Rocky relations

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The row between Airports Council International (ACI) and IATA, with the airport group refusing to negotiate with IATA over the issue of airport charges, signals a new low in relations between the two trade bodies, but it may help clear the air towards finally agreeing performance benchmarks

Sharing a roof was never easy. And when the couple beneath the roof quarrel, it is even more challenging – especially when leaving is not a realistic option. So it is with airlines and airports, which share a roof and habitually quarrel about who should fix it when it leaks or indeed about whether or not it’s leaking at all.

Rarely can airlines contemplate voting with their nosewheels and exit an airport if a quarrel over charges goes unresolved. Southwest Airline’s plan, or threat, to pack its bags and pull out of Seattle/Tacoma for a smaller and cheaper facility, Boeing Field, is the exception. Reality –  and geography – offer this option to very few airlines. And more importantly, very few traditional network carriers would make the move when they could. The value of the network would be at risk. As one opponent of a third Chicago-area airport once argued in a losing battle: “Airports aren’t just for people. They’re where airplanes go to meet each other.”

So if airlines and airports are bound to each other under the same roof, they had better accept the reality of their situation and, like even the oddest of couples, agree on a few basic ground rules. Many of course already do – at local level between individual airports and airline representative boards.

For executives from both sides of the relationship the fight that has erupted between their trade bodies will be viewed with some bemusement. After taking years of verbal whipping from IATA over charges, the airports are finally striking back. The feud originally started in 2002 when IATA called on all suppliers in the value chain to take their share of the restructuring pain as airlines dived into the red. As the table shows, there have been significant shifts in operating results in the various industry sectors over the past few years. The high profit margins at both airports and global distribution system providers, which caused IATA the most grief, have dipped, but remain robust and in line with averages for other industries. The fall reflects a general push for airports to become more efficient and competitive on the one hand, and increasing leverage from airlines over their distribution costs on the other.

IATA challenges that airport costs and expenses are not immune from airline cost-cutting attacks. IATA director general Giovanni Bisignani says: “Airlines don’t expect a free ride. But, like travellers, we demand value for money. The days of ‘we spend and airlines pay’ are over for airports.” Bisignani has urged airports to move beyond the old government bureaucracy mindset of the days of rates and charges by formula.

In responding in November, ACI director general Bob Aaronson was equally blunt. Like Bisignani, he is not afraid of plain talking when he feels it is necessary, having stood up to US civic authorities who saw airports under his management as pet projects and centres for the employment of the favoured. Aaronson told delegates at the association’s annual general assembly that IATA has “aggressively, and not very accurately, relied on rhetoric and media pressure to inflame talks that should be straightforward business negotiations”. Dealing with “sick airlines” had just made the task of airports more difficult and it was time for the carriers to fix what was broken in their business.

Aaronson’s prescription: avoid IATA in business decisions because “the best and speediest agreements have been made where IATA had no role, and where airports engaged in direct talks with airline customers and the boards of airline representatives”.

Where, then, do we go from here? The effect on day-to-day relations between airlines and airports will be negligible. However, it is plainly farcical for the industry’s main trade bodies to allow the impasse to fester. Once the dust has settled it will be time to find common ground. That ground should be to once and for all agree sound benchmarks on airport performance. Only then can an independent judgment be made on an airport’s efficiency, or otherwise. No doubt this would not put an end to the finger-pointing, but it would at least define the playing field.

IATA’s close working relationship with CANSO, the trade body for air navigation service providers, is developing into a more rational model for trade bodies to follow. The two are co-operating on the crucial issue of performance benchmarks. No one says agreeing these measures is easy, but it is a far from impossible task.

Now airports and airlines are looking at developing benchmarking, but separately rather than together. That is a futile exercise, and the sooner the two associations can convince themselves to meld their efforts the better. Credible benchmarks support good-faith negotiations. While commonly agreed benchmarks will help, what is also needed are more longer-term charging deals to avoid the annual conflict that has come to characterise too many airport charges negotiations.

ACI and IATA may be at each other’s throats today, but the hope is that the row, having flared, will clear the air and the two sides can return quickly to proper business relations.