Press Release No.:
22 October 2008
No Bounds on Industry Crisis - Arab Carriers Urged to Focus on Efficiency and Commercial Freedoms
Tunis - The International Air Transport Association (IATA) urged Middle East and North Africa (MENA) airlines to focus on an agenda of efficiency and expanding commercial freedoms.
“The oil price is falling, but what we save in fuel, we lose in revenue. This industry will lose US$5.2 billion this year. Even the Middle East is not immune. The region’s carriers posted 18.1% traffic growth in 2007. This year, August growth plummeted to 4.3%,” said IATA Director General and CEO, Giovanni Bisignani, in a speech at the Annual General Meeting of the Arab Air Carriers Association (AACO).
“Profits of Middle East carriers will fall from US$300 million in 2007 to US$200 million this year. Only a handful of carriers will be profitable, while the majority bleed red ink. The region’s fleet is set to double to 1,300 aircraft over the next decade as we enter a period of global economic uncertainty. The challenge of matching capacity to demand will be difficult,” said Bisignani.
Bisignani urged the region to adopt an agenda focused on efficiency -Simplifying the Business, fuel and infrastructure - and expanding commercial freedoms.
- Infrastructure: MENA is beginning to experiment with airport privatisation. Jordan, Saudi Arabia and Egypt have given concessions to run their airports to management consortiums. Bisignani issued a stern warning to avoid the monopoly abuse that occurred in other regions when similar moves were made. “Just look at what happened in Quito. The concessionaire ignored ICAO principles and raised rates by 128% to pre-finance airport construction. You don’t want this type of monopoly abuse here. As you privatise, strong independent regulators to enforce ICAO principles and deliver cost-efficiency are a must,” said Bisignani.
- Simplifying the Business: “MENA carriers met the e-ticketing deadline with a jump from 16% e-ticketing to 100% in just 18 months. This great effort shows what the region can achieve,” said Bisignani. Bisignani warned that the region must speed up in order to enjoy the cost-efficiencies of e-freight. Only 10 out of 22 states in MENA have ratified the international conventions needed to recognise electronic invoicing - the starting point for e-freight. Bisignani called on MENA to be a leader in IATA’s Fast Travel and Baggage Improvement programmes. “The region is investing US$46 billion in infrastructure. This is a golden opportunity to build in leading edge processes and technology,” said Bisignani.
- Fuel: “Fuel efficiency reduces costs and improves environmental performance,” said Bisignani. Already this year, IATA’s fuel campaign had identified and saved US$4.6 billion, equal to 13.5 million tonnes of CO2. IATA’s Four-Pillar Climate Change Strategy is focused on CO2 reductions with (1) investment in technology, (2) effective operations, (3) efficient infrastructure and (4) positive economic measures. Bisignani urged MENA governments to challenge Europe’s illegal and unilateral plan to incorporate aviation into its regional emissions trading scheme (ETS). “Europe’s governments have discovered a pot of green gold with aviation taxes. MENA must be tough in defending the vision of Kyoto which is a global solution for aviation brokered through ICAO. That means driving ICAO’s success through Saudi Arabia’s participation in the ICAO Group on International Aviation and Climate Change, challenging Europe’s unilateral action and delivering efficiencies in line with the four-pillar strategy,” said Bisignani.
- Commercial Freedom: Bisignani urged MENA governments to support IATA’s efforts to facilitate greater commercial freedoms for air transport. “Airlines need to operate like any other business - with a level playing field, and the freedom to access markets and global capital,” said Bisignani. IATA is facilitating this discussion among progressive governments at the Agenda for Freedom Summit this weekend in Istanbul. “In MENA, we have seen pockets of progress, including open skies agreements and domestic liberalisation. Now the region’s governments must think bigger and act faster,” said Bisignani.
“The industry crisis highlights the need for change. MENA has some great advantages - strong oil economies, top-notch infrastructure and fuel-efficient fleets. The crisis is a turning point. We must deliver significant change with efficiency and commercial freedoms. If we can do that, I am confident that we can weather this perfect storm and emerge as a stronger and more profitable industry,” said Bisignani.
Access Bisignani's full speech
Notes for Editors:
IATA (International Air Transport Association) represents some 230 airlines comprising 93% of scheduled international air traffic.