IATA's call to rip up the bilateral system is not the first and it won't be the last. But is anyone listening?

Delegates at the IATA annual meeting backed IATA director general Giovanni Bisignani's appeal to "rip up the 3,500 bilaterals and replace them with a clean sheet of paper without any reference to commercial regulation", but few believe it has a ­realistic short-term chance of coming off. "We are a long, long way from Giovanni's dream," said Tony Tyler, chief executive of Cathay Pacific Airways.

But the industry's predicament has led Bisignani to repeat and strengthen IATA's demand that governments deregulate. "We fight crisis after crisis with our hands tied because flags, not brands, define our business," he said. "This must change. Airlines would be free to innovate, free to compete, free to grow, free to ­disappear, and free to become ­financially healthy."

Emirates would welcome greater liberalisation, said its president Tim Clark, but he is not optimistic for short-term change. "We don't think it is something acceptable to all states [at this time]. It's a long, slow path, although there has been enormous progress in the last 20 years."

Open Skies

IATA's istanbul Declaration

Governments must eliminate archaic rules that prevent airlines from restructuring across borders

In view of existing fees and charges, governments must refrain from imposing multiple and additional punitive taxes and other measures that will only deepen the crisis

State service providers must invest to modernise air transport infrastructure urgently, eliminating wasteful fuel consumption and emissions

Business partners, in particular monopoly service providers, must become as efficient as airlines are now. If not, regulators must restrain their appetite with tougher regulation

Labour unions must refrain from making irresponsible claims and join the effort to secure jobs in aviation and indeed in other industries

In the interest of the global economy and the flying public, we urge authorities to enforce the integrity of markets so that the cost of energy reflects its true value 

Many look to the large western economic blocs to take the lead. For example, the first stage of US-Europe Open Skies, which came into effect in March, was an "important hop", said Bisignani, but "it did not break the mould". Even stage two, which is ­supposed to address ownership issues, is only "a skip in the right directionto break the cycle of crises we need to jump, to think much bigger".

Jeffrey Shane, the former US transportation official and now a partner at Washington-based lawyers Hogan & Hartson, said it is important to recognise the "huge value achieved in the first phase of Open Skies". However, the continuing block on ownership changes by the US Congress means he is less optimistic about further progress.

Changes in ownership laws in many regions are necessary for cross-border takeovers and consolidation to take place. Neither Tyler nor Clark see it occurring in their regions. "I feel not in my working lifetime," said Tyler. But "if oil stays up there we will have to rethink a lot of things, so I wouldn't take that off the table", said Damien Horth, head of Asia transport research at UBS in Hong Kong. One of the bad side-effects of a protracted crisis is that governments could be tempted to step in and rescue their flag carriers, he said. Keeping these "zombie" airlines afloat distorts the market and makes it difficult for the rest.

"I fully agree with a liberalised environment," said Air France-KLM chairman Jean-Cyril Spinetta, "but first there has to be aligned competition rules" between airlines. "Today this is not the case," he said. In his view this means states must standardise how carriers pay for services like security. "Who is paying for infrastructure - consumers or taxpayers?" he asked. "Who is paying for air traffic control - consumers or taxpayers?"

For example, he pointed to the case of Dubai airport where "we pay seven times less [in charges] than in Paris". The implication here is that taxpayers in the United Arab Emirates subsidise the airport. If Air France-KLM enjoyed such prices at its main hub it would be E700 million ($1.07 billion) better off each year.

To further the liberalisation cause, Bisignani said IATA will organise an Agenda for Freedom Summit this autumn in Istanbul. The aim is "to build on the pockets of progress we see around the world". Several states, including Canada, the USA, Panama, Chile, the European Union, the UAE, India and Australia have already agreed to take part, he said.

"The invitation is open to any country that understands the value of aviation in driving their economies. And that has the courage to free our industry to build a financially sustainable future," he said.

 

 


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Source: Airline Business