IATA Calls German Tax Plan, GDS Fees Threat to Airline Recovery

The International Air Transport Association (IATA) expects the airline industry to return to profitability this year, projecting a $2.5 billion net profit in 2010. But while the industry in totality is expected to return to profitability after one of its worst years in history, Europe remains the one region that will continue operating at a loss, with expected losses of $2.8 billion, according to IATA, making the new German air tax one more factor affecting the revival of the industry.

The German government has proposed a tax of 1 billion euros per year on airline tickets, which is described as an environmental initiative.

“This is the worst kind of short-sighted policy irresponsibility. It’s a cash-grab by a cash-strapped government. Painting it green adds insult to injury. There will be no environmental benefit from the economic damage caused,” said Giovanni Bisignani, IATA’s director general and CEO. His remarks were made in front of industry leaders gathered in Berlin as the 66th IATA Annual General Meeting and World Air Transport Summit drew to a close. “The proposal should be axed. It is the wrong measure at the wrong time, and it ignores the lessons learned from the failure of a similar tax in the Netherlands,” said Bisignani.

Bisignani warned that costs could potentially return the industry to the red. Specific areas included a return to overcapacity, labor strife and external costs. IATA’s “Wall of Shame” included the western GDSs who, according to Bisignani, are “charging at least $4 per transaction when China’s TravelSky does it for just $1.20.” Taxation and the cost of oil were also viewed as major threats to a return to profitability; however, one area that was not addressed that greatly affects airline profitability was the high cost of commercial credit card acceptance.

“We praise the efforts addressed by IATA on behalf of our airline owners, however, the failure to address credit card fees will be a continual drag on earnings,” said Ralph Kaiser, CEO and president of UATP, which connects over 95 percent of the world’s airline passenger-carrying capacity and provides an alternative to credit card and merchant service fees. “Credit card fees continue to rise and affect the bottom line of the airlines,” he said.

Kaiser said that airlines need to review card agreements and rationalize card fees with their credit card partners so that they are receiving true value for money. High value traffic and, particularly, corporate customers, should be loyal to an airline, not a credit card. With help from IATA, this challenge can be overcome and help the industry continue its way back to profitability. UATP is designed specifically to help with this problem.”

Source: News on the Caribbean and the Americas