“After US$30 billion in losses, the need for change in the airlines industry is critical and the role of Governments essential,” said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA) at a conference on the eve of the triennial Assembly of the International Civil Aviation Organization (ICAO).
As the air transport industry struggles to recover from an unprecedented onslaught of crises beginning with the tragic events of 11 September 2001, fuel is now the main blocker to industry profitability. “It is not a question of finding a solution to any particular crisis. The industry needs new structures to allow it to deal with cycles and shocks effectively.. And all partnersairlines, airports, air navigations service providers and governmentshave a role to play,” said Bisignani.
Bisignani called for change by ICAO member states in five critical areas:
Fuel Efficiency: The inefficient use of the industry’s supporting infrastructure, particularly air traffic control, adds unnecessary cost to operations and to the environment. “IATA’s fuel action plan targets US$1.5 billion in savings from greater route efficiency and optimised operational procedures. We cannot achieve this without the cooperation of governments. The crisis in the price of fuel exaggerates these inefficiencies and government action is required,” said Bisignani.
Security: Overall security has improved since 2001. However “governments have failed miserably at coordinating and harmonising measures. We are left to battle bureaucracy when we should be helping to fight terrorism. And the cost to industry and the flying public is tremendousUS$5 billion a year. Along with urgent government action to harmonise measures, governments must also stop passing the buck to the airlines and accept their responsibility to pay for national security,” said Bisignani.
Insurance: Bisignani said that the industry faces a massive problem with insurance as underwriters move to exclude coverage for dirty bombs, electromagnetic pulse devices and biochemical materials. “Airlines cannot face this exposure alone. And governments cannot afford to have us stop flying. The urgent need for a stable solution is obvious,” said Bisignani. IATA challenged member states at the Assembly to provide individual or collective guarantees to cover these deficiencies, and on a longer-term basis, agree to a limitation of liability regime for war and terrorism losses.
Liberalisation: “The industry cannot wait any longer for the basic freedoms that other businesses take for granted. Airlines desperately need the freedom to run their businesses as businesses,” said Bisignani. ICAO set out a vision for a liberalised industry at Air Transport Conference Five (March 2003). “But the lack of follow-up and change to national legislation is disappointing. We need a significant change, like an agreement on an open aviation area between the US and Europe, to kick start progress on the vision that was agreed to 18 months ago,” said Bisignani.
Regulation of Monopoly Suppliers: “Cost reduction has been a matter of survival for airlines while many airports and air navigation service providers continue a happy existence based on cost-plus pricing. This needs dramatic change. The value chain is broken. Airlines do the flying and everybody else is making money,” said Bisignani. IATA’s approach is to challenge our partnersairports and air navigation service providersto match best-in-class efficiency targets. At the same time, governments must ensure effective economic regulation of monopolies. “Airlines can no longer pay for their inefficiency. A competitive industry cannot accept their abuse of monopoly positions,” said Bisignani.
Bisignani noted that the agenda is not one-sided. “Airlines have dramatically reduced their costs and gained efficiency. IATA’s Simplifying the Business initiative leveraging technology to reduce the cost of complex industry processes is a good example. The initiative is headlined with a commitment to save US$3 billion annually by eliminating 300 million paper tickets. “To guide this fundamental change in the way we do business, we have set a target of eliminating all paper tickets by 2007. As governments grapple with change at the 35th ICAO Assembly, I hope that they will act with the same speed. ICAO leadership is essential for industry change and our effective partnership with ICAO is strongly appreciated. The need for change is urgent and the results must be quick,” said Bisignani.