REPORT BY MARK PILING IN LONDON
Airports and air traffic control authorities are being asked to share some of the pain by holding or even cutting airline charges. What measures are they taking to help their beleaguered customers?
There is a growing list of airports freezing or even reducing airline charges. But the problem for carriers is that this list is simply not growing fast enough. The need is immediate, says Julian de la Camara, the IATA director dealing with infrastructure charges, as the airlines try to shore up rapidly deteriorating finances amid plummeting traffic levels. "Any supplier that seeks increased prices at this time will seriously impede the ability of airlines to survive," says IATA's user charges group. "With respect to charges for the use of airport and air-navigation infrastructure, the airlines request relief in the form of unchanged or reduced charges and longer credit periods without penalties, as carriers will have cashflow problems."
According to the airports, it is not that IATA's call is falling on deaf ears, but rather that their own situation is equally grave. Mike Toms, planning and regulatory affairs director at UK airports group BAA, says: "Airlines are under enormous pressure and airports recognise that. But because of that it may have slipped the carriers' minds that every passenger lost to the airlines is also a passenger lost to us as well. It is a blow for both sides of the industry."
IATA has been contacting airports, air traffic control (ATC) providers and governments to press their case for short-term relief, says de la Camara. "We are calling on all providers to make their part of the effort to chip in." Some have already reacted. "More than 30 airport and air navigation authorities have responded with great imagination to the serious operational and financial difficulties faced by airlines," says IATA director general Pierre Jeanniot.
In the USA, for example, Chicago O'Hare has dipped into its reserves to freeze charges for the rest of the year, while San Francisco has said it will not raise charges in 2002 despite predicting a $100 million budget deficit.
Ironically, it is Athens Sparta airport that has been one of the first in Europe to respond. Greece's new gateway, which opened in March, was heavily criticised by IATA for steep hikes in charges compared with the old, congested Hellinikon airport. However, it has begun discounting aircraft parking and landing charges by between 6% and 30%, and is considering new incentives from early next year to help support thin international routes.
Charges dropped
Other European hubs to react are Vienna, which is planning to drop charges by 3% from January, while Munich and Amsterdam Schiphol have either postponed or cancelled planned increases. Elsewhere, Singapore Changi has chopped its landing fees by 10%, as it did during the Asian economic crisis, to assist beleagured carriers. And Hong Kong's Chek Lap Kok - another hub criticised by IATA for its high charges - will continue its 15% discount for another six months up to September. The most radical cut is at Dubai, where 50% reductions in landing fees may be extended from year-end into 2002.
IATA is encouraging airports and ATC authorities to reduce costs and eliminate non-essential spending. "We expect that they should take measures on a voluntary basis, and not adopt a wait-and-see attitude," says de la Camara.
Many airports have already taken stringent cost-cutting measures as they face probably their worst-ever collective financial calamity, even surpassing that during the Gulf War. For instance, Airports Council International-North America (ACI-NA) estimates its members will lose $2.3 billion in operating revenue in the year to September 2002. They will also face increased security costs of $1 billion. To date, airports both in the USA and Europe are footing the bill for more stringent security without government assistance, although they are asking for help.
While most US airports are slashing their budgets, and some - like Boston Logan with a 15% cut - have even reduced staff levels, ACI-NA warnsthat many may have to raise fees next year: "Airports with full residual agreements are likely to raise airline charges dramatically in order to come closer to financial stability."
Revenue shortfall
Larger airports that do not rely so much on aeronautical charges for their revenue may have more flexibility, ACI-NA says, but in the end airports may find they cannot recover the shortfall in revenue. It says that, ultimately, US airports operate in a closed financial system that needs to balance the books, and raising charges seems an inevitable response for many.
In essence, airports say their room for manoeuvre on charges is limited. "They are in dire financial straits," says Paul Behnke, director of economics and security at ACI World. "Many have had to cancel or postpone capital projects and are not only losing aeronautical but non-aeronautical revenue too. They are also paying higher insurance premiums. Some are hit by so much at the same time they can barely stay afloat."
An airport's room for manoeuvre is also limited because of its high fixed costs. "Our first job is to get security right and pay whatever it costs to get it in place - and we pay for that," explains Toms at BAA. "Our scope for cuts is very limited. Limited because our investment programme is so expensive."
The airports do not want to portray this as a classic "them-or-us" situation. "This is not a kind of hostile airlines-versus-airports issue, we both have to find ways through in difficult circumstances," says Toms.
While charges are of immediate concern in the short term, some are already looking to the longer-term damage the crisis may cause the airport system, and infrastructure investment in particular. Before 11 September, ATC delays and environmental issues over noise and the ability of airports to expand were at the top of out-going ACI director general Jonathan Howe's priority list. Today there is only one word is on the list: security. "Today my priority is consumer confidence in air travel, and the issue of security is a very important element of that," he says.
In the USA, ACI-NA is seeking temporary flexibility to use the $3 billion a year it obtains from government under the Airport Improvement Program for security-related projects. At present this money is restricted to use in construction projects. The word temporary is important, as ACI-NA wants to ensure its members revert to investing in capital projects when the security burden eases.
In addition to putting money into runways and terminals, airports will not be deflected from their campaign for greater commercial freedom, a field in which they have gained much ground in recent years.
This was being presented as a central issue at ACI's assembly in Montreal in early September, but ground to a halton 11 September as a stunned gathering of airport executives watched the tragedy unfold.
"The whole deregulation/commercialisation theme is still our direction," believes Howe. The message is that this theme, and the fight against congestion, may have been overtaken by events for now, but they have by no means been erased from the "to-do" list.
Source: Airline Business
