Ever since the September 2001 terror attacks, the aviation industry has lobbied hard for governments to provide financial relief for implementing new security requirements. Has it done any good?
They may not always see eye-to-eye, but since September 2001 airlines and airports have agreed on one thing: aviation security should be funded by the state. After all, they say, an act of terrorism is targeted against a particular nation and its government. As a matter of principle, therefore, it is the government that should assume the cost of any security measures developed in response to such a threat.
But the industry has learned that principle and reality can be poles apart. The bewildering raft of aviation security measures introduced around the world since September 2001 - from the initial strengthening of aircraft cockpit doors to the recent ruling on the carriage of liquids in hand baggage - have made that abundantly clear.
The common theme is that too much of that cost is passed down to airports, airlines and passengers. "Governments are still largely ignoring their responsibilities in funding aviation security," says Georgina Graham, IATA's director of security and facilitation.
But it is hard to answer with certainty how much financial burden has been placed on the industry. The Association of European Airlines estimates that in the first year after 11 September 2001, additional costs reached €1.6 billion ($2.2 billion), of which €600 million was raised by surcharges and the rest absorbed by European airlines.
Meanwhile, data accumulated by IATA points to an additional annual burden of around $5.6 billion for its member carriers. "Gains made in the harmonisation and rationalisation of some measures implemented immediately after 9/11 have been offset by additional measures put in place in the post-9/11 period," says Graham.
The US Air Transport Association says complying with post-11 September federal security mandates has cost US airlines an estimated $4.5 billion a year. This includes $3.25 billion in Department of Homeland Security fees, an estimated $542 million in lost revenue (including flying federal air marshals, plus freight and mail restrictions) and a further $751 million in out-of-pocket expenses.
Of course, it is the larger airlines that have been hardest hit - and not just in the USA. Anders Kamb, director of corporate security and emergency response at SAS, says the security measures and fees incurred by the carrier since 11 September 2001 have topped SKr1 billion ($150 million). "It cost SKr300 million just to strengthen our cockpit doors."
The sheer inconsistency of security measures can add indirect costs. British Airways, for instance, points to the need to re-screen passengers and their baggage when they have flown in from another European airport - a process that adds time and increases the probability of missed connections for baggage and passengers. "The increased connection time makes UK airlines and airports less competitive than our European counterparts," says the airline.
Security cost burden rises
Meanwhile, ACI Europe general director Olivier Jankovec highlights a leap in security costs for airports themselves. Before 2001, security accounted for 5-8% of total airport operating costs, he says. "This has now increased to around 35%, with some cases reaching 50% - and rising. As a result, passengers are seeing an additional cost of between €0.4 (55¢) and €0.5 at main hubs."
At Copenhagen, security costs are lower than some, but still account for 25-28% of total costs, says Mogens Kornbo, the airport's vice-president and chief operating officer. Three-and-a-half years ago, the airport employed 350 security personnel, but that figure is now closer to 750, he adds.
After each potential threat comes further regulation - often at considerable expense. BAA, for instance, reports that since the liquid explosives threat in August last year it has invested more than £30 million ($60 million) on recruiting 1,400 additional security staff and installing 22 security lanes across its seven UK airports.
Such gloomy talk suggests that industry efforts to convince governments to assume more of the cost of security have fallen largely on deaf ears.
Certainly, the reaction in New Zealand to costs associated with the new liquids measures can be considered fairly typical, believes Andrew Herdman, chief executive of the Association of Asia Pacific Airlines. The government imposed the requirements on carriers, but only paid what he describes as a nominal $180,000 towards media advertising, signage development and printing. "All other costs were assigned to the airlines," he says.
But governments have not kept their hands entirely in their pockets. In the USA, the Air Transport Stabilisation Board provided financial relief to carriers immediately after the events of 11 September, while a similar approach was adopted in Canada.
In addition, legislation was passed in the USA to refund domestic carrier fees that were paid for extra security measures, while airlines also benefited from a payment holiday for future security charges for a period of time.
Meanwhile, North American airports have done well at gaining relief, "despite a financial burden that has been extraordinary", says Charles Chambers, senior vice-president of security and economic affairs at the Airports Council International-North America.
Passenger screening in the USA is a function of the Transportation Security Administration, but it is up to individual airports to obtain funding for specific measures. However, with so many competing interests, simply accessing the funds can be a major challenge.
Certainly, grant programmes tend to vary in percentages according to federal guidelines and the funding available at the time of the offering, explains Mark Mancuso, deputy director of public safety at Houston Airport System. Budgeted amounts also change over the years according to the priorities of the day.
For its part, Houston has received up to 100% of funding for certain projects, such as the implementation of a new perimeter intrusion detection system at a cost of $3.5 million.
The biggest challenge, however, is meeting the ongoing security costs that stem from each TSA initiative, he says. "The problem is that the TSA simply does not have the money to sustain programmes over time, and so it falls back to local stations."
