IATA External Cost Campaign · 2013. 1. 23. · 2 Global Media Day 2009 15 December The four deadly...

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To represent, lead and serve the airline industry

IATA External Cost CampaignJeff PooleDirector, Airport & ATC Charges, Fuel and Taxation

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15 DecemberGlobal Media Day 2009

The four deadly sins…. Airport chargesATC chargesFuel fees and taxesAviation taxes

•Here are the four categories of cost that are covered by our External Cost Campaign•The first two – airport and ATC charges – amount to around $54.2 billion a year, 11% of airline revenues

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Key 2009 messages to providers No increases: reduce or freeze chargesCut costsIncrease efficiencyTo governments: lighten cost burdens on providers

•These are the messages that we have been giving to providers, governments and regulators in the context of the severe economic crisis:

•No increases in 2009: offer reductions or freezes •Greater effort on cost reduction and improved cost-efficiency; focus on savings in the short-term•Delay non-essential investments and costs•Governments also need to play a part by reducing their own cost burdens on providers

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Economic crisis actions yielding resultsOver US$3.5 billion in savings

$1.26 billion from airports$1.79 billion from taxes

Many providers avoiding major changes, with airports being most responsive

65% of savings (excl. Dutch APD) are airport

More partnership oriented approach from many providers – “we’re in this together”

•As of November, our External Cost Campaign has achieved over $3.5 billion savings, of which $1.26 billion from airports and $1.79 billion from taxes•And with the highest ever proportion of real cost reductions – 86% ($3.02 billion)

•The majority of our cost impacts this year has come from the airport category•The harsh economic reality of the crisis, and in particular the double-digit reductions in traffic, has forced providers to recognize that raising charges would be self-defeating•So there are many examples of voluntary freezing of charges •Other than a handful of airport “bad guys” most providers have engaged in dialogue with us•There has been little movement in ANSP, fuel and tax (except the removal of the Dutch Passenger Duty)

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Major savings in 2009Netherlands: cancellation of Air Passenger Tax, $1.6 billionPeru: reduction in proposed increase for 5 years, $123 million Exemption of jet fuel from ISC tax, $108 millionDenmark: charges freeze until April 2011, mitigated increase for 5 years. 25% reduction of landing charges. Total $167 millionSingapore: 25% reduction on landing fees, $87 millionCanada: Toronto Pearson airport 10% discount on landing / terminal fees, $50 millionMauritius: eliminated tax on int’l. fuel, $10 million

•The economic crisis has driven some major savings initiatives in most regions, including North and South America, Europe, Africa and Asia•The savings in Mauritius are relatively small, but important in the national context•These savings are also a good example of excellent cooperation between IATA and the national carrier to successfully change government policy•We would like to keep the momentum of this “better partnership” attitude in 2010

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Major increases in 2009India: new airport development fee and increased airport charges, $587 millionEurocontrol States: various increases in 2010 unit rates up to 32%, $360 millionDubai: passenger fee increase, $227 millionHeathrow: increase in overall charges, $161 millionCosta Rica: new tourism tax, $122 millionSouth Africa: proposing 133% increase for 2010-11

•Unfortunately, the list of unhelpful infrastructure providers is also geographically diverse•Each of those listed here is driving cost increases of over $100 million or double-digit increases in unit rates•19 Of the Eurocontrol states are increasing 2010 rates, Armenia is the worst at 32%•The increases of the 19 states wipe out the good work of the other 15 Eurocontrol states that are either reducing or freezing their unit rates in 2010•The net impact is an increase of 2.7% (= $360 million) in the average unit rate across the Eurocontrol states•Similarly, huge increases from a handful of major airports wipe out the gains or freezes at many airports

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Industry initiatives worldwideAsia Pacific

Developing ATC best practices commercial model jointly with Airways NZ

AmericasSharing best practices on charges consultation process/transparency, cost efficiencies and performance, jointly with ACI-North America

•We are working at an industry-wide level with various partners to address the current charges situation•Asia Pacific•Air traffic control commercial model: IATA is participating with airlines and other industry representatives, particularly Airways New Zealand, on the development of a best practice commercial model that addresses the issue of increased unit costs in a traffic downturn. The model could be presented by IATA/CANSO at ATC Global 2010

•Americas•Consultation best practices: IATA is working with ACI-North America on a document that would provide the basis for consultation / transparency best practices for US airports. Also sharing best practices on airports, cost efficiency and performance

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European initiativesEC Airport Charges DirectiveEC Directive on Aviation Security Charges in EUSingle European Sky Performance Framework

In Europe we are working on three major industry initiatives:

1. EC Airport Charges DirectiveThe European Commission’s Directive on Airport Charges was adopted in March of this year. Member States now have until March 2011 to transpose the Directive into their national law.

