Difficult Times, But Airline Chiefs Look to the Future

Airline Presidents representing the 28-member Association of European Airlines met in Brussels on 26th April.  The Assembly was chaired by Leo van Wijk, President and CEO of KLM Royal Dutch Airlines and AEA’s Chairman for 2002.


The Assembly welcomed, for the first time, the participation of its two newest members, Meridiana and Swiss.


Much of the Assembly’s business centred around the impact on the industry of the events of September 11th, 2001.  Two founder members of the AEA, Sabena and Swissair, had ceased to exist.  All other members had sustained severe economic damage.  Traffic losses had already surpassed those suffered after the Gulf War in 1991, and the Presidents heard that the latest situation demonstrated little sign of a sustained recovery.


The bulk of the discussion, however, centred around issues arising from September 11th which went beyond the reaction of the market, and in particular questions of insurance and security.


On the issue of Insurance, and specifically the need to secure adequate third-party war-risk cover at an affordable price, the Assembly affirmed its support for an integrated European approach.  In response to the lead given by Vice-President de Palacio, the AEA, together with other bodies from the European aviation industry, have taken the initiative to set up a European insurance scheme, the working title of which is Eurotime.

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Eurotime is intended to parallel the US-developed Equitime project - which counts only airlines among its subscribers - to ensure that a level playing-field is maintained between the European airlines and their American competitors.


Eurotime would replace today’s state-supported temporary arrangements with a structure that would reduce government involvement to the minimum and keep costs within acceptable limits.  It would also fit into an eventual multilateral solution under the aegis of ICAO.


Said Leo van Wijk:  “The events of last year showed there are risks that are so extreme they are uninsurable, in terms of normal commercial practice.  There has to be a framework that recognises this, and that framework must involve governments - as is the case in the US.”


“We call on Ministers of Finance and Transport to support this European response, where industry, insurers and governments work together to provide a coherent, non-discriminatory and equitable solution to a problem which is not of our own making”.


Regarding Security, the Assembly reaffirmed that terrorist acts as typified by the attacks on the US were aimed at the State and at the general public, and as such were a government responsibility.  This was a view which appeared to be broadly supported by the European Commission and Parliament, but not by the Member States.


The situation was made worse by a lack of coordination and harmonisation with the USA which had rewritten its own security rulebook, imposing substantial new requirements on non-US carriers.


Said Mr van Wijk:  “September 11th caused us all to re-examine our procedures, and while European standards of security are impressive, we have of course identified areas where they can be strengthened still further.  These are not necessarily the same areas as those the US authorities have chosen to address.  It must be recognised that equivalent security standards can be achieved, not necessarily by identical measures”.


Regarding both the insurance and the security issues, and other matters arising from the events of 2001, the Assembly debated the huge discrepancy between US measures in support of its industry and European responses.  Compared to the US, the European airlines’ problems had provoked, at best, a lukewarm reaction from their national and international regulators. 


The US, meanwhile, had taken speedy and decisive action which clearly demonstrated the importance it placed on having a strong and prosperous air transport industry.  The disparity between the two approaches had created a competitive disadvantage for Europe.


Said Mr van Wijk:  “When it comes to ‘Europe, Inc’, the position of our administrators is less clear.  For the time being, they cannot come to grips with how essential we are to the functioning of the Single Market.  If we must abide by our own misfortunes, then we must take our own steps to strengthen our industry, and make it more resilient”. Consequently, the AEA Assembly had initiated a major study to analyse the whole air transport Value Chain, and the airlines’ position within it, vis-à-vis other participants.
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