Governments Urged To Release $5bn Airline Revenues, Venezuela, Angola, Sudan, Bangladesh And Zimbabwe

Countries from Angola to Venezuela owe nearly $5 billion (Dh18.4bn) in local ticket sales to international airlines including Lufthansa, Air France-KLM and Emirates as the governments struggle with currency controls.

The total amount of funds blocked by 16 countries, mainly Venezuela, Angola, Sudan, Bangladesh and Zimbabwe, has dropped 7 per cent at the end of 2017 compared to a year ago, the International Air Transport Association said.

The industry body renewed calls to the governments to respect international treaties and allow foreign airlines to repatriate these unlocked revenues.

In Venezuela’s case we do not see in the short run any solution frankly, to be realistic, but we will not give up, Alexandre de Juniac, director general of IATA, said in a media briefing at the conclusion of the IATA annual meeting in Sydney.

Airlines have been struggling to get ticket revenues out of oil dependent countries such as Angola, Africa’s second-biggest oil producer, after a 2014 collapse in crude oil prices dried up foreign reserves of dollars, euros and major currencies.

In 2017, Emirates scaled back its five weekly flights to Angola’s capital Luanda to three citing difficulties in repatriating funds.

Venezuela alone owes $3.78bn to international airlines, followed by Angola where about $386 million remain blocked.

Sudan is withholding $170m, followed by Bangladesh with $95m and Zimbabwe with $76m, Iata said.

Venezuela, which has more oil than Saudi Arabia and was once one of the richest economies of Latin America, is now plagued with shortages in basic goods from food to antibiotics.

The sharp drop in oil prices in 2014 has led to an economic downward spiral in the country.

Inflation exceeded 2,400 per cent in 2017 and would worsen in 2018, the International Monetary Fund estimated.

Mr de Juniac said a solution is unlikely soon in Venezuela, given its deepening economic crisis, but remains hopeful for progress in other countries.

We are encouraged by the recent developments in Nigeria and Angola, and hope other states will also move quickly to address blocked funds, he said.

Egypt has already paid in full its obligations to international airlines, while a $600m backlog in Nigeria was cleared and Angola released $120m from the peak of more than $500m it owed, Iata said.


Tourism Observer

International Air Transport Association Warns Governments Against Privatising Airports

The International Air Transport Association (IATA) has warned governments against privatising airports in a bid to upgrade them.

Several governments in Europe and America have either fully or partially sold airports to the private sector to inject funds for giving the facilities facelift as passenger numbers rise.

It is important that governments take a long-term view focusing on solutions that will deliver the best economic and social benefits.

Selling airport assets for a short-term cash injection to the treasury is a mistake, said Alexandre de Juniac, IATA’s Director General on Monday.

IATA added that short-term financial gains based on poorly-thought out privatisation moves run the risk of un-doing long-term social and economic benefits that can be achieved through well-thought decisions.

According to data by the Airports Council International, passenger numbers at the world’s 20 busiest airports grew to 1.5 billion last year, an increase of 5.2 per cent from 2016.

At least 40 per cent of European airports are partly under private ownership, through long-term leasing or concession, says the Annual Privatization Report on air transport released in April.

Leading airports such as Heathrow and Zurich are fully privately owned while in Africa, Cape Town International Airport is partially under private ownership.

Last year, Nigeria opened up ownership of all government-owned airports to private investors as part of reviving the facilities that for years have suffered neglect and dilapidation.

German government sold 82.5 per cent of its ownership in Frankfurt Airport to HNA Airport Group of China last year.

France started efforts to sell 50.6 per cent of its ownership in Aeroports de Paris for 8 billion euros ($9.36 billion) in March.

In Serbia, airports concession holder and operator Vinci Airports secured a 25-year concession for ownership of Nikola Tesla Airport in Belgrade, in January.

Under the deal, the private firm will spend $1.2 billion to upgrade the terminal and runaways while paying the government $500 million.

Juniac added that privatisation does not guarantee solutions for airport challenges globally.


Tourism Observer

African Airlines Experiencing Great Demand

International Air Transport Association (IATA) announced global passenger traffic results for March 2018 showing that demand measured in revenue passenger kilometers, or RPKs rose 9.5%, compared to the same month a year ago, the fastest pace in 12 months.

Capacity - available seat kilometers, or ASKs grew 6.4% and load factor climbed 2.3 percentage points to 82.4%, which set a record for the month, following on the record set in February.

All regions except for the Middle East posted record load factors.

