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IATA slams UK aviation tax plans

The coalition government has come under fire for the devastating impact its planned taxation of aviation will have on the economy.

The attack came from IATA director general and CEO Giovanni Bisignani as the organisation reported a continued rebound in air traffic in May.

Bisignani said: “The new UK government is talking about a future without domestic aviation and no capacity growth, without any analysis of the devastation that this would bring to the UK’s economy.

“And the much anticipated accelerated progress on the five billion euro savings of the Single European Sky has been truncated at incremental change.

“The travelling public and Europe’s struggling economy deserves much better than this short-sighted policy myopia.” 

He also rounded on responses to the Icedandic volcanic ash crisis. “Two months ago, the Icelandic volcano made it clear that aviation is vital to the global economy,” said Bisignani.

“When the volcano went to sleep, politicians developed amnesia to the lessons learned. Germany proposed a one billion euro departure tax that will dampen demand instead of stimulating growth.”

The figures for May showed Europe’s growth levels lagged behind the rest of the world. International scheduled passenger carryings rose by 11.7% over the same month last year.

European airlines recorded growth of 8.3% in the month – the slowest of any region.

Weak economic growth, questions over financial stability and tightening fiscal policies will likely result in a continued slowdown in demand compared to other parts of the world, IATA said.

However, healthy global traffic growth is strengthening the industry’s bottom line. Airlines are expected to post a $2.5 billion profit in 2010 in a dramatic turnaround from the $9.9 billion lost last year.

“This is good news, but it is only a 0.5% margin. We are still a long way from sustainable profitability,” said Bisignani.

“In the short-term, airlines need to focus efforts on nurturing the recovery by continuing to match capacity carefully to improving demand conditions. 

“And everybody must control costs. This includes airports, air navigation service providers, global distribution systems and labour. There are no exceptions.” 

How demand is growing by region

Asia-Pacific carriers recorded a 13.2% increase in demand, helped by “robust” economic growth, primarily in China.

North American airlines saw a 10.9% rise due to a careful matching of capacity to demand which drove the load factor up to 82.4%, the highest among all regions.

Latin American airlines recorded the fastest growth in demand at 23.6%, supported by the region’s strong economic upturn.

Middle Eastern carriers recorded 17.5% aided by connecting traffic through their hubs. However, the pace of growth dropped from the over 20% increases recorded earlier in the year.

African carriers reported a demand increase of 16.9% as the region’s carriers benefitted from growing economies and more success in maintaining market share.

Bisignani said: “Demand rebounded strongly in May following the impact of the European volcanic ash fiasco in April.

“Passenger traffic is now one percent above pre-recession levels, while the freight market is six percent bigger.”

A capacity increase of 4.8%  in May lagged behind the strong upturn in passenger demand. This pushed the international passenger load factor to 76%.

But matching capacity to demand will become “increasingly challenging” in the coming months, IATA cautioned. 

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