BARIN Chairman New Year Address 2007

This year’s Theme: “Seeing the Light” i.e. “There is light in the tunnel”

It is expected that the last six consecutive years in the red will end for the world’s airlines in 2007. The $2.5 billion profit one expects this year, however, is "chicken feed" when compared to $450 billion in revenues.
Those bottom lines will improve through better deals with airports and air navigation service providers, some of which are still "abusing their monopoly position

Losses for last year are expected to be $500 million, a significant improvement over the loss of $1.7 billion that was projected based on September 2006 figures

2007 will be another year of hard work, challenges and change with tough targets to meet as "the revenue cycle has peaked". The revenue growth is predicted to fall to 4.5% this year, from 8% in 2006.

The political activity of the European Commission should be intensified in relation to the importance of topics of airport regulation and environmental developments.
“The recent European Commission’s presentation of its regulatory package on the relationship between airports and airlines, will be of the highest importance to the airline sector.

EU Commission should find regulatory ways of encouraging airports and airlines in Europe to develop “system partnerships” by agreeing upon the way in which the airlines’ requirements could best be met by airports. One very much needed rule is, an economic regulation on fees. The Commission should foresee an economic regulator to impose a cap on airport fee increases, and should also develop key performance indicators which should be implemented at local level to determine how the quality should be measured.

Air transport contributes a small part of global CO2 emissions—2%. By contrast, the air transport industry supports 8% of global economic activity. Even if all air travel stopped, the result is only a 2% global improvement in CO2 emissions. But the impact on global economies would be disastrous.

Taxes are not the answer. They do nothing for the environment. And they kill the economic social benefits that air transport brings. A solution must be found that does not limit airlines’ ability to invest in new technology.

Environmental responsibility is a pillar of our industry alongside safety and security. We are the safest form of transport because of global standards and harmonisation. The same approach is needed to deliver the best results on environment issues.
Such Tax doesn’t contribute to environmental measures. It unjustifiably increases the price of airtransportation.
There is an ongoing increasing demand for more mobility, and such a tax will victimise the passenger.
Level playing field world wide and for all transport modes is a "must", in case one insists on such a tax

Denied Boarding Charge
The European Ombudsman has recently concluded that the European Commission disseminated misleading and incorrect information on passenger rights in the EU communications.
Although the Ombudsman did not find all the complainants’ allegations valid, he did identify certain inaccurate and misleading statements in the informational material. Specifically, he concluded that the statement "If you are denied boarding or your flight is cancelled, the airline operating your flight must offer you financial compensation and assistance" incorrectly suggested that compensation must be paid in every cancellation scenario.

"So far, air passengers have been misled on their rights in case of flight irregularities. This has created unnecessary disputes at airports between airline staff and passengers," The Ombudsman asked the Commission to correct the information. We therefore see no reasons, as some people suggested, to initiate a Geschillen Commissie ( a sort of Aribitration Committee) to handle DBC issues in this country, as the assigned IVW – inspection board of the MoT, should be able to continue to handle this once clarity has been created by the Rule maker, the EU.
Competition is the strongest incentive for airlines to assist passengers when things go wrong and the Montreal convention provides a global standard for compensation.
We should call for benchmarking of all European regulations against their economic impact.
I repeat what I said last year that the Commission should take leadership to reform outdated regulations, implement an effective single sky policy, and regulate monopoly suppliers—airports and air navigation service providers. Action in these areas will help build a competitive industry and sustain affordable air travel.

There is no valid national security argument for national ownership rules. Why should airlines be treated differently than other strategic sectors? Airports from around the world are calling on governments to work together internationally to harmonise the restrictions on liquids in hand luggage, following the introduction of new measures by theEU.
The International Airport Counsil calls upon governments to consult with airports, airlines and industry stakeholders and then move urgently to establish a global security framework through ICAO. By harmonising solutions to security requirements, all address a basic need for providing the quality service that airlines and their passengers expect.
In addition we should reinforce the relationship with our customers. Carriers have struggled to regain profitability in recent years, and had to direct their energies towards cost control. Meanwhile our customers, who ultimately are the reason we exist, have found themselves increasingly burdened by security measures. By the time they take their seats on the aircraft, they are likely to be already highly stressed. We have to make the whole air travel process easier for them”.
Apparently the EU and its members are still struggling with the question of who should pay for the continuous vast cost increases on aviation security: the EU, member states, or airlines or their passengers. The issue is clear in the U.S. because the federal government passes only part of the cost of handling security along to airlines and travellers. It is about time the same approach should be taken in Europe, i.e. in The Netherlands to also take their financial responsibility absorbing part of these mounting cost, as they concern national security
Athough the EU is taking a greater role coordinating aviation security, it is of great concern that politicians, piling one measure on the other, and are going too far. As we would say in Dutch – hun doel voorbij schieten – overshooting the objective.

