ON TOUR: The Air Carriers Meet in Tokyo
One theme dominated the 61st annual meeting of the club of some 270 of the world”s major airlines, IATA (International Air Transport Association), at the Grand Meridian in Tokyo last week. Yes fuel, and its soaring price was a major topic, 22% of the industry”s total cost, as was the encouraging signs of actual travelling numbers growing, by between 7% and 8%, and not unexpectedly the progress being made towards paperless travel, the e-ticketing phenomena, which is expected to be the industry standard by 2007. All was duly noted.
What really gained the attention of the airline presidents and CEOs was something even closer to their hearts, the business standard known as a level playing field. Just as in politics there was the left, right and centre, each justifying its position in the market place, making clear its policies are justified and that it did not have a commercial (and therefore bottom line) advantage over its rivals. To the left (and we will stick to this definition as these airlines could be considered a special social case) are some of the US legacy carriers, seemingly forever trading in bankruptcy, criticised by the mainly middle of the road airlines who say ”it just ain”t fair”. If pension funds and debts can be renegotiated how can you establish your fare levels in a proper commercial manner they say. The defence is very simple. ”We don”t want to keep trading in this way but we do see a way out. The cost of non-airline charges is enormous with lawyers, accountants and consultants all taking their piece of the cake and not contributing one iota to the running of the carrier. We want to get them off our backs as soon as we can and put our efforts into running the airline. To go under would be a worse mess”.
United says it will be trading normally by the end of the year. Air Canada is an example of what can be done and Hawaii notes it is paying its creditors 100% of what it owes.
And at the other end of the spectrum you have what seems to be every other airline”s bogeyman, Emirates, the state-owned airline of a tiny Sheikdom of just 2m people with an astonishing 45 Airbus A380s on order, with, it is said, another huge commitment planned for announcing at the Paris Air Show next week. What routes have the airline chosen for the super jumbo, how will they be configured and where will the money be raised? Wolfgang Mayrhuber of Lufthansa made it quite plain that he thought export credit guarantees from Europe were unfair, reducing the price to Emirates by 8%. Also far from enamoured by the Gulf state carrier was Geoff Dixon of Qantas price cutting on the Antipodeans routes raising serious questions. Soon Emirates will be going twice daily from Dubai to all the major Australian cities. There are 12 airlines operating across the Tasman Sea to New Zealand, most of the allegedly flying far from full. "When will it all end?" said Dixon!
It is a strange club all working to a common goal. Or are they? British Airways, a proper stock market quoted airline, middle of the road by the standards set out above, did not escape criticism (or jealousy) with its 40% of the slots at Heathrow, clearly at an advantage inspired by history. It is easily the world”s most popular airport for airline chiefs. Rod Eddington, now one of the elder statesmen of the industry and looking very relaxed, spoke from the floor asking the question "Where do the State - owned airlines fit in? Can they compete fairly?" Making his first industry appearance as an employee of British Airways was Willie Walsh, now not a bit player as the boss of Aer Lingus, but as a major figure in the world airline scene whom everyone suddenly seemed to want to talk to. What an interesting 12 months it has been for him!
This time next year, May 2006, the airlines of the world (well some of them ” there are budget carriers who are members but many are not ” Malaysia”s Air Asia is outside the club but CEO Tony Fernandes was a prominent platform speaker) will meet in Paris.
Maybe Airbus will have a ”sales demo” A380 at Le Bourget ready to take delegates on an ”educational”. Toulouse hosted one dinner and Seattle the other. Opinion seemed to be that Boeing/JAL got it right on the evening but will they succeed so easily when it comes to 787 v A350.? There is one great advantage of the so-called subsidies. The aircraft coming off the production lines are not as expensive as they could be. And if the costs were higher could the airlines afford them?
http://www.iata.org