Iata lashes out at 'half measures' on aviation

PUBLISHED : Tuesday, 31 May, 2005, 12:00am
UPDATED : Tuesday, 31 May, 2005, 12:00am

Industry chief accuses governments of 'hot air with no results' for airlines

Asian airlines made US$2.6 billion in profit last year by capitalising on a dynamic China market and lower comparative labour expenses but more costs must be cut before other regions could reap similar rewards, according to the International Air Transport Association (Iata).

Giovanni Bisignani, Iata's director-general, said airlines must shoulder some of the blame for losses that might again reach US$6 billion this year. But he rounded on governments for taking 'half measures' that had failed to create an environment in which profits were sustainable, especially as soaring fuel costs threatened the long-term future of the industry.

'We have had a lot of impressive words from governments, but it has so far been a lot of hot air with no results,' Mr Bisignani said at Iata's annual general meeting in Tokyo yesterday. 'They are not delivering the change that everybody needs.'

In the Pearl River Delta region alone, he said, the failure of local aviation authorities to improve airspace design and usage cost the industry US$300 million last year.

Profits in Asia, Europe and the Middle East last year were overshadowed by a massive US$9 billion loss in the United States, where efficiency gains were unable to compensate for structural problems and a huge jump in fuel costs.

Sky-high fuel prices were the 'the fifth horseman of the apocalypse', Mr Bisignani told reporters, adding that average jet fuel prices had risen 88 per cent over the past three years. Combined with added security expenses since the September 11 attacks, fuel bills had doubled total expenses for the average global airline during the same period, he said.

Iata said that if jet fuel prices had remained at the 2002 level of US$25 a barrel, the industry's operating margins would have been 5 per cent of its US$400 billion in sales last year. Instead, it lost a provisional US$4.8 billion - a figure that may rise another US$1 billion when the final accounting is done - after spending US$83 billion on fuel, 113 per cent more than in 2003.

To cope with fuel costs, Asian airlines are turning to hedging contracts and customer surcharges. Taiwanese carrier China Airlines has hedged 58 per cent of fuel costs this year and 30 per cent for next.

'We have applied to raise our regional surcharge to US$7.30 from US$5 and to US$22.30 on long-haul flights from US$15,' China Airlines chairman Chiang Yao-chung told Bloomberg.

Mr Bisignani raised the industry's perennial bugbear - airport user charges - to illustrate what he said was a lack of commitment to the kind of change the airline industry needed to return to the black on a global level.

'Measures have been taken to intensify airline competition without regulating our industry partners,' he said. 'They are also preaching competition but subsidising our [transport service] competitors.'

However, Iata members got some relief in that regard from an unexpected source yesterday: Tokyo's Narita International Airport.

Narita, Asia's most expensive airport for airlines and traditionally the most reluctant to bow to industry pressure and lower user fees, reportedly agreed to lower user fees by 20 per cent across the board.

The reduction is bound to turn the spotlight back on Hong Kong's international airport, which, Iata says, trails only Narita and airports in China for the high costs of user fees.