Airport Charges
Europe should have a single regulator to monitor the fees airports charge carriers.

IATA’s director general stated recently "Where there is no competition, there must be some rules of the game," He noted that Europe has 15 of the most expensive airports in the world, with operators able to dictate fees to carriers, and Schiphol is one of them.

A large number of Airports are classic monopolies, and show no understanding of efficiency.
Europe’s airlines have achieved a 9% reduction in aircraft operating costs, a 24% reduction in distribution and back office costs and a 14% increase in pilot productivity. Airports, on the other hand, gave the airlines a 13% increase in per passenger costs with a total bill for airlines and their users of US$14.5 billion,” IATA reported.
They noted that several airports are on track with cost reduction per passenger, including Manchester (-38%), Rome (-25%) and Birmingham (-13%). “But far too many airports are not delivering the competitiveness that Europe needs. Fifteen of the 25 most expensive airports in the world are in Europe.
And the bad ones are getting worse. Between 2001 and 2004 IATA has seen increases in cost per passenger at Aeroports de Paris (+44%), Amsterdam (+34%), Stockholm (+35%) and Munich (+26%) to name but a few. These are very disturbing examples of airport monopolies, still not seeing the light, living in the dark ages.
It is time to drive for results on airport efficiency and the Commission could play an enforcing role.
There is noting against profitable airports providing safe infrastructure with investment to meet growth. But Airports, such as Schiphol, must achieve all of this with greater cost efficiency in the same way we – airlines – have delivered on efficiency. Airlines are not asking anything that we have not done ourselves

It has been noticed that the Commission is working on a Directive for airport charges. “The Directive must require robust independent national regulation of airport monopolies and must fulfil at least some objectives

1. Take politics out of airport management
2. Comply with ICAO principles, including non-discrimination
3. Ensure stakeholder engagement with real and transparent consultation
4. And above all, act as a substitute for competition, ensuring continuous improvement on cost efficiency, by challenging airports to do better by reducing charges
We are of the opinion that the present Economic Regulation in this country does not accommodate these objectives to the required extend, so there is still work to be done on this issue.
The Office of Transport Regulation of the Netherlands Competition Authority NMa however, has made an encouraging start in their new role to keep a close watch on Schiphol, that will have to operate within the new Aviation Law, as from this year. Their draft decision on Schiphol’s cost allocation system, which they released on the 3rd of January is forcing the airport to take drastic steps in re-allocating cost which should not have been allocated to the aviation activities. Hopefully that this will lead to substantial lower aviation cost, which is very much needed.

We, as the customers of Amsterdam Airport Schiphol, are the key contributors to an other highly successful year, as Mr.Cerfontaine- President of Schiphol rated 2006. In his new year’s speech he proudly reported that the number of passengers rose to 46 million, cargo transport increased with 5.5%, and the air transport reached 423,000 movements.
He also stated to expect another record year for the Airport of Schiphol in 2007
Last year, the Dutch Cabinet indicated that it intended to allow the airport an initial growth to about 500,000 aircraft movements, and then to approximately 600,000.
The initial growth, however, within the current environmental system will be difficult and that means that 2007 will reach the limits of the existing noise system.

We will anxiously await affect of the Dutch Air Traffic Control Authority (LVNL) and Schiphol Group proposed environmental impact assessment, investigating a number of options designed to enable the airport to grow further in the short and medium term. Especially the option of the simultaneous use of two runways for take-offs and two for landings, which is expected to reduce the nuisance for more distant areas considerably.
The outcome of the Dutch Royal Commissioner Alders, assigned to the undertaking to see whether it is possible for the aviation sector, the national government and the region to reach agreement regarding the continued development of Schiphol’s network and nuisance reduction, will be interesting.

