The heated debate about the desirability and nature of airline industry reforms and their likely impact on smaller airlines added some zest to the 49th Annual General Meeting of the International Air Transport Association (IATA) held in Dallas, USA, in November this year.
IATA AGMs often tend to be predictable events in which the world’s airline bosses gather with much pomp and ceremony to rubber stamp routine motions and then quickly disappear like shooting stars. The Dallas AGM was slightly different.
Fortunately for African delegates, perhaps, the closing debate on industry reforms overshadowed the embarrassing revelation that Air Zaire and Nigeria Airways were to be expelled from IATA for non-payment of their membership dues.
This decision was taken by IATA’s Executive Committee which was Chaired by Sir Harry Tirvengadum, the Chairman and Chief Executive Officer of Air Mauritius, who found himself in the unpleasant position of having to faithfully implement IATA rules against fellow African carriers.
“We tried our very best to persuade these two airlines to meet their financial obligations before action was taken, to no avail,” explained Sir Harry to AFRICAN AVIATION. He added that the matter could be resolved if these carriers quickly put their accounts in order.
The controversy over airline industry reforms was ignited by John E. Robson, a Visiting Fellow of the US-based Heritage Foundation and former Chairman of the now-defunct US Civil Aeronautics Board, whose provocative presentation was like a red flag to a bull.
Robson was a member of the US National Airline Commission which recently concluded that the current bilateral air services regime – which has been in force for half a century – “is seriously flawed and hopelessly inadequate as a framework for international aviation in the 21st Century.” The Commission recommended that the “growth-repressing bilateral system be phased out and replaced by a market-orientated, liberal regime.”
Said Robson: “The forces of the market will ultimately prevail. It is no surprise that those who, out of fear, shrink from the prospect of open competition, fiercely oppose liberalisation of the international air system. The protectionist cry-babies of international aviation should not and will not prevail. The long-term interests of the industry should not be held prisoner to the short-term fears of the timid and inefficient.”
He added: “the Commission’s recommendations are not, as some have alleged, simply a Trojan Horse designed to assure US commercial aviation supremacy.” However, for many delegates this reassurance was undermined by Robson’s sole nomination of the USA to assume leadership of the reform process because of its “weight in the international aviation market.”
Robson’s caustic remark that smaller nations should use the subsidies paid to their loss-making flag-carriers to develop their tourist industries – and not worry about which airline brings in the tourists – was widely rejected.
Mohamed Mekouar, Chairman and Chief Executive of Royal Air Maroc, Morocco, voiced the views of many airlines by pointing out that a flag-carrier plays an invaluable role in the economic and social development of a country.
Among the airline executives who voiced strong opposition to Robson’s views, was Jürgen Weber, Chairman of Lufthansa German Airlines. He contended that US airlines were seeking one-sided agreements but were not interested in giving reciprocal rights. Ironically, it would appear that big airlines in Europe view the dominant and hungry US carriers with as much apprehension as they themselves are viewed by weaker African airlines.
Robson’s contention that the airline industry should be governed by market forces and his seeming advocacy of a ‘might-is-right’ policy was graphically described as a “Thugs’ Charter” by Captain Brian Pocock, General Manager of Air Botswana. “Thanks to the bilateral system, small airlines still have a voice in the industry,” he said.
In his Annual Report, IATA’s Director General Pierre Jeanniot noted that the Association’s members made a total net loss of US$11.5 billion on their international scheduled services in the three years to the end of 1992. “Record losses of US$4.8 billion were registered in 1992 alone and it will be surprising if IATA members’ losses in 1993 are less than half of those in 1992,” he said.
“The inability of the industry as a whole to generate profits means that it may not have the financial resources to invest in the future and reap the benefits of market growth,” said Herman de Croo, a former Belgian Minister for Transport and current Chairman of the European Commission’s ‘Committee of Wisemen’ on aviation.
The IATA AGM was hosted by American Airlines. Robert Crandell, the airline’s Chairman and Chief Executive, and IATA President for 1993, remarked that there continues to be a mismatch between aircraft capacity and passenger demand. “The industry’s revenue continue to be out of balance with its costs – and both careful cost control and appropriate pricing policies are the clear responsibility of management,” he said.
During the AGM Sudan Airways Chairman and Chief Executive, Captain Sheikh Abdalla, delivered a statement on behalf of members of the African Airlines Association (AFRAA) and the Arab Air Carriers Organisation (AACO). The statement expressed deep concern that delegates representing Libyan Arab Airlines were refused entry visas to the USA and it was strongly endorsed by IATA boss Jeanniot.
On a more positive note, one welcome outcome of the AGM was the approval to double the capital of IATA’s International Airline Training Fund from US$2 million to US$4 million by the year 2000. A sum of US$1 million is to be raised from traditional donors, such as aircraft manufacturers, and another US$1 million will be raised through an annual contribution of US$1,500 from each IATA member airline over the next five years. The Fund is headed by Assefa Ambaye, who was formerly with Ethiopian Airlines.