Crying Wolf?

By | Category: Travel rumblings

IATA's Governors

IATA's Governors

IATA, the international body that 230 airlines belong to has decided that their members are having a hard time of it this year so has cut in half the amount of profits that airlines will make this year to $4 billion. At its AGM In Singapore, bBad weather, fuel prices, the unrest in the Middle East, the Japanese earthquake and tsunami are all blamed. But is this a case of IATA shouting wolf? And should we care?
IATA often paints bleak pictures but then it has a lot to be bleak about. Airlines, especially older, traditional airlines haven’t been the most profitable companies over the last decade or so. From the old days when airlines were state owned and heavily over staffed, some have been slow to adapt. They have had to face young, better-run airlines which have greater control over their costs. I am thinking of no-frills airlines Ryanair, easyJet and Southwest (in the USA) and the Middle Eastern Airlines like Emirates and Etihad. But that didn’t stop them making $18 billion last year despite the impact of the Icelandic volcano.
Now they face another problem, as do we the passengers. From 1st January, the EU is introducing a carbon offsetting tax. All airlines in the EU will be taxed. But any tax increases deter passengers particular leisure ones. The EU action is unilateral and China, India and Singapore, to name just three have protested and there have been talks of retailiation. With this tax not being world-wide some airlines will be disadvantaged. Forget for a moment whether the tax is a good or a bad idea. The bigger issue is that if some countries threaten reprisals or disruption, retaliation or sheer bloody-mindedness then there could be additional taxes from them on EU passengers or delays or even the withdrawal of some flights. China estimates that it wil cost their airlines about $120 million in year one so we aren’t really talking about a lot of money. It is principle.
But then within the EU, governments aren’t making it easy for airlines. Or passengers. IATA complains that the APD taxes raised by UK, Austria, France and Germany will raise $5 billion for those governments, 20% more than IATA is forecastingin profits from its member airlines.
The rejoinder to most claims levied by IATA is they do not operate on a level playing field. Unlike trains or caoch travel, they pay noVAT on tickets or fuel so in many ways APD and the carbon tax go some to redressing the balance.
And the passenger ends up like piggy in the middle getting jostled from side-to-side. But from the passenger viewpoint, air fares are still good value. For my regular, family trip to Australia I am paying hardly any more than I was paying 40 years ago. And think what inflation, house prices and petrol has gone up by over that period. So I expect we will tut tut, moan and grin and bear it because whilst IATA shouts wolf, we aren’t doing too badly after all even if they aren’t.

image courtsey of IATA

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