“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 the 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.
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