BARIN Chairman New Year’s 2005 Address

Schiphol Hilton, 28 January 2005
New Year’s Address of the BARIN Chairman, mr. Coen Waasdorp, at the BARIN New Year’s Informal Gathering on 28 January, 18.00 hrs at the Schiphol Hilton Hotel

Dear guests, members of the travel industry, members of the BARIN.

A special welcome to Mrs. Tammenons, Director General of the MoT and Mr. Cerfontaine President Schiphol Airport.

BARIN, the Board of Airline Representatives in The Netherlands is extremely pleased that so many of you are joining us this day at our New Year´s Informal Gathering., which is becoming a tradition, very much thanks to the generous and excellent hospitality of the Schiphol Hilton.

GENERAL
The crisis of the recent years have taken us beyond the habitual ups and downs of a business cycle. The present reality is in a state of constant change, where crisis are no longer extraordinary events.
Initial projections for 2004 saw the industry making a small profit. The very high oil prices will have a very substantial effect on the outcome of the financial year for the airlines. The industry needs a new cost structure, a lower cost structure in order to face the new economic realities.
Airlines have acknowledged their drive for significant changes with the prime focus on “Simplifying the Business”. Here four examples:

– Elimination of paper tickets as from 31st of December 2007 and the sole use of electronic ticketing.
– Implementation of “bar codes” to simply the process of boarding.
– Implementation of Common Use Self Service Check-In kiosks at airports and to promote the use and share costs of the self-service technology.
– Implementation of Radio Frequency Identification technology for baggage sorting and handling to reduce the number of mishandled baggage.

LOW COST TERMINALS
Air transport is evolving to an industry whereby low cost is the key issue. This is what consumers demand. Airports need to reduce costs for all travelers, shippers and airlines. Building limited use low cost terminals is not the answer. Building low cost airports for ALL airlines should be the objective.
Where low cost facilities are developed, the bottom line is:
– These facilities must be available to all carriers
– Transparency is a must
– Security charges must be equal for all airlines.

