IATA DG: Govts’ shouldn’t use airports’ privatisation to raise fund

Alexandre de Juniac is a French businessman. He previously served as the Chair and CEO of Air France (2011-2013) and later as CEO of Air France–KLM (2013-2016). He is also the current Director General and CEO of the International Air Transport Association (IATA). He spoke to WOLE SHADARE at the just-concluded IATA AGM in Sydney, Australia on issues affecting aviation, including the good news that Nigeria had cleared $600 million airlines’ blocked funds, among other issues. Excerpts.

What do you see as trends and challenges for African aviation?
The implementation of Air Traffic Management is one of them. The second is to maintain the safety at the level they have reached. The third one is to be able to structure some solid regional airlines in some parts of the continent such as West Africa and Central Africa. These should be important. We have one or two of our staff that are key members and are trying to consolidate their position. It is important for Africa to modernise its airports. We have some issues in terms of infrastructure that are not sorted out.There is need for improvement in Nigeria, Egypt and so on. The opportunities for aviation are great, but so are the challenges. Many carriers struggle to break-even. Some challenges are beyond our control — the appreciation of the US dollar for example. But governments should be aware that Africa is a high-cost place for aviation.Taxes, fuel and infrastructure charges are higher than the global average. Additionally, insufficient safety oversight, failures to follow global standards and restrictive air service agreements could all add to the burden that stands in the way of aviation’s economic and social benefits.

Countries are making efforts to have their national airlines; do you in any way support it?
For us, we do not advocate or not in favour of national airlines. In IATA, we say Africa needs connectivity. Africa needs to have what I call regional airlines. Big regions in Africa are not covered. In some cases, you may need to first go to Europe to be able to connect another African country. That is very important. From my point of view, it is something lacking in Africa. In West Africa for instance, it is quicker to move to Paris than to move from one African country to another. It is not totally normal.

 

Airlines in Africa are small and fragmented, what is IATA doing to assist African airlines?
For the small airlines in Africa, we do assist. First of all, we have them in safety through IOSA audit. We do consulting on some specific areas. Two areas, which IATA will invest heavily, are training and consulting.

 

Airlines’ trapped funds. How much are these trapped funds?
We in IATA call on governments to abide by international agreements and treaty obligations to enable airlines repatriate revenues from ticket sales and other activities. The amount of airline funds blocked from repatriation totalled $44.9 billion at the end of 2017, which was down seven per cent compared to year-end 2016. However, airline funds remained blocked in some 16 countries. In Nigeria, it is cleared.

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The connectivity provided by aviation is vital to economic growth and development. Aviation supports jobs and trades and helps people to lead better lives. But airlines need to have confidence that they will be able to repatriate their revenues in order to bring these benefits to markets. We have had some recent success. The $600 million backlog in Nigeria has been cleared. We have made $120 million of progress from a peak of over $500 million in Angola. I encouraged the government of Angola to work with airlines to help reduce this backlog further. Given the deepening economic crisis in Venezuela, a resolution appears to be unlikely in the short term. But we are encouraged by the recent development in Nigeria and Angola and hope other states will also move quickly to address blocked funds.

What are your takes on reduction of traffic for Middle East Airlines?
You know that the Middle East airlines’ traffic is yet to recover. Since 2017, they have been recovering. Our expectation for 2018 is that they would do something between 2.5 per cent of .5 per cent of profit, which is lower than any other region, but better than last year. There is average profit for Middle East 2.5 per cent.

 

Just recenty, IATA talked about 20 per cent increase in jet fuel. Brent crude is going for average $75, is that not going to impact the industry that is expected to make profit of $33.8 billion this year?
You are right to say that at the beginning of the year, we were projecting $38 billion and we have reduced that slightly to $33.8 billion mainly due to increased oil price.

 

What do you recommend should be applied to cushion the shock of crude oil rising price considering how it would affect global Gross Domestic Product (GDP)?
We have always said that the average margin of the industry, which is 4.1 per cent for the industry, is a good figure, but it is still a revealing longevity in this sector because there is a buffer to cope with shocks. We can say that we are proud in

the fourth year in a role returning capital on investment. Good news, but we are still not very profitable if you compare it with other sectors. Also, if we take it into account, we are exposed to many things. One of them is volcano and nuclear plant.

