IATA calls on governments to rethink management of air industry

IATA calls on governments to rethink management of air industry The International Air Transport Association (IATA) high fuel prices and rising taxes are crippling the profitability of the airline industry and called for urgent government action to reverse the situation.
   Speaking Monday at the opening of the AirFinance conference in New York, Giovanni Bisignani, director general and chief executive officer of IATA, said, “The high price of fuel is robbing our profitability. The fuel bill has risen from $44 billion in 2003 to $63 billion last year.”
   “If oil averages at $43 per barrel (Brent) for 2005, the bill will be $76 billion. And that would leave us with an industry loss of $5.5 billion for 2005 and over $40 billion for the period 2001-2005,” Bisignani said.
   Increased competition without stringent monopoly regulations, relating to airports and traffic control providers, is hurting airlines, he said. “Governments intensified airline competition without effective regulation of monopoly suppliers that account for 10 percent of operating costs. The cost of labor as a percentage of operating costs ranges from 18 percent in Asia to 38 percent in the U.S.”
   Bisignani reiterated a previous call for governments not to burden the airline industry with the cost of security. “We cannot accept the $5.6 billion global cost burden for security that governments are passing annually to the industry. Governments must take responsibility and pay for national security,” he said.
   While calling upon airlines to make further efforts at cost-cutting, he urged governments to rethink the way in which the industry is governed. “We have nationalistic rules for businesses that compete globally. And, in place of a strong vision and leadership for our industry’s future, governments micromanage and misregulate. In Europe alone, misregulation and micromanagement cost the industry 5.9 billion euros ($7.6 billion) each year,” he said.
   “We need modern rules that will allow us the same freedoms that other global businesses take for granted. Ownership and control rules that restrict access to global capital are of a different age,” he said.
   “We need to run our businesses like real businesses. Markets and competition must shape the future of our industry, not the 60 year-old bilateral system,” he added.