2. EC Aviation Security DirectiveThe European Commission in May adopted a proposal for a Directive to regulate aviation security charges at all European airports.It establishes an obligation to consult airlines before any decision is taken.

3. Single European Sky Performance FrameworkThere is a limit to how much cost efficiency we can achieve in Europe by dealing with the individual Air Navigation Service Providers, hence our strong support for the proposals of the European Commission for a Single European Sky Package II.More details of these three initiatives can be found in the supplement slides at the back of the presentation.

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Challenges in 2010Achievements tougher in 2010 because:

Impact of 2009 under-recoveriesPerception that charges can rise again with economic recoveryGovernments taxing aviation under environmental & other pretexts

Image: Courtesy SBDC

•We believe that the positive results achieved thus far will be much tougher to repeat in 2010•As airports and ANSPs continue to suffer from reduced traffic (albeit improving), there will be pressure for them to improve their financial positions – for example by increasing charges to reduce the financial under-recoveries•And economic recovery, even if slow, may encourage the perception that charges can rise in better times•We hope that providers will maintain the “better partnership” attitudes and not revert to previous behaviours •Also, there is a threat of governments seeking to fill their empty coffers by imposing new taxes, both environmental and otherwise

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Taxation: an ongoing threatCertain tax initiatives cancelled

Netherlands Passenger DutyBelgium Ticket TaxUS APHIS Agricultural fees

But threat from governments remains:Costa Rica Tourism Tax (confirmed)Philippines discriminatory taxes on international airlines (under discussion)UK Air Passenger Duty increases

•Aviation supports 32 million jobs and $3.5 trillion in economic activity•While certain governments have seen the damaging economic effects of taxation on aviation and removed taxes in 2009, all the efforts of the External Cost Campaign can be wiped out by a single mad tax decision – e.g. the UK Air Passenger Duty.

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Key 2010 messages to providers: Same goals, new environment

No increasesNeed to find new solutions for post-crisis situationNeed to maintain partnership approachFocus on longer-term view(3-5 years)

(Image: Courtesy educatednation.com)

•Our messages for 2010 remain unchanged, but the solutions will need to be adapted to the new situation as we recover from the crisis

•No increases•Need to find new solutions for post-crisis situation – ways to avoid the exploding of the volcano of under-recoveries from 2009•Need to maintain partnership approach – do not let the recovery lull us into a sense that the industry has survived so charges can be raised•Focus on longer-term agreements, (3-5 years), rather than the 1-year time frames we typically see

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To represent, lead and serve the airline industry

IATA External Cost CampaignJeff PooleDirector, Airport & ATC Charges, Fuel and Taxation

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E.C. Airport Charges DirectiveAdopted in MarchCalls for non-discrimination, transparency, consultation, and independent Supervisory AuthorityIATA has issued guide to help member States to implement into own national law

• The European Commission’s Directive on Airport Charges was adopted in March of this year• Member States now have until March 2011 to transpose the Directive into their national law• States will need clear guidance on the implementation of the Directive• IATA has thus issued a comprehensive implementation guide with input from airlines• The document clarifies airline expectations on airport regulation and best practices, including

non–discrimination and the need for independence and proper funding of a Supervisory Authority• Key messages include the fact that the Directive should be recognised as the minimum

requirement, and that implementation should occur at the earliest possible date and in full compliance with EC Treaty and ICAO provisions

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E.C. Aviation Security DirectiveIn May adopted proposal to regulate European aviation security charges. Main points of proposal:

Obligation to consult airlines before any security charges decisionsAirlines should not discriminate among airlines or passengersSecurity money should be used exclusively to finance security costs

IATA actively lobbying European Parliament and Transport Council but:

only "progress report“ to Transport Council in Decemberunlikely to see real progress before March 2010

• The European Commission in May adopted a proposal for a Directive to regulate aviation security charges at all European airports

• It establishes an obligation to consult airlines before any decision is taken• It also makes it clear that airlines should not discriminate among airlines or passengers, and that

the money raised should be used exclusively to finance security costs• IATA is actively lobbying the European Parliament and Transport Council BUT

• next step is probably only a "progress report"to the Transport Council in December• unlikely to see real progress before March 2010

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SES Package II: performance-drivenIATA focusing on binding performance targets

Develop measures for safety, capacity, environment, cost effectiveness EC to present initial recommendations to Single Sky Committee in mid-December

Other major initiatives9 Functional Airspace Blocks by 2012Network Manager functionSESARReform of EUROCONTROL

•There is a limit to how much cost efficiency we can achieve in Europe by dealing with the individual ANSPs, hence our strong support for the proposals of the European Commission for a Single European Sky Package II•We have been instrumental in calling for a new “Performance Driven” approach through the three key elements shown on this slide + the two facilitating elements of the SESAR project and reform of Eurocontrol

IATA External Cost Campaign · 2013. 1. 23. · 2 Global Media Day 2009 15 December The four deadly...

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