IATA warns NCAA, other ANSPs against raising airport charges
[By VICTOR NZE]
International Air Transport Association (IATA) has warned airport managers and Air Navigation Service Providers (ANSPs) across the world over planned increases in fees charged on airlines and other airport users, as it posits that the move will stall recovery in air travel and damage international connectivity.
According to IATA, airport and ANSPs charges increases have already reached $2.3 billion, even as it feared further increases could be 10 fold this number if proposals already tabled by airports and ANSPs are granted.
In Nigeria, it would be recalled that the Nigerian Civil Aviation Authority (NCAA) had in early March, this year, said it recorded over 40 per cent drop in its revenue due to the Coronavirus disease (Covid-19) pandemic in the country, adding further that it also suffered a 100 per cent increase in both running and operating cost.
NCAA said to this end, it was raising its internally generated revenue base by increasing charges on services provided to airlines, other airport users, as well as, other fees like the 5% Ticket Sales and Cargo Sales Charges, in order to stay in business.
Director General NCAA, Captain Nuhu Musa, while receiving members of the Senate Committee on Aviation at the Regional Headquarters of the regulatory body, in Abuja, said the financial status of the agency has been in red in the past one year as a result of the negative impact of the Covid-19 on its operations which has also hampered debt recovery moves.
The agency also complained to the Aviation Committee members that its service charges are not at par with its contemporaries in the region, adding that what it charges for Air Operators Certificate in Nigeria is $500 about N200, 000 which cannot send its inspectors for training while in The Gambia, the charge is $200, 000.
Musa said it has become stressing that over the years the devaluation of Naira, inflation in the country has affected the industry adversely and that the COVID-19 crushed all hope to improve the industry’s contribution to the GDP.
“One of our main challenges of the COVID-19 is the loss of revenue, from December 2019 to November 2020, we’ve had about approximately 40% drop in revenue because flights were not coming in which is a significant part of our income as the 5% Ticket Sales and Cargo Sales Charges. Out of this revenue we are required to pay 25% to the consolidated account which now we have been told is 50%.
“We are not doing cost recovery; we are actually operating at a loss. Let me give you an example, in Nigeria to get is an Air Operating Certificate (AOC) which is a licensing for running airline is N200, 000 that is $500 but in Gambia it is $200,000 when we charge $500 dollars. It cannot pay the cost of my inspectors to buy tickets and go for training.
“So we are in a very tight situation and tight corner and things are not easy. We need help from the National Assembly, we are doing our best but the numbers don’t add up. “
However, IATA in warning against such increases in service charges on airlines and other airport users across the world in the wake of the slow recovery by the aviation industry from the Covid-19 pandemic, described the move as not only ‘outrageous,’ as it advised regulatory agencies to reduce their cost of operation, and not increase charges.
According to IATA’s Director General, Willie Walsh, “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 ANSPs. It is for their customer airlines.”
IATA, however, pointed out that biggest culprits in the latest increases are the European ANSPs.
IATA said that collectively, ANSPs of the 29 Euro-control states, the majority of which are state owned, are looking to recoup almost $9.3 billion from airlines to cover revenues not realised in 2020/2021.
The airline body said that ANSPs want to do this to recover the revenue and profits they missed when airlines were unable to fly during the pandemic and that they they want to do this in addition to a 40 per cent increase planned for 2022 alone.
IATA listed other examples to include: Heathrow Airport pushing to increase charges by over 90 per cent in 2022; Amsterdam Schiphol Airport requesting to increase charges by over 40 per cent over the next three years; Airports Company South Africa (ACSA) asking to increase charges by 38 per cent in 2022; NavCanada increasing charges by 30 per cent over five years; Ethiopian ANSP raising charges by 35 per cent 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.
Walsh said that some regulators have already understood the danger being posed by the behavior of infrastructure providers, adding that regulators in India and Spain successfully intervened on the increases proposed by airports.
He urged other regulators to follow the steps taken by India and Spain.
IATA stated that already the Australian Competition & Consumer Commission had 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, IATA said undertook drastic cost cutting from the outset of the pandemic, reducing operating costs by 35 per cent compared to pre-crisis levels and that this was supported by increased commercial borrowing and shareholder contributions.
Airlines, it also said sought government aid, the majority of which was in the form of loans that need to be paid back, adding that 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 and that any defaults could result in airline failures and the loss of tens of thousands of jobs.
IATA, therefore, 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.