That Was The Week That Was 12-16 October
Pressure intensifying; results, maybe less so…
Strictly, this news came out over the weekend, but it was the weekend, so the European industry woke up on Monday to a piece in the New York Times that laid bare the myths of frequent flyer schemes. Airlines have been using their schemes as security for raising capital in the market. Say what you like about the big banks, their regulatory structure requires a certain amount of transparency when trying to raise cash, and it was transparently not pretty. Delta, for instance, admits that the foundation of frequent-flier programs is ‘the aspiration of earning a free flight.’ Note the word ‘aspiration’ there. Because of our aspirations getting the better of us, Delta adds, it can ‘manage costs by modifying inventory levels and value.’ United, on the other hand, talks about how it can ‘nimbly’ adjust redemptions. Most of the value of FFPs comes from the additional miles earned using the card for other purchases. Travel may have fallen by 60% but mile accumulation by about 5%. The United FFP is now worth about twice that of the airline.
Meanwhile, in Montreal, ICAO showed its commitment to reform by cancelling this year’s Air Transport Regulation Panel. On the agenda had been a conversation about the possible reformation of the ownership and control provisions – or perhaps making sure that ownership and control is not reformed, to be more accurate. Now, what with one thing or another, that discussion is ‘not mature’ apparently. This may well be a visionary development from ICAO. Control over ownership and control is likely to be a universal problem soon, not just something the EU and the US carriers think needs to be ‘managed’.
Tuesday saw the culmination of all that ‘intensifying’ pressure you may recall from last week, brought down by the airlines and airports onto the heads of the European Council as it considered the need for testing, rather than quarantine for airline passengers. So intense was that intensifying pressure that the Council decided to coordinate quarantines. Whoops. The industry response to that announcement was one crafted perhaps, more in anger than in sorrow. Stark warnings were issued. The shortcomings were a political failure, apparently. Voids were shouted into. All that intensified pressure was somehow absorbed.
Whilst the Council was resisting the intensifying pressure, SESAR JU was holding a webinair – one of a series on DigitalSky – about how to recover. Full disclosure, Aviation Advocacy was involved. As far as the ANSPs are concerned, the overarching guidance seems to be ‘steady as she goes’. If pressure is intensifying about ATM reform, the ANSPs are doing a good job of keeping calm and carrying on.
By way of contrast to the airlines and airport response to the Council decision, Wednesday saw the response from the hotel and hospitality industry body NET. Maybe it is because they have the name hospitality in their job description. Maybe it was because they waited a day to hit send; but their response was much more measured. The measures were a good start, they noted. Their stark warning was that the measures were ‘not nearly sufficient’. No failures were branded in the writing of their release.
Eurocontrol’s Eamonn Brennan also took the conciliatory road on Thursday when he introduced the most recent HardTalk, an interview with KLM’s Pieter Elbers (yes, another full disclosure, Aviation Advocacy does pop up). Introducing the session by showing the most recent industry traffic figures, Brennan too noted that the measures were a good start. Which is just as well, because the figures he set out were not a good anything. If you have not found HardTalk yet, let me recommend them, despite my involvement. They are informative. There are to be three more this year and Eurocontrol is planning a new series of them into the new year as well.
In the meantime, at the UK Parliament, a Commons committee hearing was looking at how emission trading and aviation is to be handled post-Brexit. The UK would suggest that it has three options: to create a stand-alone ETS, in parallel with the EU ETS, with links to it; to introduce a stand-alone carbon tax; or some hybrid of those two. A fascinating conversation was had, including the making of the very relevant point by Prof Fankhauser of LSE that the modality is not the point, the price is the point. As befits any discussion in a committee meeting of this nature, there are a number of pros and cons, and that the best option might be a hybrid.
That might be the expected outcome from a committee, but you are probably entitled to better conclusions from UK Ministers of State, in this case the Secretary of Transport for the UK, Mr Grant Schapps. He seems to think that once Brexit happens, there will be no air transport between the UK and the members of the EU. He is right that the UK comes out of the EU common aviation market. But there are air service agreements with most EU countries. The UK will fall back on those. Not good news for the well known European airline BA but there you go.
While Eurocontrol was having its HardTalk on Thursday, CANSO – the industry body for ANSPs – was holding its own hard talk, its annual general meeting. So on Friday, the world was shocked, shocked to see the press release that arose from that AGM. Yes, CANSO reaffirmed its commitment to ATM recovery. That is a relief. One can only hope that the commitment is intensifying.