Demand for air travel remains strong, supported by the comparatively healthy economic backdrop and business confidence levels.

But rising cost inputs, particularly fuel prices suggest that any demand boosts from lower fares will moderate going into the second quarter, said Alexandre de Juniac, IATA’s Director General and CEO.

African airlines continued to enjoy very strong demand as well, with traffic up 11.2% compared to March 2017, which was more than twice the 5-year average pace of 4.8%.

Airlines here are seeing healthy growth on routes to/from Europe and Asia, while the region’s two largest economies, Nigeria and South Africa continue to improve.

Capacity climbed 6.7%, and load factor strengthened 2.9 percentage points to 71.0%.

March international passenger demand rose 10.6% compared to March 2017, which was up from 7.4% year-over-year growth recorded in February.

All regions showed strong increases. Total capacity climbed 6.6%, and load factor improved 2.9 percentage points to 81.5%.

Asia-Pacific airlines’ traffic soared 11.6% in March, compared to the year-ago period.

Passenger traffic is continuing to trend upwards, supported by strong regional economic growth and ongoing expansion in the number of airport-pair options for travelers.

Capacity increased 8.2%, and load factor rose 2.5 percentage points to 80.9%.

European carriers saw March traffic climb 9.8% over March 2017, up from 6.9% annual growth in February.

Business confidence in the most open countries in the region has been hit by trade tensions in recent months, but economic conditions remain broadly supportive.

As with Asia Pacific region, demand is also being stimulated by increases in the number of nonstop airport-pairs.

March capacity rose 6.4% and load factor was up 2.6 percentage points to 84.6%, highest among regions.

North American airlines posted a 9.5% traffic risein March compared to the year-ago period, well above the 5-year average growth rate of 3.6%.

Capacity climbed 4.9% and load factor was up 3.5 percentage points to 83.5%, which was the second highest among the regions.

The weakening US dollar is having a positive effect on inbound traffic, while the comparatively robust domestic economic backdrop is supporting outbound demand.

Latin American airlines had an 11.8% increase in March traffic, which was the largest increase among the regions for a third month in a row.

March capacity climbed 10.0% compared to a year ago, and load factor edged up 1.3 percentage points to 81.8%.

Traffic continues to recover from the disruptions caused by the harsh hurricane season in the third quarter of 2017, driven in part by economic recovery in Brazil.

Domestic demand rose 7.8% in March, which was a slight deceleration from 8.2% growth recorded in February, driven primarily by developments in the US market.

Domestic capacity climbed 6.2%, and load factor lifted 1.3 percentage points to 84.0%.


Tourism Observer

SINGAPORE: Big Aircraft Deals Will Lead Nowhere If Air Traffic Congestion Is Not Checked

IATA DG& CEO Alexandre de Juniac
Big aircraft deals done at air shows will mean nothing if air traffic congestion and infrastructure challenges are not addressed, the head of IATA warned in a speech just before the opening of the Singapore Air Show.

IATA director general & CEO Alexandre de Juniac called for urgent attention to the air transport industry’s growing infrastructure bottlenecks, which are increasingly affecting fast-growth markets in Asia-Pacific, with airport capacity severely constrained in Bangkok, Jakarta and Manila.

In a keynote address Feb. 5 at the Singapore Airshow Aviation Leadership Summit, held the day before the air show’s opening, de Juniac said infrastructure was vital to the industry’s future, but in many key places was not being built fast enough to meet growing demand.

All the great plane deals that will be done at this air show will mean nothing if we don't have the capability to manage the traffic in the air and the airports at each end of the journey.

Infrastructure is vital to travel industry's future. Airline requirements are not that complicated.

Sufficient capacity to accommodate demand is required. Quality must be aligned with our technical and commercial needs. And the cost of the infrastructure must be affordable.

I believe, however, that we are headed for a crisis. First, infrastructure in general is not being built fast enough to meet growing demand. And there are worrying trends that are increasing costs.

One of these is airport privatization. We have yet to see an airport privatization that has, in the long-term, delivered on the promised benefits.

That is because we have not found the correct regulatory framework. It must carefully balance the interests of the investors to turn a profit with the public interest for the airport to be a catalyst for economic growth.

De Juniac did single out some countries and their airports for praise in how they have managed growth.

Seoul’s Incheon Airport, he said has recently added runway and terminal capacity without raising charges for airlines and passengers and extended an airport charges discount introduced two years ago.

