IATA Takes The Gloves Off

     It was a hard-hitting Giovanni Bisignani at his fighting best.
     Addressing the Confederation of Indian Industry (CII) and the Asia Pacific Aviation Media Association, the Director General and CEO of the International Air Transport Association (IATA), yesterday (September 24) minced no words to lambast the Indian government in general and the civil aviation ministry in particular.
     "The coming months are critical. The industry is sick. I had to suspend over 25 airlines from our settlement systems because they went bust," he said. His words only echoed what many industry pundits have been saying that domestic carriers in India have been bleeding financially as a result of the high prices of aviation turbine fuel in the country. The IATA has, in fact, compiled a list of 20 airlines which could go bust in the near future but officials in Bisignani's office refused to comment on whether there were any from India on the top-20 list.
     The lack of infrastructure and high fuel prices—largely due to high rate of taxation in India—raised Bisignani's ire and he showed his unhappiness.
      "On my last visit I made it clear in my presentation that India's aviation dream -- built on market liberalisation and new aircraft orders --- could become a nightmare. Certain issues needed to be handled correctly: improving infrastructure, matching capacity growth to demand, harmonising to international standards and building a competitive cost structure," he said and quickly took it up from there with, "None of this has happened, and today the situation is critical. India's airlines expanded quickly taking advantage of new opportunities. But targeting market share put the bottom-line at risk.
      "Rising food and energy costs are eating into disposable income. So cutting fares to fill seats is not working…"
      He pointed out that the growth in the industry had slowed from 33 percent in 2007 to 7.5 percent in the first half of this year and had gone negative in the last two months. "The global crisis is hitting India hard. While the established airlines are working to match capacity to demand, some start-up airlines continue to expand rapidly," he said.
      As a result, Bisignani said, "The bottom line is bleeding. India will post the largest losses outside the U.S. -- potentially US$1.5 billion this year. Airlines are starting to take some tough medicine. Domestic capacity growth will stop by the end of the year. Aircraft orders are being deferred and we have seen some consolidation. Among the consolidations, the historic merging of Air India and Indian Airlines was the biggest and most important. Now, effective implementation to achieve efficiencies is the challenge."
      Taking up the issue of the high fuel prices, the IATA chief said that fuel was the biggest factor impacting profitability. "While fuel is 36 percent of average industry costs, it is up to 50 percent for some Indian carriers. India is among the most expensive places on the planet to buy aviation turbine fuel. In August a kilo-litre of ATF cost Rs 73,600 in Mumbai. In Singapore it was Rs 46,500 rupees. That 58 percent differential is robbing Indian airlines of their competitiveness."
      He then went on to advise what the Indian government could do: "Two additional important domestic tax measures must be taken -- removing excise taxes and implementing a 4 per cent standard state tax for domestic fuel in line with Ministry of Civil Aviation recommendations. We must also look at greater transparency in ATF base pricing and common-use fuel facilities. Achieving all of this, will give India's aviation industry a much more solid competitive footing."
      Referring to the government's decision to establish a committee to look into the problems facing the aviation industry, Bisignani said,
      "My biggest concern is speed. This is a fast changing industry and India's decision-making is too slow. The crisis highlights this."
Having dealt with the fuel prices, the IATA boss went on to pick holes in the aviation infrastructure in the country. "Delhi is improving. A new runway (the third one reported in detail by Air Cargo News FlyingTypers) will soon provide extra capacity as will the new terminal in 2010. Greenfield projects like Bangalore and Hyderabad are helping, as are upgrades in Chennai, Kolkata and others. But these are not complete solutions. They will soon be at capacity. Long-term solutions that think much bigger are required."
      He then took up the case of Mumbai where he said the situation was critical. "Today its terminal handles 24 million passengers a year. That is twice what it was designed for…The Greenfield site under consideration with a phase one capacity of 10 million might provide relief, but it is not a serious solution. We need an airport that can adequately serve the financial capital of the world's second most populous nation. That means thinking much, much bigger. We must use the breathing space of the current downturn to engage the airlines and plan in the 100 million range like Delhi…"
      To his listeners, who were just about recovering from the serial blasts that occurred in Delhi a few days ago, Bisignani pointed out that India had taken a major diversion from global standards as far as security was concerned.
      "I was very disappointed to see the Indian Government mandate non-standard data transmission requirements for Advance Passenger Information (API). Airlines have spent millions to adapt their systems to UN-EDIFACT. This system is used by every other country with API programmes. India's go-it-alone decision is an added cost burden for an industry that cannot afford it. India's unique standard provides no additional security benefit. And it limits the ability of the government to share information with other jurisdictions. This is a serious flaw for India's APIS at a time when increased cooperation is needed. This must change," he said.
      Praising Civil Aviation Minister Praful Patel for pushing the aviation industry forward, Bisignani said, "Minister Patel's liberalisation of India's domestic and international markets created tremendous new opportunities although pressure on the infrastructure still demands urgent solutions. And the expansion of airlines led to a process of consolidation building stronger carriers. But we must not lose sight of one important fact: aviation is making India a better place by connecting business to global markets, expanding tourism and creating jobs…Now we must look beyond India's borders. The 60 year-old bilateral system must change so that the airlines that facilitated the global village can enjoy its benefits. Almost every other industry can sell its products where markets exist, start businesses across borders or merge and consolidate where it makes business sense. But airlines need an international treaty to start services and cross border consolidation risks traffic rights."
      Calling himself an India optimist, Bisignani emphasized, "India is not just a great potential market. This great country has a natural leadership role to play. But it can only achieve this by addressing the issues of today's crisis with quick decisions based on global standards…Europe and America are our industry's history. Asia is our future."
      Jet Airways' CEO Wolfgang Prock Schauer, standing in for his boss, Naresh Goyal who was supposed to attend the interactive session with the IATA chief, welcomed Bisignani. Prock Schauer said that "today's crisis is far more severe that 9/11 and we need to be careful to tackle it."
      Ankur Bhatia, Past Chairman, CII Delhi State Council, in his concluding remarks thanked Giovanni Bisignani for bringing clarity to the problems facing the aviation industry and hoped that the government would take necessary action.
Tirthankar Ghosh

