IATA chief calls airlines for more tie-ups

 

The head of the International Air Transport Association (IATA) has called for more tie-ups in the airline industry as the struggling sector braces for rising oil prices. Airline “mergers and consolidation is a must,” Giovanni Bisignani, IATA’s director-general and CEO, told a Tokyo press conference today before meeting government and airport executives. “I strongly support consolidation.”

His comments follow last week’s merger of British Airways and Spanish flag carrier Iberia, creating Europe’s second-biggest airline by market capitalisation and an estimated $533 million in annual savings. In the United States, United Airlines and US Airways are reportedly discussing a merger, with both companies having publicly called for further consolidation in the sector. Both deals show the accelerating pace of airline tie-ups as carriers look to combine resources and know-how in the face of rising costs, and as passenger demand remains soft after a crippling global economic downturn.

Oil prices hit 18-month highs above $87 last week. Despite an increase in cooperation between carriers, “airlines are still highly dependent on the traffic generated by their local economies and trade lanes,” IATA said in a recent report. This is in contrast to many “companies listed on major stock exchanges that generate their earnings from across the globe. These companies are not restricted by the market and ownership rules that constrain airlines.”

IATA said that while the sector’s recovery is led by Asia and emerging markets, mature markets face more sluggish growth. Premium travel, which is where carriers make their profits, remains 17 per cent below 2008 peak levels. In Japan, Bisignani said he would urge Transport Minister Seiji Maehara to boost the competitiveness of Haneda and Narita airports by reducing landing fees for international carriers, currently double those in Singapore.

Currently at Haneda the landing fee is 2,400 yen ($26) per tonne. Narita charges 592,700 yen for a Boeing 777, nearly three times as high as the fee at South Korea’s Incheon airport. “It would be disappointing at this critical point for Japan to once again be home to the world’s most expensive airports. Setting such high charges is missing an opportunity to regain the competitiveness that Japan has lost.”

Haneda and Narita have ‘a unique opportunity to decrease unit costs’ with their plans to improve capacity, he said. Haneda is slated to build its fourth runway while Narita will extend its second runway.

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