10 Apr, 2006
Tension Grows Between Airports, Airlines Over User Charges
The turbulence in the global aviation industry is heightening tensions between airlines and airports. The latest example is last week’s row between the International Air Transport Association (IATA), the global airlines club, and Munich airport.
In a speech on 7 April, Giovanni Bisignani, the IATA Director General and CEO, called on the European Commission to find ways to limit the increases in the various user-charges European airports levy on the airlines.
Calling airports are “a drag on European competitiveness,” Mr Bisignani appealed to Jacques Barrot, Vice President of the European Commission and Commissioner responsible for Transport and Energy, for “robust independent national regulation of airport monopolies.”
Noting that airlines directly contribute US$45 billion to Europe’s GDP, resulting in over US$270 billion in economic activity, Mr Bisignani said, “Efficient air transport is critical for European businesses to be globally competitive.”
Thanks to global problems like SARS, terror, wars, economic downturns, high oil prices, and continued competition from the low cost carriers, global airlines are looking at over US$43 billion in cumulative losses.
To offset this, he said, since 2001, airlines have raised their global labour productivity 34%. Europe’s airlines, have cut aircraft operating costs by 9%, in spite of record high oil prices; reduced distribution and back-office costs by 24% and “even got the pilots to work 14% more hours!”
The major problem now is infrastructure like airports and air navigation charges.
Lauding some airports for delivering cost reductions per passenger, such as Manchester (-38%), Rome (-25%) and Birmingham (-13%), Mr Bisignani said that “far too many airports are not delivering the competitiveness that Europe needs. Fifteen of the 25 most expensive airports in the world are in Europe.
“And the bad are getting worse. Between 2001 and 2004 we have seen increases in cost per passenger at Aeroports de Paris (+44%), Amsterdam (+34%), Stockholm (+35%) and Munich (+26%) to name but a few. These are embarrassing examples of airport monopolies living in the dark ages.”
”We want profitable airports providing safe infrastructure with investment to meet growth. Airports must achieve all of this with greater cost efficiency in the same way as airlines have delivered on efficiency. We are not asking anything that we have not done ourselves,” said Mr Bisignani.
Noting that the EC is already working on a Directive for airport charges, Mr Bisignani called for it to “require robust independent national regulation of airport monopolies over five million passengers — Europe’s top 50.”
This directive, he said, must: “1. Take politics out of airport management; 2. Comply with ICAO principles, including non-discrimination; 3. Ensure stakeholder engagement with real and transparent consultation and 4. Act as a substitute for competition ensuring continuous improvement on cost efficiency — not only preventing increases above inflation, but challenging airports to do better by reducing charges.”
A few hours later that same day, Munich Airport issued a statement refuting the IATA chief’s comments as “misleading.” The airport is entirely state-owned by the German government, the Bavarian state government and the city of Munich.
Referring to the inclusion of Munich airport in Mr Bisignani’s claim that costs per passenger are rising, the airport’s media release said that “IATA has failed to accurately represent the actual passenger and landing fee situation at Munich Airport by using only partial data.”
Said the rebuttal, “In fact, although IATA`s claim that passenger fees in the period between 2001 and 2004 increased by 26% at Munich Airport is accurate, aircraft landing fees based on aircraft weight and type decreased by 17% during the same period.
“This is the result of a new landing fee pricing structure requested by airlines serving Munich Airport. By lowering aircraft landing fees and raising passenger fees, Munich Airport accommodated the airlines’ wish for more risk sharing between themselves and the airport.
“In total, the increase in passenger fees together with the decrease in aircraft landing fees represents a cumulative increase not any higher than the rate of inflation in Germany,” the release said.
“Take for example the passenger and landing fees charged for an aircraft typical at Munich Airport — a Boeing 737-300 with load of 104 passengers and a weight of 63 metric tonnes flying within the European Union.
“The total passenger and aircraft landing fees for flights like this only increased 5.7% between 2001 and 2004 at Munich Airport. To summarize, the average annual increase in total passenger and aircraft landing fees at Munich Airport represented only 1.9%.
“This moderate increase in total landing fees at Munich Airport can hardly be used to prove that an airport like Munich Airport is not achieving ‘greater cost efficiency in the same way as airlines have delivered on efficiency.’
“In contrast, independent of the huge infrastructure investments that must be made by airports, the Munich example shows that airports have recognized and adjusted to the specific needs of the airline industry by increasing cost efficiency and creating mutually beneficial pricing policies,” the statement concluded.
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