DAVID KNIBB PALM BEACH
Latin America's airlines are becoming increasingly vocal in criticising the way that aviation is treated by their own national governments
The woes of Latin America's airlines continue, but for the first time the carriers have openly acknowledged that their own governments are a big part of the problem. Delegates at the ninth International Airline CEO Conference, a respected Latin aviation forum held this year in Palm Beach, heard an unprecedented outpouring of complaints about the governments of Central and South America. These complaints came together with an array of views about how to influence or find ways to work around them.
The conference theme "The best is yet to come" may have been designed to convey optimism, but speakers took it to mean that things could hardly get worse. Robert Papkin, conference chairman, described the latest financial results of Latin American airlines as "deplorable". Federico Bloch, chief executive of Grupo TACA, said the Latin airline industry is "in shambles". Patricio Sepulveda, regional director for the International Air Transport Association, warned that 85% of Latin America's airlines are in jeopardy.
Papkin's list includes Aerolineas Argentinas, which he warns "may be near its end"; Bolivia's LAB, which he says is "trying to save one of the oldest airline names in Latin America"; and Ecuatoriana, which is "little more than a paper airline".
Yankees go home
The immediate causes are familiar - lack of capital, an average fleet age of 18 years, and an inability to hold their own against an invasion from the north. In the past decade US carriers have boosted their share of the US-Latin American market from 58% to 65%. Some major carriers, such as AeroPeru and Viasa, have failed. Others, such as Colombia's Aces and Avianca, seek consolidation as a way to survive. Enrique Cueto, LanChile's chief executive, warns that if Latin airlines do not solve their problems soon they will face "consolidation by force" rather than voluntarily.
In the past, USA-bashing has been a popular activity in Latin aviation circles. Complaints have ranged from the US Federal Aviation Administration's safety assessment program, open skies, and delayed antitrust immunity, to US capacity dumping.
Those problems were real, and most persist, but there is a growing recognition that much of the underlying responsibility lies closer to home. Safety oversight is the best example. Sixteen Latin and Caribbean countries are listed by the FAA as Category 2, meaning their airlines cannot add flights to the USA or codeshare with US partners. Some of these nations have languished in Category 2 since the FAA first started safety assessments seven years ago.
Category 2 represents an FAA judgment that a country's civil aviation authority does not meet the International Civil Aviation Organisation standards for airline safety oversight. In most cases there is no real dispute over that conclusion, yet some Latin governments seem incapable of addressing their shortcomings. "Transportation ministers are only interested in us when an airline has an accident or is planned for privatisation," laments Juan Emilio Posada, new director of Latin America's air transport association (AITAL).
Papkin, a Washington DC lawyer who has represented many Latin aviation clients in disputes with Washing-ton, is no fan of the FAA's review program, yet he sees the failure of Latin American governments to address the causes for the region's poor safety ratings as lack of political will. Jeffrey Shane, former US assistant secretary for transport policy and international affairs, is more blunt: "I am bewildered that this is still a problem. Until Latin American governments show the political will to address air safety, Latin aviation will languish."
Yet, according to Joan Bauerlin, senior transport advisor to the Inter-American Development Bank, there is no evidence of growing Latin American concern. "Governments in the region have no clear idea of the importance of aviation to their economies. We recently received a financing request from a poor nation that wanted $350 million for road improvements - enough to pave every road in the country. Aviation is essential to that country, but it was never mentioned. Aviation is just not a priority."
Why is this so? Because "our industry produces few votes," Posada bemoans. Yet, the problem runs deeper than simple neglect. "Governments treat us like a luxury. They tax us as if we were a cash cow," complains Ozires Silva, chief executive of Varig Brazilian Airlines. Posada agrees, pointing to a recent AITAL task force which found that Latin carriers pay on average 30% more for infrastructure use than in the USA.ÊA study sponsored by LAPA showed that Buenos Aires airport charges are 77% higher than in Santiago, Chile, and 200% higher than the USA. This mentality, warns Bauerlin, could "kill the goose that lays the golden egg. Governments assume that airlines make lots of money. They don't realise what a tough business it really is."
Political apathy
In his keynote address Silva saw the problem as even worse than a lack of knowledge. "The Brazilian Government hates aviation," he claims. "Airlines in Brazil are islands in a sea of government controls." Whether it be a new domestic route, a fare change, or simply a switch in aircraft, "we need permission for everything". Parochialism makes this worse. Silva complains that "Brazil's officials are very domestic-minded. They have little awareness about the global aspects of aviation." Posada notes the same thing. When asked why Mexican and Colombian competition authorities seem more concerned about domestic than foreign competition, he replied, "because foreigners don't have a right to vote in political elections".
The governments of Latin America seem to have made the adjustment from owning airlines to regulating and taxing them, but they have not yet learned the role aviation plays in their trade and external affairs. To the extent Latin American airlines were expecting help from February's Summit of the Americas in Quebec they were sadly disappointed. Government officials emerged gushing about the benefits and need for more liberal trade, but they failed to acknowledge any link between that and freer aviation.
Their boldest aviation directive was that transport ministers should "explore the opportunities" for discussion. "That doesn't mean anything," Bauerlin retorts. "Hardly a mandate," muses Papkin. If help is not forthcoming from regional leaders, then airlines maybe forced to do more on their own.
TWA chairman Gerald Gittner, for example, stressed to conference delegates that "airline managers must take account of politics". Bauerlin added that being politically savvy also means being politically active. She gives Latin airlines poor marks for broadening their base of support. They tend to talk to each other, she claims, but "have failed to nurture allies". She also invites airlines to put more political pressure on the Inter-American Bank so that it too pays more attention to aviation.
Need for co-operation
That raises the bigger question of whether airline initiatives in Latin America should focus on individual governments or something broader. Silva urged Latin carriers to form partnerships to address aviation's needs jointly, implying a more regional approach.
So far the only activity by regional agencies such as IATA and AITAL has been to weigh in on airport charges. Posada suggests that Latin carriers throughout the region treat airport fees as a surcharge rather than include them in fares. "We need to make it transparent so the public knows what is being charged," he says.
The most far-reaching suggestion comes from Cueto and Posada, whose views deserve attention because of their leadership in Latin aviation. Borrowing a page from Central America, where Federico Bloch, another of these recognised leaders, was instrumental in forming a regional air safety agency, Posada says: "We must push for broader geographic scope, as in Europe. We need to move away from individual government controls." In his usual forthright way, Cueto stresses the same point. "We need a common regulatory agency so that the FAA is assessing the whole region as one. Without this kind of global scale, we will be nothing."
Source: Airline Business
