Special Report: Open skies, security,profits and safety – Iata AGM 2015

Special Report: Open skies, security,profits and safety – Iata AGM 2015

Iata Annual General Meeting 2015: Airline chiefs discuss GDS fees, open skies and more. Travel Weekly reports.

Open skies: Washington warned of backlash if it rescinds air freedoms

US carriers will face retaliation if Washington bows to demands to dismantle ‘open-skies’ agreements with the Gulf states, Qatar Airways chief executive Akbar al Baker warned last week.

Al Baker told Iata members: “There is concern at calls for protection in the US and Europe. Any roll-back of open skies will reverberate across the world and lead to retaliatory action on trade.”

The Iata airline annual general meeting in Miami was told there would be no discussion of the row, but it overshadowed most debate. Al Baker insisted: “It’s important Iata reiterates its stand for freedom of the aviation industry. I don’t agree we should not comment.”

Delta Air Lines, American Airlines and United Airlines allege Gulf carriers Emirates, Etihad and Qatar Airways received more than $40 billion in government subsidies in the last 10 years. The US carriers argue this was in breach of open-skies agreements. Washington started an investigation in April.

Lufthansa and Air France-KLM have also questioned the alleged subsidies. The Gulf carriers reject the claims and have won support from British Airways’ parent IAG.

Etihad president and chief executive James Hogan insisted: “This could have been handled in a more conciliatory process. We have had to fight our corner.” Hogan recently submitted a counter document suggesting the three US carriers benefited from $70 billion in state support.

American Airlines chairman and chief executive Doug Parker said: “We clearly have a disagreement, but it has nothing to do with protectionism. This is about being able to compete against airlines and not governments. We are just trying to get the government to enforce its trade policies.”

Security: Airports in US face more-stringent regimes

US airports face a toughened security regime after government auditors exposed serious failings, and Iata confirmed air passengers can expect no relaxation of restrictions on carry-on liquids.

The head of the US Transportation Security Agency (TSA) was recently demoted after auditors managed to smuggle guns past security in 67 of 70 attempts.

Alejandro Mayorkas, deputy secretary of the US department of homeland security, told Iata members: “Vulnerabilities were detected in the screening. The TSA will immediately change its procedures to address the weaknesses.”

Separately, an Iata spokesman confirmed: “Lifting the liquids ban is not imminent. The technology [for screening liquids] is not ready.”

He said: “Our concern is harmonisation and consistency. It would be disastrous if people weren’t sure what they could take on board or thought the restrictions had been relaxed. People may not like it, but most are now aware of the restrictions.”

Iata director-general Tony Tyler urged governments to boost procedures: “Security and border controls are seen as pain points.”

Profits: Iata members predicted to make 4% margin on $727bn revenue

Iata expects member carriers to make a collective profit of $29 billion (£19 billion) this year.

The forecast profit, on predicted annual revenue of $727 billion, would represent a margin of just under 4%.

Iata director-general Tony Tyler told the airline association’s annual general meeting: “Many airlines are winning the basic struggle to keep revenues ahead of costs. For the first time in Iata’s records, the industry as a whole is earning its cost of capital [cost of financing].”

But he added: “The fortunes of airlines are far from uniform. More than half of global profits are being made in North America.“The lower oil price is having a positive impact, but it is greatly moderated by the strength of the US dollar.”

Tyler said European carriers had reported “improved but still weak profitability”, while in the Asia-Pacific region, “some airlines are delivering exceptional results, but others are struggling”.

He hit out at those who insist that fares should fall in line with oil prices, arguing: “It’s astonishing that some politicians wrongly interpret that airlines are hiding windfall profits in our 4% average net profit margin. Apple earned $13.6 billion in the second quarter of this year for a 23% margin. But no politician is asking for iPad prices to fall.”

UK chancellor George Osborne called in January for lower oil prices to be “passed on to families at petrol pumps, through utility bills and air fares”.

Iata reported a 2.8% net margin for European carriers and forecast a 6.5% increase in capacity across Europe this year.

Separately, the airport association Airports Council International (ACI) reported: “Most airports are in the red.”

The ACI estimates that seven out of 10 airports worldwide operate at a net loss, with most handling fewer than a million passengers a year.

Safety: Regulator urged not to bow to public pressure

Regulators should not rush to introduce new safety rules following air disasters, whatever the level of public pressure.

That is the view of airline bosses, including those involved in recent disasters – the disappearance of Malaysia Airlines’ flight MH370 in March 2014, the shooting down of Malaysia flight MH17 last July, and the Germanwings disaster in December when a pilot crashed an A320 into the Alps.

Carsten Spohr, chief executive of Germanwings’ parent Lufthansa, said: “The public wants answers. There is huge pressure, but you should not give into it if the public is not happy.”

Etihad Airways chief executive James Hogan added: “The public wants answers, but we have to be sure the solution works.”

Iata is working with the International Civil Aviation Organisation (ICA) to develop a 15-minute reporting standard on the position of flights. But Malaysia Airlines chief executive Christoph Mueller said: “We track our aircraft more or less constantly.”

Spohr said: “We went from 15-minute [reporting] intervals to five. It’s costly, but we felt we had to do it.”

Referring to the Germanwings disaster, Alaska Air chief executive Brad Tilden said: “Mental health is a tough issue. The more you look at it, the more complicated it is. We need to go slow, but the public doesn’t want to go slow.”

Mueller argued: “We can’t delegate this to doctors. There is a limit to what they can detect and then report. The key is peer monitoring.”

Spohr said: “The highest measure of safety we can have is a low level of fear of a mental problem being detected and leading to loss of income.”


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