Please let me stress that nowadays ALL CARRIERS have to operate on a
low cost basis and not only those carriers with the label "low cost
operators". Those carriers which do not endorse this business model will
soon be out of the business.
SECURITY
We have a higher level of security, but not efficiency. We are battling paperwork instead of terrorism. And our passengers and air cargo shipments are being hassled. We are confusing inconvenience with effectiveness.
Governments must act urgently to find a harmonized set of rules. To finance security measures is also a problem. Why do governments pay to keep their citizens safe from terrorism everywhere except in airports or on airplanes? Airlines and travelers should not be the exception.
The cost to the industry is US 5 billion per year for extra measures since September 11. A number of countries accepted to take on some of this cost. The US is THE example. All governments must act quickly to pay for what is their responsibility.
Effective consultation is needed. We all want a secure aviation environment, not in the least due to its economic importance. Airlines can help make security measures operationally effective and efficient. Too often we are not involved until decisions have been made. Today, we are very much battling paperwork instead of terrorism.
The Dutch government, again and again stresses that Schiphol Airport is of great importance due to its main port function and driver of the Dutch economy. NOW is the moment for the government to show its commitment to Schiphol Airport and to take on its account the geo-political related security costs of the airport. The very high profits generated by Schiphol Airport and the dividend paid out to the major share holder, the government, could be a source of funding.
AIRPORT CHARGES
BARIN would like to congratulate Schiphol Airport with the growth figures achieved in 2004.
By doing so, we recognize that the airline industry has made an extreme effort to ensure that the negative trends of the last couple of years, for reasons known to all of us. The airline industry hasclearly demonstrated that it listens to the needs and requirements of its customers.
To state it quite bluntly customers want a top-notch product for very attractive prices. In particular during the recent down-turn in the economy, the aggressive pricing policy of airlines have moved the market, be it the business, the leisure or tourist segment.
The airline industry has managed, by adapting a model of stringent cost cutting, to offer their clients top products for prices not shown before. In the last ten years the average yield dropped in excess of 30%.
On the other hand, the airline industry, the key generator of traffic flows through airports, has not “yet?” seen that airports have applied similar stringent cost cutting exercises resulting in lowering airport charges for airlines and or airport taxes for passengers. The profit margins of airports, plus the potential cost savings opportunities, offer amply scope to lower the costs of the airport customers (airlines and their passengers and shippers).
It is with great concern to see that Schiphol Airport for 2005 will increase its cost base with over 16% and that the airport charges for Schiphol again will increase. The increase of airport charges of 3,2% is, in the view of the airline industry too high and unacceptable.
Too high when considering the needs of the traveler, which is looking for lower prices; too high when considering the development of the rates at other European benchmark airports (Frankfurt +1,75% and Madrid +2%), and too high as the costs of operating the airport is rising faster than the traffic volume. With a 38% increase in airport charges for the period 1999-2003 Schiphol is on record as the airport with the steepest yearly increases, when compared with the benchmark airports in Europe.
Besides the increases in the user charges of Schiphol airport, it should also be noted that the security charges are one of the highest in Europe. E.g. in Copenhagen a charge of EU 3 per passenger is applicable for, from our point of view, the same services rendered as at Schiphol where around EU 11per passenger are being charged.
We again have objected to these increases, and although the Executive Board of SG did recognise the validity of our standpoint, gave the priority to their prime responsibility to maximise the profitability of the airport, enabled by the legislator. So they advised us to go to the legislator the MoT. We did and much to our dismay we have been told by the MoT that they have been given, by law, hardly any authority and no influencing tools to make the airport management intensify cost control and reduce their cost in order to set a more realistic charges policy.
The industry’s value chain is broken. it is often said that Airlines do the flying and everybody else makes the money. Airports make record profits while airlines lose billions. Our partners should be profitable. But happy airport monopolies achieving margins exceeding 25% while airlines lose billions is not acceptable anymore.
MINISTRY OF TRANSPORT (MoT)
BARIN has written to the Secretary of State of the MoT, repeatedly expressing many aspects which, in our view, are valid and should be acted upon. The outcome of this correspondence is not quite satisfactory. The Ministry of Transportation used a “marginal trial” (marginale toets) of the proposal by the government owned Schiphol Airport. In the view of BARIN there should not be a “marginal trial” but a “solid judgment” by the ministry of Transportation of the charges proposal by Schiphol Airport. One might wonder what will happen if it is decided to privatize Schiphol Airport.?
We want to stress that an economic regulation is required to guarantee the airport’s role as a catalyst for the overall economic development. Privatization must benefit the general public, travelers, airlines and shippers, not just the operators of the airport and the government.
Constant cost reduction is critical to any business—except monopolies. It is no longer acceptable that airport charges must increase every year again and again.
Consequently BARIN, together with our associated partners IATA- the International Air Transport Association and our operational colleagues of SAOC- Schiphol Airline Operators Committee ,are forced to start once again a formal objection procedure, and have filed such at the MoT, yesterday
FUTURE
Having made the previous observations, BARIN,in concert with IATA and SAOC, invite Schiphol Airport to rise to the challenge to meet the requirements of the travelers, the shippers and the airlines to lower costs and to lower charges.
BARIN will take its responsibility to go one step further than just a consultation process. We have to look not only at this and the next year, but also at the mid and long term.
Schiphol Airport should sit together with their customers to define the needs and objectives, on which an industry wide consensus is reached. No doubt the rates and charges will than become the outcome of a balanced approach.
Being on the subject of Schiphol Airport and the Government, BARIN would like to draw attention to the opportunities of substantial cost saving. If the airport area could be made “Schengen Exempt” savings of over EUR 40 mln are feasible. Why “Schengen Exempt”? At this moment, due to security requirements, all travelers have to show their passport at check-in, which means the need to have Schengen passengers separated from non-Schengen passengers has been surpassed.
IN CLOSING
To conclude you might have wondered , what this bell is for ? Well, in Dutch we say “De bel voor de nieuwe ronde” and “nieuwe ronde – nieuwe kansen” i.e. “the bell of a new round and a new round new chances”.So lets have that bell ring at the beginning of this year, for a new round with new chances and opportunities to create a win-win situation for The Dutch Economy, Schiphol Airport and us, the Airline industry active in this country.
And who could do that better than the highest ranking representatives of the two government bodies, present here. May I invite the Director General of the MoT, Mrs Tammenoms and the President of the Schiphol Group Mr. Cerfontaine to ring this bell together, to kick start this new round within we should achieve this win-win objective. For photo click www.presslink.nl/barin/
Now I invite all of you to join me in bringing out a toast to this goal and that we all mAy achieve this in good health, in a more peaceful environment and prosperity.
Happy New Year!! Thank you for your attention.

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