Other Than War, Fuel Pricing, Union Contracts, Decline in Travelers, Overcapacity...

The International Air Transport Association (IATA) this weekend said that the armed conflict in Iraq could easily add $10 billion dollars of losses on international traffic by extending the current traffic slump well into the summer season. The association is calling for significant industry liberalization to enable carriers to survive.

"At this point, the air transport industry must look beyond the horizon and re-invent itself," said Giovanni Bisignani, IATA director general and CEO, speaking in Montreal at the seminar opening the International Civil Aviation Organization (ICAO) ATC5 Conference.

IATA identified three obstacles to industry change: the current bilateral system, national ownership rules and the attitude of competition authorities. IATA calls these the "three pillars of stagnation."

In a number of position papers presented to the ICAO Conference, IATA outlines the measures that the airlines propose in order to bring about the changes the industry requires.

"Bilateralism should evolve into a regional system with the merger of the single markets. While the North Atlantic could be the starting point in seeking a new way, we call on all like-minded governments to begin the modernization of the bilateral system," Bisignani continued. "Airlines should be free to merge and approach the international financial markets for capital. The wave of globalization must eliminate national ownership limits wherever they represent an obstacle to development. These limits are denying airlines the freedom of action given to all other businesses."

IATA says it is well aware that for many developing countries, a national airline may be considered an attribute of sovereignty and a necessary asset for its economic development.

"Some states may wish to keep a 'golden share' to make sure their national interests are taken into account. Fine! We simply ask these states not to create obstacles for those who wish to liberalize further," Bisignani said.

IATA says "dogmatic competition policies" combined with a lack of understanding of how air transport operates on the part of the competition authorities also restrict the airlines' freedom to cooperate or to merge.

"What other global business is more fragmented than air transport?" Bisignani asked in Montreal. "We need the economies of scales that mergers or acquisitions can provide with the proper competition supervision. The regulators must take up the challenge of change!"

FMI: www.iata.org