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The impact of the fuel increase for the moment is not very significant. The industry has significantly improved with its resilient force probably having more cautious policy.

If it continues to rise, it will impact our account. In addition, up till now, the airlines have not translated the increase in their prices. In the moment, we do not see a significant impact; there will probably be an impact if fuel continues to increase. There are things that IATA cannot intervene. Of course, we have nothing to do about that.

The crisis in Qatar is about a year; many people thought it is going to last for weeks, months over fifth freedom. IATA always talk of freedom in aviation. People are restricted. They cannot fly. How would this situation be remedied?
There are two things. First of all, it is a big political issue. IATA is not a political organisation and we cannot comment on that. The only thing that we can say is that because we are defending the business of aviation, we want connectivity to be maintained between Qatar and the rest of the world. We are firm advocate of connectivity between Qatar and rest of the world.

 

The issue of airports privatisation came up at the IATA Annual General Meeting (AGM); in Africa and even in my country Nigeria, government is talking about concession. What I heard here is not too cheery of how governments go about it, which is suspect. In what area do you think this could be a win-win situation for everyone – government and travellers?
We are facing a capacity crisis -majority of airports are already facing capacity constraints. Governments struggle to move quickly and the cash-strapped state of their finances is fuelling a trend of looking to the private sector for solution. What I will say is that we tell governments to be cautious about privatisation. It is not the only magic solution. If you look at increasing capacity and investing in airports, they attract private people for so many reasons. Your own (Nigeria’s) public finances are in difficulty. You need to look at other measures before you rush to privatise airports. There are several methods. If you go to privatisation, follow some guidelines in the process of privatising.The dos and the don’ts of privatisation and thirdly, implement a strong regulation, fair, strong and balanced, in which case, the voice of the airlines must be taken into account.

 

Some of the airports are considered to be very expensive, especially in Senegal, how do we bridge this? High taxes have the capacity to hurt air travel, how do we tackle this?
I always tell governments in Africa to lower taxes if they want to develop aviation in the continent, otherwise people won’t come to your airport. In the Gulf State and Qatar in Abu Dhabi, they have developed very strong aviation strategy and they are successful in coming to that with a very low tax and charges Airlines in the Middle East have been coming with low taxes/charges. Airlines’ traffic and GDP amount to growth and jobs. We are urging governments to lower taxes and charges everywhere.

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Africa is seen as the next frontier in aviation and business, do you think the continent is rightly positioned for the potential in aviation?
In fact, I see Africa as the region with the greatest aviation potential. Over a billion people are spread across this vast continent. And aviation is uniquely placed to link Africa’s economic opportunities, connecting the continent internally and to the rest of the world. Doing so expands prosperity and changes peoples’ lives for the better. Of course, you don’t need me to tell you about the continent’s great promise. Already, aviation supports $72.5 billion in economic activity and 6.8 million jobs here. And the scale of aviation’s footprint in Africa is estimated to quadruple over the next two decades. By 2035, the number of passengers traveling to, from or within Africa could reach 300 million. The impact of that growth in supporting the UN’s Sustainable Development goals will be tremendous. This includes the challenging goal of eradicating poverty – that still afflicts 400 million people in Africa – by 2030. And the development of aviation will facilitate improvement in the key challenges of healthcare and education as well.

 

Safety is an issue in the continent, are you satisfied with air safety in Africa vis a vis global air safety record?
Let’s start with safety – our number one priority. Last year, sub-Saharan Africa had no passenger fatalities or jet hull losses. Committing to the IATA Operational Safety Audit (IOSA) improves safety. The results speak for themselves. The accident rate of 33 sub-Saharan airlines on the IOSA registry was half that of those not on the registry. Globally, we are making progress on safety. In 2017, for the second time in three years, there were no passenger fatalities in accidents on jet operations in about 34.9 million flights. That’s an amazing result. The recent Cubana crash, however, was a human tragedy that sharpens our determination to make our safe industry even safer. Accident investigation is an important tool in that quest. Fully completed investigations drive safety improvement. We insist on these with governments. But with just 45 accidents of any description last year, we must also use other sources to guide us forward.

 

Wole Shadare