Travel

IATA and US Air Transport Assn. strongly objected to a US Dept. of Homeland Security proposed rule that would establish an "exit" program at US airports requiring airlines to fund and manage the collection of fingerprints from non-US citizens departing the country. In a letter to Homeland Security Secretary Michael Chertoff and Secretary of State Condoleezza Rice, IATA DG and CEO Giovanni Bisignani said the program "would result in significant and unnecessary delays in passenger processing," disrupt connections at airports throughout the world and cost the airline industry $12.3 billion over 10 years. He acknowledged that airlines have a security "responsibility," but said the industry "can no longer tolerate such inefficiencies and the impact they have on the traveling public and the international aviation system generally." He added that the exit program, particularly if carriers have to collect fingerprints, would "impose yet another duplicative, complex and costly mandate on the back of the industry. . .[that] can no longer be dismissed as simply the 'cost of doing business' for an airline operating in the US."

ATA President and CEO James May called for the exit plan proposal to be "terminated now," adding, "Not only is the rulemaking proceeding not justifiable, it is purely and simply against the law." He said DHS is "ignoring Congress' clear direction that the department be responsible for fingerprint collection. . .[and] continues to unfairly try to shrug this responsibility onto the airlines." (Source:  Air Transport World)

About 2.7 million fewer passengers will travel with major US airlines this summer due partly to high fuel prices, a weakening economy and capacity cuts, said the Air Transport Association of America (ATA). The ATA is the trade organization for major US airlines. ATA members and their affiliates transport more than 90 percent of US airline passenger and cargo traffic. (Source: Reuters)

Return flight to bankruptcy possible for U.S. airlines.  Airlines are cutting U.S. flights, shedding employees, putting off plane orders and even talking about combinations.  But with cash bleeding fast, fuel prices high and credit tight, nothing they do may be able to stop several major airlines' return flight toward bankruptcy, and possibly liquidation.  Unlike when four of the six legacy carriers filed for bankruptcy protection between 2002 and 2005, airlines facing bankruptcy in this climate may find it tougher to reorganize because of tight credit markets and they have fewer unencumbered assets to use as collateral for loans.

``It may be Darwin's law of the fittest. If one of the carriers goes into bankruptcy and liquidated, it would take a lot of seats out of the market and other carriers would benefit,'' Calyon Securities airline analyst Ray Neidl said.

A handful of small carriers in recent months have filed for bankruptcy protection or gone out of business altogether.  With losses piling up for most of the major airlines, maintaining a strong cash position is important to avoid the same fate.  Spiralling fuel costs and limited means to trim other costs quickly makes that a tricky proposition.

``Unlike 2002, 2003, 2004, when it was largely a revenue problem that drove them into distress, this is largely a fuel price problem,'' said Fitch Ratings analyst Bill Warlick. ``You could argue that the risk associated with fuel price spikes is largely uncontrollable in contrast to the revenue problem post 9/11, which was addressed through a variety of measures such as cutting costs.''

Several of the carriers used their first trip through bankruptcy protection to wipe away debt, resize their fleets and terminate employee pensions.  ``There are fewer opportunities to restructure now that the initial work is done,'' Warlick said.

The airlines are furiously trying to remove domestic flights from the air to reduce costs. At least two have announced plans to cut U.S. capacity by double-digit percentages and trim thousands of jobs. Others are putting off buying certain new planes.

The price of oil has doubled in the last year. But fare increases have fallen well short of keeping pace with the price of fuel. As their finances have been buffeted, stocks of most major airlines have plummeted by double-digit percentages over the last year.  Neidl said in a recent research note that mergers, which are supposed to make the industry more efficient, may not work in the current environment because there is a large cash outlay up front and high execution risk. He believes the current crisis, which he described as the biggest challenge the industry has ever faced, may serve to cool the merger frenzy.  (Source:  The Associated Press)

Japan Airlines, Asia's biggest airline by revenue, said the delay in delivery of Boeing's 787 aircraft was hurting its expansion plans but it was not looking to go for an alternative plane.  The comments were made in Singapore by JAL President and Chief Executive Haruka Nishimatsu, who earlier said the carrier could not absorb the rising cost of fuel and needed to raise fuel surcharges.  (Source:  Reuters)