Interestingly, Mancuso refers to the well-established canine detection programme in the USA as a potential model of how to operate a long-running security programme. "It is consistently funded to about a 20% level and is well managed with high standards and rigid certification," he says.
Meanwhile, Chambers at ACI-NA has high hopes for a funding breakthrough following the delivery to Washington of an industry-led Baggage Screening Investment Study. The report defines an investment strategy for the TSA's electronic baggage screening programme that its authors say will accelerate the deployment of explosives detection system equipment and more automated screening at US airports.
With checked baggage screening a federal responsibility, the Baggage Screening Investment Study working group believes federal government should be responsible for all the funding necessary to achieve this mandate.
However, says Chambers, the group is also realistic about the constraints of the federal budget and so has included a variety of potential funding and financing options. This includes suggestions for a tax-exempt bond system for providing relief that would see airports and airlines shoulder around 25% of the facility modification costs required.
"This is currently being considered by congress, although realistically we will not get word until maybe another year down the line," he says.
Asian lobbying effort
In Asia, lobbying efforts have produced similarly mixed results. For every country like Japan, where the government has shared some of the financial burden, there is a country such as the Philippines where the cost has been placed firmly on the shoulders of the industry.
Herdman points to New Zealand where the country's Aviation Security Service performs screening for passengers and cargo, but then charges back for its time. Air New Zealand was, however, successful when lobbying the TSA to remove the requirement for secondary screening for US flights.
And there have been other minor successes elsewhere, most notably in Australia, where the industry has been particularly vocal in its lobbying efforts. One example is the Counter Terrorist First Response function that is now completely government funded. "This has brought a saving to the industry of approximately A$32 million [$26.6 million] per annum," notes Herdman.
Australia's government has also purchased explosive trace detection equipment, and funded the installation of hardened flightdeck doors on regional airline aircraft with 30 seats or more. However, warns Herdman, the underlying view of the Australian government is that the industry should shoulder all costs associated with passenger security.
Indeed, there is genuine industry concern that the many small security measures have become so burdensome and inconsistent that they have seriously damaged the passenger experience at airports. It is a point illustrated only too well by the introduction of the liquids ruling in Europe (see sidebar).
"The current situation is untenable," believes Graham at IATA. "Make no mistake, security has improved greatly since 9/11, but somewhere along the line the passenger was forgotten."
It is for these reasons that IATA, ACI and others feel that efficiency will improve and costs will come down only when states work closer together to ensure mutual acceptability of measures based on genuinely global standards. There are signs that such harmonisation is beginning to happen, but progress remains painfully slow.
Sales down, charges up?
Passengers want predictability and consistency when travelling by air, but both have been in short supply when it comes to security measures, with the recent ruling on the transport of liquids a perfect example.
Designed to combat the threat of liquid-based explosives, the new rule that came into force in November 2006 at airports in the European Union, Iceland, Norway and Switzerland restricts the amount of liquids that passengers can take through security checkpoints.
But despite the best efforts of airports to communicate the fine details of the ruling, confusion has reigned. "At Stockholm Arlanda, many passengers are still uncertain about the amount of liquid they can purchase and carry on board," admits Anne-Marie Zuidweg, managing director of the Arlanda Schiphol Development Company.
As a result, duty-free sales have taken a significant hit. BAA, for instance, reports what it says was an entirely expected dip in revenues following the initial introduction of the new security restrictions, although declines to say just how bad the fall was.
And it is a problem exacerbated by the farcical situation of passengers not being allowed to carry duty-free items purchased outside the EU through a European transfer point. Major European airports confiscate several thousand litres of spirits on an almost daily basis - leaving passengers bewildered about a rule that effectively changes mid-journey.
"A passenger flying on an American carrier cannot purchase whisky on a flight that transfers through London, while a passenger travelling on a UK carrier can," says British Airways. "The lack of harmonisation results in considerable expense to the industry, as well as concern and frustration to our customers."
And there is another important point that worries airlines: commercial revenues are vital for financing airport capacity development and security. As ACI Europe general director Olivier Jankovec points out, global airport retail sales represented some $14 billion in 2005, with liquids accounting for more than 50% of sales.
Given that such non-aeronautical revenue also helps keep charges down for airlines, there are fears that some airports will seek to make up the shortfall with an increase in charges. "This is a big concern and is totally avoidable without compromising security," says Georgina Graham, IATA's director of security and facilitation.
As such, IATA and ACI have been working closely with ICAO to develop a globally acceptable framework that will harmonise restrictions on liquids and also allow seamless transit of duty-free items through security screening. It is hoped that this will be in place by June. The industry is also working on a common standard tamper-evident bag for purchases made airside.
We have set up two landing pages online to go with our airports special report. Visit www.flightglobal.com/ME and www.flightglobal.com/T5.
Source: Airline Business
