Planned increases in charges by airports and air navigation service providers (ANSPs) will stall recovery in air travel and damage international connectivity, warned the International Air Transport Association (IATA)
IATA also charged the global air transport industry to achieve net-zero carbon emissions by 2050. This commitment will align with the Paris Agreement goal for global warming not to exceed 1.5°C.
IATA confirmed that airport and ANSP charges increases have already reached $2.3 billion. Further increases could be tenfold this number if proposals already tabled by airports and ANSPs are granted.
IATA gave the warning and the mandate at its 77th Annual General Meeting held in Boston in the US.
“A $2.3 billion charges increase during this crisis is outrageous. We all want to put COVID-19 behind us. But placing the financial burden of a crisis of apocalyptic proportions on the backs of your customers, just because you can, is a commercial strategy that only a monopoly could dream up. At an absolute minimum, cost reduction—not charges increases—must be top of the agenda for every airport and ANSP. It is for their customer airlines,” said Willie Walsh, IATA’s Director-General.
A case in point is found among European air navigation service providers. Collectively, ANSPs of the 29 Eurocontrol states, the majority of which are state-owned, are looking to recoup almost $9.3 billion (€8 billion) from airlines to cover revenues not realized in 2020/2021. They want to do this to recover the revenue and profits they missed when airlines were unable to fly during the pandemic. Moreover, they want to do this in addition to a 40% increase planned for 2022 alone.
Other examples include: Heathrow Airport pushing to increase charges by over 90% in 2022, Amsterdam Schiphol Airport requesting to increase charges by over 40% over the next three years, Airports Company South Africa (ACSA) asking to increase charges by 38% in 2022,, NavCanada increasing charges by 30% over five years and Ethiopian ANSP raising charges by 35% in 2021
“Today I am ringing the alarm. This must stop if the industry is to have a fair opportunity at recovery. Infrastructure shareholders, governmental or private, have benefited from stable returns pre-crisis. They must now play their part in the recovery. It is unacceptable behavior to benefit from your customers during good times and stick it to them in bad times. Doing so has broad implications. Air transport is critical to support economic recovery post-pandemic. We should not compromise the recovery with the irresponsibility and greed of some of our partners who have not addressed costs or tapped their shareholders for support,” said Walsh.
Some regulators have already understood the danger being posed by the behavior of infrastructure providers. Regulators in India and Spain successfully intervened on the increases proposed by airports. They provide an example for other regulators to follow. And the Australian Competition & Consumer Commission¹ warned in their recently published report that increasing charges to recover lost profits from the pandemic will demonstrate airports systematically taking advantage of their market power, damaging the vulnerable airline sector’s ability to recover at the expense of both consumers and the economy.
Airlines undertook drastic cost-cutting from the outset of the pandemic, reducing operating costs by 35% compared to pre-crisis levels. This was supported by increased commercial borrowing and shareholder contributions. Airlines also sought government aid, the majority of which was in the form of loans that need to be paid back. Of the $243 billion that was made available to airlines, $81 billion supported payrolls and approximately $110 billion was in support that needs to be paid back. As a result, airlines have amassed a huge debt burden of over $650 billion. Any defaults could result in airline failures and the loss of tens of thousands of jobs.
IATA urged airports and ANSPs to apply solutions to address the financial impact of the pandemic including implementing sustainable cost control measures, tapping shareholders, accessing capital markets and seeking government aid.
“The world’s airlines have taken a momentous decision to ensure that flying is sustainable. The post-COVID-19 re-connect will be on a clear path towards net zero. That will ensure the freedom of future generations to sustainably explore, learn, trade, build markets, appreciate cultures and connect with people the world over. With the collective efforts of the entire value chain and supportive government policies, aviation will achieve net-zero emissions by 2050,” said Willie Walsh, IATA’s Director-General.
According to the resolution, achieving net-zero emissions will be a huge challenge. The aviation industry must progressively reduce its emissions while accommodating the growing demand of a world that is eager to fly. To be able to serve the needs of the ten billion people expected to fly in 2050, at least 1.8 gigatons of carbon must be abated in that year. Moreover, the net-zero commitment implies that a cumulative total of 21.2 gigatons of carbon will be abated between now and 2050.
A key immediate enabler is the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). This will stabilize international emissions at 2019 levels in the short-to-medium term. Support for this was reaffirmed in today’s resolution.