The United States on May 13 proposed a deal to sweep away a global "spider's web" of airline ownership rules, taking the EU by surprise as it seeks a transatlantic deal for its airlines to buy their US rivals. US Deputy Assistant Secretary of State for Transportation Affairs John Byerly said Washington had an open mind on Europe's long-standing demand to ease American restrictions on foreign ownership of US airlines. But Byerly, the chief US negotiator in the "open skies" talks with the EU, said Washington would seek a far wider deal by pledging to forgo access restrictions on airlines from more than 60 nations, based on the nationality of their owners, a deal which could be expanded to other countries in the future.

Such a move would involve "dismantling the sticky spider's web of restrictions in bilateral aviation agreement that form a huge impediment to expanded cross-border investment in, and management of, airlines around the world," he said in a speech. Under those rules, which are starting to be relaxed, a country allows access to airlines from third countries only if they are owned and controlled by nationals of that same country, something that has impeded cross-border airline takeovers. The United States and the EU will open talks on Thursday in Slovenia on a second phase of the liberalization of the transatlantic aviation market, known as "open skies".

The EU's chief negotiator said he was surprised by the US proposal to broaden the liberalization talks. "The EU's priority is more on a transatlantic area and then to move forward after that," Daniel Calleja told reporters. Brussels wants to do away with US federal laws that cap foreign control at 25 percent of the voting stock.

Britain has threatened to exercise its right to tear up the first-stage agreement, which forced it to open lucrative routes from London's Heathrow Airport to more competition, unless the EU wins the right for Europeans to own or control US airlines. But many US lawmakers oppose scrapping the limit.

Washington acknowledged that letting Europeans own US carriers could boost investment and competitiveness in the US sector which has been hit by a wave of bankruptcies, Byerly said in a speech to the European Aviation Club. But the EU would have to convince a doubtful US Congress and unions of the benefits. "We approach with an open mind the expected European proposal to change US laws that limit foreign ownership of US carriers," Byerly said.

He also reaffirmed Washington's rejection of EU plans to include civil aircraft flying into and out of Europe in its system for trading carbon dioxide emissions based on legally binding limits. Byerly said the United States did not rule out "the possibility of environmental constraints on traffic freedoms" figuring in the talks but they must be consistent with International Civil Aviation Organization (ICAO) principles. The ICAO last year opposed the EU plan to include foreign airlines in its Emission Trading Scheme, but EU ministers voted in December to go ahead nevertheless. (Source: Reuters)

US FAA came under intense scrutiny when "whistleblower" agency inspectors, Dept. of Transportation Inspector General Calvin Scovel and a House of Representatives committee detailed "cozy" relationships between inspectors and airlines, pervasive "dysfunction" and "regulatory abuse" at a regional office and "a disconnect" between its Washington headquarters and day-to-day field operations.  Associate Administrator-Aviation Safety Nicholas Sabatini conceded at a House Transportation and Infrastructure Committee hearing that the agency's "customer service initiative" and "voluntary disclosure" program were interpreted in an "unacceptable" way at its Dallas office, where Southwest Airlines was viewed by inspectors as an FAA "customer" and "client."   Sabatini said the purpose of the customer service initiative is for FAA personnel to treat airlines in a "respectful" manner that's "responsive" to concerns. But he emphasized that carrier! s should not be treated as clients. "We're going to recalibrate this misunderstanding," he said.

While acknowledging mistakes in FAA's oversight of SWA, he defended the voluntary disclosure program, saying it allows the agency to glean critical information from airlines that has contributed to the U.S.'s stellar safety record. He noted that initial results of an FAA audit of domestic airlines' compliance with ADs revealed 99 per cent compliance.  SWA Chairman Herb Kelleher said it would be a "mistake to toss out the whole voluntary disclosure program. I think it would cause airlines to be less forthcoming." He added that FAA and airlines are "married to each other in effect," but agreed that the relationship shouldn't be "kissy-kissy." The regulator should be "firm" without being "totally hostile," he said. (Source:  Air Transport World)