general

Global airlines made a full-throated defense of globalization on Monday at their largest annual gathering, vowing not to give up on climate change agreements and calling for a swift resolution of a diplomatic rift threatening air travel in the Middle East. Missing from the general meeting of the International Air Transport Association in Mexico was Qatar Airways Chief Executive Officer Akbar Al Baker. Usually a star of the show, he appeared to have left the summit amid a dispute between Arab powers. Asked about Saudi Arabia and Bahrain's move to ban Qatari planes from their airports and airspace, IATA Director General Alexandre de Juniac called for openness. "We would like borders to be reopened, the sooner the better," he said. "Aviation is globalization at its very best," he had told executives from IATA's more than 200 airlines. "As aviation's leaders, we must bear witness to the achievements of our connected world." Qatar Airways could not be reached for comment. The Arab rift was a stark reminder of the political risks to the airlines, which have run up healthy profits even as the global consensus they rely upon comes under the threat of nationalist and protectionist political currents.<br/>

Air travel across the Gulf region and beyond faces major disruption following the move by Saudi Arabia, Egypt, the United Arab Emirates (UAE) and Bahrain to sever ties with Qatar, accusing the tiny oil rich state of supporting terrorism. Saudi Arabia Monday banned Qatari airlines from its airspace, while Abu Dhabi's state-owned Etihad Airways and Dubai's Emirates Airline said they would suspend all flights to and from Doha from Tuesday morning until further notice. Qatar is home to global airline Qatar Airways and many airports in the Gulf region are major hubs for international connecting flights. Qatar's main Hamad International Airport, for example, served around 9.8m passengers in January-March, according to its website. "There is a wider impact than Qatar Airways not being able to land in markets like Saudi and UAE since those markets are significant sources for transfer traffic," said Will Horton, a senior analyst at CAPA Centre for Aviation in Melbourne. "A Riyadh passenger may not be able to connect to Bangkok via Doha and a Dubai passenger could not get to London via Doha." The harshest restrictions came from Saudi Arabia's General Authority of Civil Aviation (GACA), which banned all Qatari planes from landing at the kingdom's airports and stopped them from crossing Saudi airspace. It also banned Saudi commercial and private air operators from serving Qatar. Bahrain's civil aviation authority, meanwhile, announced flights to and from Qatar had been suspended, according to state news agency BNA. Among airlines, EgyptAir, flydubai and Bahrain's Gulf Air joined Etihad and Emirates in saying they would suspend all flights to and from Doha. Qatar Airways said on its official website it had suspended all flights to Saudi Arabia.<br/>

Global airline earnings will fall less than previously forecast this year as Europe rebounds from a weak 2016 and Asian carriers tap a surge in cargo shipments, according to the industry’s main trade group. Net income is likely to total $31.4b worldwide in 2017, the IATA said Monday. While that’s $1.6b higher than suggested last December, it would still represent a near 10% decline from 2016’s $34.8b figure. Passenger and cargo demand has been “stronger than expected” this year, Alexandre de Juniac, IATA’s CEO, told airline leaders at the body’s annual meeting. European earnings should be E1.8b higher than first projected as bookings recover from a spate of terrorist attacks, while the outlook for Asia was lifted by $1.1b as freight volumes surge in a region that accounts for two-fifths of global shipments. Though revenues are gaining, earnings face a squeeze from an increase in spot prices for jet fuel, and the average net margin is set to shrink to 4.2 percent from 4.9% in 2016, De Juniac cautioned, adding that recent terrorist attacks in the UK demonstrate the potential for “negative impacts” on demand. “There is not much buffer,” said De Juniac, who was previously CEO of Air France-KLM Group. “That’s why airlines must remain vigilant against any cost increases, including from taxes, labor and infrastructure.” Some $15.4b of the industry’s net income will be generated by carriers in North America, $2.7b less than previously forecast but still around half of the industry total, IATA said. Passenger demand is forecast to increase by 2.3 percentage points compared with IATA’s previous estimate, to 7.4%, matching 2016’s growth rate.<br/>

President Donald Trump has proposed privatising the US air traffic control system as part of his attempt to unleash $1tn in public and private infrastructure spending that he pledged during the campaign. Trump said his administration would push to modernise the antiquated system in an effort to reduce the cost of airline travel and to cut the amount of time passengers lose because of delays on runaways and in the skies. “We’re proposing to take American air travel into the future, finally,” Trump said. “We’ll launch this American travel revolution by modernising this outdated system of air traffic control.” US presidents have had a chequered history in tackling the domestic air traffic control system. Ronald Reagan sacked striking air traffic controllers in 1981 in a move that has since been seen as severely weakening American labour unions. Several presidents have tried to overhaul the system since, including Democrat Bill Clinton, who failed to turn the system into a public corporation. Under Trump’s proposal, air traffic control systems would rely on GPS technology instead of the decades-old radar and ground-based systems that are commonly blamed for the long delays that have become synonymous with US air travel. “At a time when every passenger has GPS technology in their pockets, our air traffic control system still runs on radar,” said Trump, before adding that dozens of countries, including Canada, had made similar changes with “terrific results”. The air traffic plan would create a new air traffic control organisation separate from the Federal Aviation Administration. The US is one of the few industrial nations that still has a government agency provide air traffic control. Among the arguments for separating the function is the view that safety regulation and technology management do not sit well in one institution.<br/>

