Urgent Call for Progressive Liberalisation Time to Align Policy with Airline Industry Realities

“Failure to liberalise the air transport sector is delaying the recovery of a sick industry. Since 2001 airlines have lost in excess of US$40 billion. The case for change and greater commercial freedoms is immediate and urgent. But the government response is disappointingly slow,” said Giovanni Bisignani, Director General and CEO of International Air Transport Association (IATA).

Bisignani pointed to the US-EU negotiations on open skies and regulatory convergence to kick-start the liberalisation process. “An agreement would add US$5 billion to the bottom line of the industry. It is an opportunity we cannot afford to miss. It is time to move from discussion and deliver results. The combined markets of Europe and North America account for over half of global aviation traffic. The ball is in the US court and I am confident of their commitment. I hope that this important business agreement is not once again hijacked by domestic politics,” Bisignani said.

Bisignani was addressing the International Civil Aviation Organization (ICAO) Global Symposium on Air Transport Liberalisation being held in Dubai, UAE. The symposium is a follow-up to the 2003 Fifth Air Transport Conference where governments agreed to a vision of progressive liberalisation.

“The fundamental question is the role of governments—the core of the liberalisation debate. Safety, security, regulating monopolies where markets do not work and liberalising where markets do work are areas that require strong government leadership. The future success of the air transport industry requires that airlines have the basic commercial freedoms to serve markets where they exist and to merge and consolidate where it makes business sense,” said Bisignani.

Bisignani rejected arguments of safety and security as excuses not to liberalise:

Security: “There is no valid national security argument for national ownership rules. Why should airlines be treated differently than the strategic sectors of telecoms or banking? What happened to the merchant marine fleet? With the exception of some coastal shipping, most countries have no national merchant marine. But this has not prohibited the delivery of goods in times of national crisis. Commercial markets have taken up the challenge. It is time to move on," Bisignani commented.

Safety: “Air transport is the safest mode of transport. The 2005 accident rate was the lowest ever at 0.76 accidents per million flights or 0.35 if you look at just IATA members. The IATA Operational Safety Audit (IOSA) is the first global standard for airline safety management and will be a condition of IATA membership from 2008. Put IOSA together with ICAO’s enhanced Universal Safety Oversight Programme and the safety argument against liberalisation is history,” said Bisignani.

Bisignani went on to argue for liberalisation to build a healthier air transport sector that delivers benefits to the consumer and broadly throughout the economy:

Consumer Benefit: “Liberalisation between India and the UK has seen weekly flights double to 200 in a year. Airlines are sharing the market opportunities and consumers have never had so much choice. Similarly, the Single Aviation Market in Europe saw traffic double between 1993 and 2005. Real prices for air travel dropped by a third and more people than ever are flying,” Bisignani said.

Economic Benefits: “Air transport is the US$450 billion heart of a value chain that supports US$2.9 trillion in economic activity. A recent study led by Boeing quantified the spin-off effects of liberalisation by looking at 320 restricted city-pairs around the globe. The impact of liberalisation would be 63% increase in traffic, 24.1 million jobs and US$450 billion in economic activity. That is the equivalent of adding an economy the size of Brazil to global commerce,” Bisignani said.

Current Situation: “IATA research shows that over 98% of traffic is still governed by bilateral agreements with ownership or principle place of business restrictions. Only 17% of traffic operates in a liberalised environment. There are well over 3,000 air service agreements, of which 200 accounts for 75% of traffic. So changing only a few agreements can have a big impact. That is why a US-EU agreement is so important. Failing that, we will look for leadership elsewhere,” said Bisignani.

Challenge: “We have the vision for progressive liberalisation, now we need action and speed to deliver results. We live in the internet age and the 60 year-old-rules that govern our industry are in need of a nice retirement party. The challenge for our government leaders is to bring policy in line with the changes airlines have achieved and deliver the on leadership vision that our industry needs for the next 60 years. There is no time to sit and wait. The world is changing—and so must air transport,” concluded Bisignani.

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