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ACI pursues close collaboration with ICAO

Economic challenges of the global airport industry

The Director General ACI World Angela Gittens was invited to speak to ICAO Council members concerning the economic challenges of the global airport industry last week. She states, “We were pleased to have this opportunity to raise some key issues with the Council.  Following on the heels of the official opening of the new ACI World headquarters in Montreal, it is an excellent start for our objective to establish a better flow of information between ACI and the State delegations at …

The Director General ACI World Angela Gittens was invited to speak to ICAO Council members concerning the economic challenges of the global airport industry last week. She states, “We were pleased to have this opportunity to raise some key issues with the Council.  Following on the heels of the official opening of the new ACI World headquarters in Montreal, it is an excellent start for our objective to establish a better flow of information between ACI and the State delegations at ICAO and more interaction with the ICAO Secretariat. We want to ensure a better understanding of the airport industry as we work together for the benefit of passengers and shippers.”
 
At Council, Gittens reported that, “Between 2007 and 2010, many airports sustained substantial business losses. For example, forty airports in U.S. lost commercial air service for good, while other airports suffered significantly from the effect of carrier mergers and network consolidations. I am glad to report that traffic is now back to pre-economic crisis levels. The time is right to pursue strategies that further strengthen the industry to withstand future shocks and ensure high quality service for consumers.”
 
Gittens highlighted the impact of two key business constraints: fixed operating costs and high cost of capital.  She said, “In a downturn, these stay constant whereas airports suffer revenue loss linked to fewer passengers resulting from reduced demand, carrier service and route adjustments, bankruptcies and mergers. During this latest economic downturn, the increasingly diversified portfolio of airport revenues served as a lifeline – a clear sign that airport entrepreneurship is critical in our very competitive global airport market.”
 
Gittens added, “We need better understanding from our airline partners so that we can put to rest misunderstanding and specious debate about user charges.  Naturally, airports charge for the services that airlines require since they have to spend money to provide and maintain facilities for aircraft to land and park. The global average airline cost of $4 per passenger is a great bargain. Where can you even park a car for $4 today?”
 
Within 20 years, traffic is forecast to double. Gittens stated, “Airports must now build the capacity needed, without further delay to plans for expansion and modernization. Governments and private investors must not be shy about committing to infrastructure investment that is so crucially linked to economic development.”
 
But with few governments in a position to make major outlays for new infrastructure, ACI expects a new wave of private sector investment in both developing and advanced markets. Gittens calls on regulators to contribute as well, “With the considerable risk of capital intensive venture for a private investor, the regulatory framework can become a key factor in the appraisal of airport investments. Developing such a framework takes time and consultations among stakeholders, and is a critical component for winning investor confidence and engagement.”
 
States have a role to play as well, according to Gittens. Further progress on liberalization of international air services is essential: “There is too much cherry-picking in the development of open sky agreements, and too little progress on lifting ownership restrictions. We call on ICAO to champion greater liberalization so that the global industry can excel on choice, competitive fares and service quality.”
 
Gittens concluded, “ICAO’s documents in the area of airport economics serve as an indispensable reference for governments and industry stakeholders. Economic conditions for airports vary from country to country and may require different measures of oversight and control, but ICAO’s proven principles and guidance provide a common platform that governments and stakeholders can agree on and honour. ACI actively supports implementation of the ICAO policy through its joint courses with ICAO on airport user chargers – courses that have been extremely successful in educating airports on the principles of airport charging and economics.”

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