Another profitless year for European airline industry
IATA chief: European carriers "balancing on a knife edge"
Mar 22, 2013
If you're a business traveler in Europe, you'll no doubt have complained at length about the regions' airlines, be it the cost of a plane ticket, the quality of the food or the delays. It's natural to feel hard done-by.
If it's any consolation, however, you're not the only one grumbling at the unfairness of it all. According to the IATA (International Air Transport Association) 2013 is expected to be another profitless year for the European airline industry. Tony Tyler, IATA's director general and CEO, argues that the industry is "balancing on a knife edge" with even the sturdiest and more established airlines feeling the pressure.
You only have to look at the profits forecast for the year to see how behind we really are. According to the Association of European Airlines, the sector is expected to lose $1.5 billion this year. U.S. carriers however, are expected to fare better and post profits totalling $3.4 billion.
Tyler argues this disparity is in part down to sluggish economic growth in Europe; crucially, however, it can also be impacted by what he calls "onerous" EU regulation and legislation. As an example, he cites delays: "There can be delays absolutely outside the control of the airline, but the airline still has to not only compensate the passenger but also to meet a whole lot of costs of those delays for passengers." The additional costs don't end there either: air traffic control costs are roughly double in Europe than they are in the United States.
The costs vary on land too. Europe's economic crisis has meant some governments have increased airport operating charges. In an opinion piece in Spain's El Pais, Tony Tyler argues that European airlines face "significant hurdles to sustained profitability, starting with the cost of airport and airways infrastructure." Spain's Madrid and Barcelona airports are a case in point: there, Tyler says, airlines have seen a 50% increase in charges.
Despite cutting legacy costs through mergers, consolidation and restructuring, European carriers are still facing the heavy hand of regulation and government, adds Tyler. "Just look at what's happening now in Spain with Iberia for example; very difficult to do the necessary restructuring in that environment".
Tyler is referring to battle between IAG (International Airlines Group) and the Spanish government. Whilst IAG's Chief Executive, Willie Walsh, wants to cut jobs and restructure the loss-making airline, the Spanish government is wary of a shrinking brand Iberia, which it argues is closely associated with 'brand España'.
Speaking to me from Geneva, Tony Tyler called on governments to do more to help European carriers. He argues they can start by helping to control cost, by adding more runways, and repelling "some of the excessively onerous consumer protection regulation." In his words, to make Europe's airlines more competitive, government needs "to back off."
But in a time of great economic crisis in Europe, where each country is facing their own internal struggle, backing off may just be too painful for government.