This sets a very positive example for other airports to follow. It also demonstrates great understanding of the role aviation plays in linking the Korean economy to economic opportunities globally.

The Singapore government is also showing great foresight with its expansion plans for Changi Airport, including Terminal 5.

But there are challenges. We must ensure the plans for T5 are robust enough to meet the high standards of airline operations and passenger convenience users of Changi Airport have come to expect.

We need to get the funding model right to avoid burdening the industry with extra costs. The prize to keep in sight is the airport’s contribution to Singapore’s overall economy.



Tourism Observer

Shortcomings In Passenger Airport Charges

International Air Transport Association (IATA) calls on the European Union to significantly strengthen economic regulation of major European airport monopolies by focusing on the interests of passengers.

Enforcing greater cost-efficiency at Europe’s airports will feed through into cheaper air fares, stimulate travel and enhance European competitiveness. In turn, this will support jobs and grow the economy.

The case for stronger airport charges regulation is seen in how European passengers have been denied the full benefits of cheaper air travel, as illustrated over the period 2006-2016 in a just-released IATA study:

- The average cost of an air ticket remained virtually the same,including all ancillary charges such as hold bags.

- The revenue portion of the ticket price for airlines fell from 90% to 79%

- The portion of the ticket price taken by the airport doubled. Passenger taxes also doubled

- Had airport charges remained constant over the 2006-2016 period consumers could have benefitted, on average, 17 Euros per one-way trip. That price stimulus of nearly 10% of average tickets costs would have improved Europe’s competitiveness, and potentially generated an additional 50 million passengers.

In turn that would have unlocked 50 billion Euros in European GDP and created 238,000 jobs.

Airlines, like all competitive businesses, are in a constant struggle to improve efficiency.

Europe’s airports however are largely insulated from competitive forces.

Europe’s light-handed Airport Charges Directive has failed Europe’s travelers and its own competitiveness by letting airport charges rise.

Tighter EU regulation is needed to stop airport monopolies from taking money from the pockets of travelers to reward investors.

The goal should be economic regulation of airport monopolies that is an effective proxy for competition—promoting efficiency while protecting consumers.

In that regard the voice and interests of airlines – airports’ main customers – should be carefully listened to.

This will ensure effective regulation that will broadly balance the interests of travelers, investors, citizens and economies, said Alexandre de Juniac, IATA’s Director General and CEO.

The trend of increasing private ownership of European airports adds urgency to the situation.

Since 2010 the number of European airports in private hands has almost doubled.

In many cases privatization has failed to deliver promised benefits to passengers and the local economy often suffers the results of higher costs.

The balancing role of effective and strong economic regulation is essential, said de Juniac.

Airport regulation in Europe has not responded adequately to the changing landscape in the airport sector.

The share of fully privately owned airports in Europe increased from 9% to 16% between 2010 and 2016 while the share of mixed ownership models increased from 13% to 25% over the same period.

Where publicly-owned airports may be considered as benign monopolists, often pursuing economic and social goals to support their local region, this is not the case with privately-owned airports who are driven by investor returns.

Increasing private ownership of airports in Europe has not been combined with appropriate regulatory oversight that drives airports to increase cost efficiency and ensure that airports are responsive to consumer demands.

Between 2006 and 2016 the average all-in cost of an air ticket bought to fly from an EU28 airport remained broadly flat, increasing by just 2% in nominal terms from €216 in 2006 to €220 in 20161.

However, the distribution of revenues between airlines, airports and governments changed significantly.

Average airline revenue per passenger fell from €194 in 2006 to €173 in 2016 and shrank from representing 90% to less than 80% of the all-in ticket price.

At the same time, both airport passenger charges and taxes have more than doubled, with average charges increasing from €16 to €33 and average taxes from €6 to €14.

The increased demand for air travel would have provided a significant boost to the European economy.

Lower airport charges would have benefited European businesses through lower travel costs and increased competitiveness, stimulating additional tourism and lastly encouraging the continued development of the European aviation sector.

Economic modelling carried out by IATA suggests that the economic boost from cheaper air travel could have unlocked an additional EUR50 billion in Gross Value Added (GVA) and supported the creation of an additional 238,000 jobs across the EU28.

In its Aviation Strategy, the European Commission has rightly identified the need to boost the efficiency of airport services and has engaged in an assessment of whether and how the Airport Charges Directive needs to be reviewed.

IATA fully supports the urgent finalization of this assessment under the leadership of Commissioner Violeta Bulc and of her team.



Tourism Observer