Success in Cuba is a “middle- to long-term” prospect for airlines, particularly for US carriers that launched service to Cuba after the market was reopened to US commercial flights last year, according to IATA regional VP-Americas Peter Cerda. Nine US airlines launched flights to Cuba last year and early this year, but three—Frontier Airlines, Silver Airways and Spirit Airlines—have already dropped service to the island nation, citing difficult market conditions. “You had a huge hunger from the airline industry” to launch flights to Cuba once the Obama administration allowed a resumption of commercial flights, Cerda said. “And what happened is there was overcapacity.” He noted that the Cuban destinations outside of Havana served by US airlines have been especially poor performers “because there was an oversaturation” of airline seats going to those smaller cities. Those markets outside Havana are hurt by the fact that the US still disallows travellers to go to Cuba purely for a vacation. Even in Havana, infrastructure “is a major issue,” Cerda said. “They need to build that infrastructure quite quickly.” The US-Cuba market also remains almost entirely a one-way market, with few Cubans traveling to the US, Cerda said.<br/>

Airbus raised the prospect Monday of a new cut in production of its A380 superjumbo because of weak sales but pledged to try to make sure the struggling project still breaks even. Airbus already plans to cut production to one superjumbo a month in 2018 from an unspecified level now and has said it needs to win more sales this year to maintain output at that new level, called rate 1 by the company's executives. At the same time, Airbus is trying to reduce its industrial costs to prevent financial losses, pending what it believes will be an upturn in sales as global air traffic continues to grow. "My first job is at least to adapt to the assumptions that we have for rate 1 in 2018, which is being done," Programmes Head Didier Evrard said. "Doing that is our first goal and meanwhile (sales chief) John (Leahy) is trying to sell more to A380 customers." Asked whether Airbus could have to cut production again, Evrard said, "Yes, it is likely that we may have to go below rate 1... and we will continue to study opportunities to (make) our program as healthy as possible on the financial side." Airbus shares fell 1.1%. Leahy told the same briefing that Airbus was working to reduce the A380 breakeven level to less than one a month. But he insisted he saw a future for the world's largest airliner as air traffic continues to double every 15 years.<br/>

This will be a "very, very slow year" for orders for Airbus, a top executive said Monday, but insisted business remained good for the European planemaker. "Will this year be a big year for orders? Absolutely not. It will be a very, very slow year for orders for Airbus," said its chief operating officer for customer relations, John Leahy. But that is a normal part of the business cycle, and will give the company a chance to work on its backlog, he added. "The airlines have to slow down their orders, take a breath and start to absorb the airplanes that they have ordered," he said. "This could last for a year or two, which is not an issue. Production will keep ramping up through that period due to the strength of the backlog." At Airbus and across the industry, the backlog of orders is at a record high, he said. Airbus had orders for 6,715 planes as of the end of April, including 5,517 narrow-body planes and 107 of its A380 superjumbo jet.<br/>

The combined capacity of airports under Airports of Thailand's supervision has fallen well short of actual utilisation, resulting in congestion, according to AoT data. The data showed that while the six AoT-operated airports have a combined capacity to handle 96.6m passengers a year, a total of 120m passengers were processed in the fiscal year to Sept 30, 2016, 24.3% over. All but one AoT airport is being run well beyond the designed capacity for passenger handling. Chiang Rai airport is the only exception, even though passenger traffic through the facility has been on the rise, fuelled by holiday travel. Airport with the most critical shortfalls in passenger handling capacities were, from highest to lowest, Suvarnabhumi, Phuket and Don Mueang. With a 45m-passenger-year designed capacity, Suvarnabhumi, Thailand's main gateway, processed 55.5m in the 2016 fiscal year. Congestion will only worsen over the years to come as AoT continues to squeeze increasing numbers of passengers and flights into the crowded<br/>facilities, while not moving fast enough to add new airport capacities. The IATA has recently called on Thai authorities to expedite airport upgrades, especially Suvarnabhumi, to make sure they are able to cope with the soaring number of air travellers over the next 20 years.<br/>