In 2006 the BARIN expressed strong reservations regarding the privatization plan for Schiphol, claiming the airport will continue to behave as a "monopolist," keeping prices and tariffs artificially high, and were pleading to first put a robust Economic Regulation in place, before privatisation is to be considered. And, as mentioned earlier, BARIN also argued the legislation put in place, as insufficiently robust. It does not offer adequate protection to airlines as it does not foresee a maximum price cap or minimum requirements for service levels. BARIN also warned that higher tariffs will affect Schiphol’s hub position negatively and noted that AMS had lost its rank as Europe’s fourth-largest airport to Madrid Barajas. We pointed at various examples, such as Lufthansa, which announced last year that it would exchange "expensive Schiphol" for Dusseldorf for its feed of passenger traffic from the Netherlands.

But it looks as if Schiphol finally is about to see the light which , for years, we have been trying let them to discover, by the many solid arguments we continuously presented to them, and to the legislators.

May be the good example set by the LVNL – the Dutch Air Traffic Control Authority, cutting- and controlling cost to the extend that their charges have not been increased during last couple of years, has helped them as well, seeing this light.

Schiphol decided to make no changes to the fees, which the airport charges to the airlines and passengers. They stated not to increase the charges on balance, for the airlines and passengers effective per 1 April 2007, in order to strengthen its competitive position in respect of the other European airports, so they stated.

They have even expressed their objective to freeze the charges for the next three to five years, as was again confirmed, as recent as last week in a meeting we had with them. With the experience of the past years, you can understand that we regularly check whether they still stick to this objective.

As I have expressed in a recent interview, talking about seeing the light, we will cautiously take the standpoint “Seeing is believing”…..but I must admit that the first signs are visible that Schiphol is in the process of realising that establishing a “win – win” basis, between them as the supplier and us airlines as the customers, is the best and, to my opinion, the only way forward.
The next steps to be taken are that the airport finds- and implements the necessary efficiency drives to get the cost – and consequently the charges down; from the present freezing level – of course.
Than the “cold is out of the air” . a straight translation of a Dutch saying!!!

There could not be a better way to start this year, in which we happen to celebrate BARIN’s 50th Anniversary !

BARIN has come along way, especially in this decennium, having build a trade organisation one has to reckon with; and I have to say that I am proud to have been- and still will be part of till the end of my 5 years’ BARIN chairmanship, which I will complete by the end of this year.

It goes without saying that I couldn’t have been able to carry out my BARIN tasks without the excellent cooperation of my fellow executive board members; and I like to especially mention the dedicated support of our Secretary General – Frank Allard, who took on that post – 10 years ago! An other crown year, this year!!
It is good to see Frank Takes here – in good shape again – my fellow Board Member who also will have served 5 years on our Executive Board by the end of this year.

In closing:

This year we are looking forward to positive developments – and “must act” measures to happen, among which:

– the implementation of the Code of Conduct of Travel Offers, BARIN has been instrumental in setting this up in a self regulating manner in close cooperation with the Ministries of Econom.Affairs and Transport, the Dutch Travel Association ANVR, HISWA Trade Association for Water Sports, and Koninklijk Nederlands Vervoer (KNV) the Employers’ Association in the Passenger Road Transport Sector in this country.

– the start of a constructive cooperation with the airport, guided by the prime objective to achieve things on a “win-win” basis.

– a new cabinet taking their responsibility, as I have reiterated earlier

– more transparency, efficiency drives, accelerating handling and follow up by the Government – Provincial departments, such as the MoT department Progis and the Schadeschap, dealing with the Noise issues such as insulation of houses and claim handling. Sofar airlines and their passengers paid over 800 million Euro’s on Noise Charges.

– the EU taking the necessary steps, the industry is fiercely pleading for

– a continuation of the growing joint effort cooperation with our associates, such as SAOC, IATA, AEA, and the European BARs Forum

– and last but not least, a festive 50th Anniversary Year, which will kick off with a great BARIN Social Event outing, to Maastricht Airport, Eurocontrol and the city of Maastricht taking place on 28 March .
Arie Verberk thank you very much for making one of Martinair’s aircraft available to fly us to Maastricht and back home, at the end of a great day; a highly appreciated gesture indeed!

Ladies and Gentlemen, may I invite you to join me with a toast to a prosperous, healthy and peaceful 2007 for you and your families, and a successful business year for you all !

Thank you !

Schiphol HILTON 26 January 2007.

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