geoff dixon - Orient Aviation

49TH ASSEMBLY OF PRESIDENTS
The Asia-Pacific’s legacy
airlines have warned airport
authorities around the region
not to attempt to subsidize
new low-cost airline (LCC)
terminals by raising charges on existing full
service carriers.
The growth in the budget airline sector
has added a “new twist” to the charging
scenario, the Association of Asia Pacific
Airlines (AAPA) said in its annual report.
“To compete with other hubs in the
region, airports are being tempted to grant
special concessions or incentives to lure
these new entrants to use their facilities. In
some countries, including Singapore and
Malaysia, airports are building dedicated
‘low-cost’ terminals to cater specifically
to the needs of such LCCs, in other words,
to provide maximum operational flexibility
while minimizing costs for the airlines and
passengers using these facilities,” said the
report.
This only begs the question of why
airports are not providing the same choice
of cost-effective services to their existing
airline customers, it added. “Other relevant
questions raised include: Will the financing of
such LCC terminals be passed on to existing
airport users in the form of further increases
in charges and fees Are airport incentives
effectively disguised subsidies for one group
of users at the expense of another
“All airlines should have the choice to use
whatever facilities are on offer and the pricing
of services must be transparent, fair and based
on equitable principles.
“We will continue to press for greater
transparency in pricing regimes, as well as
oppose any attempts by airports to crosssubsidize
new entrants,” said the report.
According to the AAPA, all too often
aviation is misconstrued as being under-taxed
as an industry. “Even now, with close to two
billion passengers flying safely each year,
some still view air transportation as a kind
of luxury good rather than an essential public
service. Calls for new and higher taxes to be
imposed on airlines ignore these realities,
preferring instead to attack aviation as a
candidate for ‘sin taxes’ of the kind commonly
imposed on alcohol and tobacco,” it said.
The AAPA pointed out the aviation
industry is subjected to a variety of very
substantial corporate and local taxes. In the
U.S., both airlines and passengers are liable
for up to 13 major taxes and fees, contributing
over 13% of federal tax revenue.
It slammed proposals raised at this year’s
Airports warned not to
subsidize LCC terminals
at expense of airlines
Asia-Pacific’s LCC pioneer AirAsia
World Economic Forum for a mandatory
levy on airline tickets and jet fuel to help poor
nations in Africa. While the fuel tax proposal
was swiftly rejected, the possibility of
imposing an airline ticket tax remained open
for deliberation, with France in particular
leading a call for worldwide support and
implementation of the proposal.
“While no one denies the need to find
solutions to eradicate poverty and tackle
global health issues, the choice of the aviation
industry as a target to raise funds for such
laudable efforts is sadly misdirected,” said
the AAPA annual report.
‘ Budget airline sector has added
a “new twist” to the airport
user charges scenario’
Association of Asia Pacific Airlines
“A ticket levy is a misguided and counter
productive approach. It would only serve
to reduce demand for travel and tourism
– which are themselves key drivers of
economic development for many poorer
countries.”
Complaining that many governments
seem to view airlines as “cash cows”, the
report said one example was a move earlier
this year by Indonesian authorities to impose
a tax on the uplift of jet fuel for international
flights from that country.
“The AAPA joined other industry
stakeholders in writing to the Indonesian
Government questioning the legality of such
a move and highlighting the potential damage
to the travel and tourism sector and broader
local economy that would result. Fortunately,
the proposal was subsequently withdrawn by
the Indonesian authorities,” said the report.
Airlines are having to cope with an
“onslaught of charges” imposed by monopoly
or quasi monopoly providers, such as
airports, added the AAPA.
“Much of this comes about as some
governments invest heavily in airport infrastructure
in a bid to enhance their position
as air transport hubs within the region,” said
the report.
“But monumental terminal buildings
require extremely high levels of capital
investment and are expensive to run and
maintain.
“Inevitably this leads to conflicts when
such excessive costs result in increased
airport charges to be borne by airlines,
passengers and other airport users.
“In today’s environment where airlines
are fighting for their survival by battling
falling yields and margins, facing increasing
regulatory challenges and mounting costs,
increases in airport charges can only be
considered in relation to real improvements
in service quality and efficiency.
“Unfortunately, the fact that many
airports are effectively monopolies reduces
any commercial pressure to implement such
improvements.”
18 ORIENT AVIATION DECEMBER 2005-JANUARY 2006