Continent's major carriers struggle against rising insurance, security and air traffic services costs

The Association of European Airlines (AEA) is calling on the European Commission to compensate the continent's carriers in line with the financial assistance the US Government has given its carriers to survive the post-11 September crisis. The call comes as the association reveals its 28 member carriers are expecting losses of €2.5 billion ($2.3 billion) for the year, instead of breaking even, as predicted before the terrorist attacks. Job losses are expected to total 20,000.

In the five weeks following 11 September, AEA carriers experienced an 18.3% drop in passenger traffic. Compared with the same five weeks last year, North Atlantic traffic up to mid-October plummeted 36.2%, traffic in Europe fell 9.6% and in Asia 14.8%, says the association.

Europe's four-day lost revenue package on North Atlantic routes is "scarcely appropriate to the magnitude of loss suffered" and compares with $15 billion provided to US carriers - the equivalent of two weeks' earnings, according to the AEA. Europe's airlines want "fair compensation for damages arising out of 11 September, sustained over a much longer period, at least until the end of the year", says Jean-Cyril Spinetta, chairman and chief executive of Air France and AEA chairman.

Spinetta says that a longer-term solution to the war risk insurance issue is also required. Most European governments have agreed to underwrite additional insurance cover until the end of December, while US carriers are benefiting from a six-month interim government programme.

Echoing recent requests made by Europe's regional airlines, AEA carriers are also demanding that governments fund additional security measures and that air traffic control charges should not be increased to compensate for reduced revenues from lost traffic, which AEA claims several air traffic service (ATS) providers have already done for next year, with increases ranging from 10-25%.

European airline groups, including the AEA and the European Regions Airline Association, met recently with the continent's ATS providers to request they adhere to pre-11 September traffic estimates for 2002, relax the charges payment period from 30 to 120 days and maintain long-term capacity plans.

The Civil Air Navigation Services Organisation (CANSO) has responded to airline demands by pointing to International Civil Aviation Organisation rules which state that air navigation service provision should be provided on the basis of cost recovery, with excess revenue being handed back to customers. "This means we have no financial reserves to bridge periods of lower revenues," says Alexander Kuile, CANSO secretary general. "Shortcomings must be recovered immediately, through higher charges or by cost cutting.

"As radars cannot be parked in the desert, operational costs are largely fixed so in most cases financial adjustments must come from employment", he adds.

Source: Flight International