our business is to fly but we have regulatory anchors from another age. A commercial agreement for an Open Aviation Aviation area between the US and Europe will set the tone for the structural change we desperately need. Governments have an important role to play in safety and harmonising operations. In other areas, governments must get out of the way. We have business to do," said Bisignani.
60 Years of Industry Achievement:
On the 60th Anniversary of IATA's founding, Bisignani lauded the achievement of the air transport industry. "Air transport has never been safer, more environmentally responsible, more accessible or vital to the global economy," said Bisignani.
Safety: "Over 1.8 billion people flew safely in 2004. Last year was our safest year ever," said Bisignani. IATA's Operational Safety Audit (IOSA) is the first global standard for airline safety management. It is at the core of IATA efforts to reduce the accident rate by a further 25% between 2004 and 2006. Bisignani announced IATA's Partnership for Safety to bolster existing regional safety efforts and help airlines from developing nations prepare for IOSA with pre-audit analysis and training. "IATA is investing heavily in safety. We are starting with Africa where the need is greatest. And we will roll this programme out to all regions," said Bisignani.
Environment: Bisignani said that last year's 3.4% improvement in fuel efficiency was "a fantastic achievement that clearly demonstrates the industry's strong commitment to environmental responsibility. Our responsible approach to the environment started well before Kyoto. Over three decades emissions have been reduced by 70%," said Bisignani. Air transport is a global industry that needs global solutions. Bisignani challenged governments to stop compromising the industry's good environmental performance with inefficient infrastructure. "Inefficient air traffic control results in up to 48 million tonnes of unneeded CO2 emissions each year. We hear impressive words from governments, but it is just a lot of hot air," said Bisignani.
"Airlines have a clear vision and are passionate about the future defined as a low-cost, environmentally responsible industry that safely and securely connects the globe, provides value to passengers and shippers and supports global economic growth," said Bisignani.
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