Airline industry sees losses mounting, urges governments to help out

TOKYO, May 30 (AFP) - The global airline industry said Monday its losses would mount to six billion dollars this year as high fuel prices and soaring costs in North America outpace growth in Asia and Europe.

Opening a two-day meeting in Tokyo, the International Air Transport Association (IATA) called on governments to pursue business-friendly policies and lashed out at a French-German proposal to tax air tickets to aid the developing world.

IATA said it has done its part to adapt after the September 11, 2001 attacks shook up global air travel. It said it has slashed costs and last year saw its safest year with only 428 people killed in commercial air crashes.

"Losses between 2001 and 2004 exceeded 36 billion US dollars. And we will lose another six billion dollars this year," IATA director general Giovanni Bisignani told the opening of the meeting attended by 265 companies.

IATA, which represents 95 percent of the world's air carriers, had previously estimated losses for 2005 at 5.5 billion dollars.

"Parts of the industry are profitable. But the margins are not acceptable for a 400 billion-dollar industry. Urgent action and change are needed," Bisignani said.

He called the price of fuel "the fifth horseman of the apocalypse," saying the industry's expected fuel bill this year was 83 billion dollars.

Non-fuel costs were forecast to drop by 4.5 percent this year, said Bisignani, who lamented that the aviation industry had in the past been "too weak with labor".

The success story of the industry has been Asia, where airlines posted 2.6 billion dollars in profit last year.

"Strong growth fuelled by China and low labor costs are the competitive advantage" in Asia, Bisignani said.

He said India, which has seen a nascent fare-cutting war to encourage air traffic, "may be the next great market for the industry".

European airlines also posted a profit of 1.4 billion dollars last year with better passenger flows and industry consolidation.

But IATA said the biggest obstacle to the aviation industry's growth was North America, whose airlines posted total losses of nine billion dollars in 2004.

He said North America's labor costs and airport taxes were too high and that low-cost carrier competition was eating into overall profits.

Governments "see us as profit centers, not as a catalyst for economic growth. In the United States, taxes on a 200-dollar ticket average 26 percent. This is a 15 billion-dollar ripoff," Bisignani said.

He saved some of his strongest criticism for a proposal backed by French President Jacques Chirac and German Chancellor Gerhard Schroeder to tax airline fuel and tickets to fund the fight against health epidemics in Africa.

Chirac, on a visit in March to Japan, called for the tax to be implemented by the end of 2005 and said it would help save more than three million lives a year.

But the IATA chief called the idea a political gimmick, saying the Europeans should start with themselves if they want to help developing nations by reforming their agricultural subsidies.

"Development is a serious issue that needs a serious solution. But taxing airline travelers is about the dumbest way possible to achieve it," Bisignani said.

He praised Japan for moving in a more business-friendly direction with Tokyo's Narita airport due to lower landing fees later this week as demanded by IATA.

IATA last year launched a major project to slash costs including the complete replacement of paper tickets with electronic ones by 2007.

IT use can cut airline industry's costs by $6.5 bil.: IATA
31 May 2005
Kyodo News

The International Air Transport Association said Tuesday it will encourage member airlines to utilize integrated circuit tags for baggage management and other cutting-edge information technology, as such moves could cut the global aviation industry's annual costs by about $6.5 billion.

The IATA, which concluded its two-day annual meeting in Tokyo on Tuesday, said it will promote such IT to help airlines benefit more and to achieve lower costs and ticket prices, as well as to improve customer convenience, such as when reserving air tickets.

The global aviation industry group consisting of about 260 airlines said that by applying IC tags to travelers' baggage, airlines will be able to reduce errors associated with baggage management and shorten the time necessary to find lost luggage. Utilization of IC tags will enable the industry to save $760 million in annual costs, it said.

The group has devised a system that enables passengers to print out bar-coded boarding passes at home with their personal computers. The system can cut the industry's costs by a total of $500 million as airlines can cut spending on paper.

Other steps the IATA will promote include introduction of electronic ticketing systems and common use of self-service check-in equipment among airlines.

