‘We need freedom to do business’

IATA director general and CEO has warned Middle Eastern airlines and govern-ments not to compromise growth by raising infra-structure costs.

At the same time, he pulled up airlines for their lethargic implementation of e-ticketing but urged them to press for liberalisation. The incredible growth of the regional airline industry, also a much-talked about subject at this year’s World Travel Market, comes with some risk, he told the Arab Air Carriers Organization (AACO) AGM in Kuwait last month.
The Middle East and North Africa is one of the most exciting areas of the world for aviation, he said, pointing to the incredible opportunity pro-vided by double-digit growth and booming economies. However, he said airlines must move forward with IOSA, speed up e-ticketing and press governments for much-needed change on liberalisation to drive growth .
Bisignani congratulated Arab carriers on their ‘emerging and impressive success story’ with year to date increases of 15 per cent in passenger traffic and 17 per cent in cargo traffic. Both are approximately three times the global average, he said.
While more airlines in the Middle East announced profits in 2005 than ever before, he said the challenge for the region is to manage that growth. “Growth is not a guarantee for continued profitability,” he cautioned.
“And we must recognise that successfully running four enormous hubs in a small geographic area is challeng-ing,” he said, citing the example of South Asia, where Singapore, Bangkok and Kuala Lumpur all have similarly large world-class hub facilities. “Of these, two are struggling to meet growing demand, and one is struggling to attract traffic – and they draw on a potential regional market of 3.5 billion.” The MENA region’s local market, he said, is 565 million.
Massive investment in infra-structure is a driver to diversify oil-based economies, he said, but warned that cost-efficiency cannot be compromised. Using the UAE airports’ plans to raise fees for landing, parking and aerobridges as an example, he said airlines “must not be shy of reminding airports that putting up prices is not the way to grow traffic,” particularly as regional carriers have already placed orders for 350 aircraft worth $60 billion to fill the airports.
In his address, made available to TTN by email, Bisignani stressed the need for the region to raise their game in three of IATA’s lead initiatives: safety, simplifying the business and liberalisation.
While air transport is the safest, he said the accident rate in the MENA region, at 2.1 per million flights in 2005 is six times higher than the global rate of 0.76 per million flights. Calling the IOSA certification process the first global stan-dard for airline safety manage-ment audits, Bisignani pointed out that 12 IATA carriers in the region have not started the IOSA process, including four AACO members.
On the liberalisation front, he said, regional airlines would do well to learn from Dubai. “We need the freedom to do business and liberalisation is critical for our industry,” he said. “There is no excuse – except politics.” This region was particularly at risk, he said, because of the enormous airport and aircraft invest-ments at risk.
“A Booz Allen Hamilton study looked at the 10 leading airports in this region, whose combined capacity will be 320 million passengers in 2012. IATA’s recent traffic forecast – based on airline expectations – projects 160 million passen-gers. The entire Europe to Asia market generates only 110 million passengers.” The airports of tomorrow can be filled partly by liberalisation, he said, using Dubai, Singapore and the Netherlands as examples. “Liberalisation brings growth,” he said.
While there has been some progress in the region with privatisation and open skies in Lebanon and Kuwait, he said the implementation of real policy measures to support growth was needed.
On the efficiency front, Bisignani slammed regional airlines on their e-ticketing achievements. While IATA has achieved 70 per cent of e-ticketing penetration among its BSPs, the Middle East is dead last at 13 per cent. “It is embarrassing for a region that is growing so fast and it is a missed opportunity.”
In global terms, he said, an expected industry profit of $1.9 billion in 2007 was good news, but on $450 billion in revenues that amounted to 0.4 per cent returns. “So there’s much more work to do,” he said.