Clouded DG Regulations Since 911

     If you ask Patrick N. Oppenheimer Senior Manager Dangerous Goods & Safety at FedEx Express “why does FedEx offer a dangerous goods service?” his answer will be as direct as the session he chaired earlier this year at the IATA World Cargo Symposium in Rome, Italy March 5, 2008.
     In the seven years since September 11, 2001, regulators have layered onto existing DG issues a wave of regulation —like never seen before.
     Included are a “variety of political and various organizational pressures and posturing that have further clouded a difficult issue.
     Although FedEx Express daily DG volume is less than 1/3 of 1% of overall daily package business, the company is widely recognized worldwide as leader and innovator in DG technologies.
     “When prepared/handled correctly and safely, DG poses no more risk than any other package being transported, that is why we provide the full value and range of services to our customers.
     “Certain industries/industry segments are highly dependant on the service (no/few alternatives)
     “Offering an effective DG service also meets medical, health, community needs.
     “In most cases the public at large in fact is not necessarily aware of its need and dependence for DG transportation.
     “Also by offering a well planned comprehensive DG service air cargo discourages “underground/undeclared” shipments.
     “Awareness is important —if fear is the intent of terrorism, then knowledge is the defense.
     “Air cargo should communicate facts without communicating fear.
     “To balance the needs of commerce, business operations and security and safety, we need to use technologies that aren’t available yet or are still in concept phase.
     “But utilizing simple administrative actions will carry the day while technology catches up.
     “Air cargo should pursue and support government research, development and sound science.
     “But at the same time everyone should carefully review existing requirements, laws and regulations before layering on more.”
Geoffrey