The IATA's next annual meeting will be in Paris in June 2006.

Air Canada's Milton named IATA chairman
Canadian Press
1 June 2005

Robert Milton, chairman of Air Canada, has been named chairman of the International Air Transport Association's board of governors for 2005-06. Mr. Milton succeeds Jean-Cyril Spinetta, chairman and chief executive officer of Air France-KLM, who ended his term with the closing of the 61st annual meeting of IATA in Tokyo yesterday, attended by more than 600 delegates. IATA is an industry association based in Geneva, representing most of the world's commercial airlines. Mr. Milton is also CEO of ACE Aviation Holdings Inc., the parent company for Air Canada and its various subsidiaries.

Air-Travel Industry Says Governments Need to Lower Taxes
31 May 2005
The Wall Street Journal

TOKYO -- Governments need to lower taxes and relax restrictions on air travel to help airlines stay competitive amid increasing pressures for cost cuts, officials at a gathering for commercial aviation industry said.

"Governments must give us the freedom to run our business like any other business," said Giovanni Bisignani, director general and chief executive of the International Air Transport Association, at this year's World Air Transport Summit.

The two-day meeting draws representatives from airlines, civil aviation groups, manufacturers and airports.

Government taxes remain a burden on the industry, with taxes on a $200 plane ticket in the U.S. averaging 26%, Mr. Bisignani said. The association also called on governments to encourage competition and stop doling out privileges to low-cost airlines, but didn't mention specifics.

IATA represents 265 airlines from 136 countries, including some low-cost carriers. The discount airlines have increasingly been seen as a threat to the so-called traditional carriers that form the bulk of the organization.

Topping the agenda for the association is the pressing need to cut costs and boost efficiency. Last year, airlines had losses totaling $4.8 billion, and they expect losses to total $6 billion this year.

IATA Focuses on Africa with Safety Initiatives

31 May 2005 (Tokyo) - At its 61st Annual General Meeting and World Air Transport Summit in Tokyo, Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA) announced two major initiatives on safety with specific reference to Africa.

"Despite our great record on safety, the regional differences that remain are not acceptable. We need to concentrate on the areas of greatest need with the appropriate tools. The IATA Operational Safety Audit (IOSA) programme—the global standard for airline safety management—is the tool at the core of our efforts. And Africa is the region that needs help the most," said Bisignani.

Partnership for Safety
"Airlines in developing nations need assistance to prepare for the IOSA audit programme. I am pleased to announce that IATA is investing US$2 million in the IATA Partnership for Safety (IPFS) to achieve this," said Bisignani.

The IPFS will promote IOSA standards among airlines and governments with training and analysis. For airlines, gap analysis will provide a baseline assessment of operational capabilities that will lead to the identification of measures needed to reach the IOSA standard and training / awareness programmes will prepare airline managements for the audit process. Governments will also benefit from the training, which will show how IOSA can provide significant complementary benefit to their own safety oversight programmes.

"The programme will commence with Africa and will be rolled around the globe. Step one of the programme will be entirely funded by IATA. Once needs are identified, IATA will work with global development institutions, and going forward we will build partnerships to provide the funds needed to bring all developing world airlines to IOSA standards," said Bisignani.

Training
"Skill development is critical in Africa. To complement the efforts of the International Airline Training Fund it is a pleasure to announce a partnership focused specifically on Africa with one of our industry's great partners, CFM International," said Bisignani. CFM International contributed US$100,000 to kick-start a fund to support operational training for Africa's airline industry.

"We have recognized the need for partnerships to support the future of aviation in Africa. This is important not only for the airlines, but as a mechanism for the continent's development. We are extremely happy to be responding to industry needs through the industry's global Association, IATA," said Pierre Fabre, President of CFM International.

"Safety is priority number one. While 2004 was our safest year; we are committed to doing even better—a 25% improvement in the accident rate between 2004 and 2006. The IPFS and our initiative with CFM are two concrete examples of how we are going to make this happen," said Giovanni Bisignani.