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Gulf Times
Saturday, June 13, 2015

COMMENT
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Editor-in-Chief : Darwish S Ahmed
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GULF TIMES
Migration crisis,
Burundi loom large
at African summit
Leaders gather in Johannesburg tomorrow for the
African Union (AU) summit, with the global migration
crisis, xenophobia and turmoil in Burundi expected to
dominate an event that often avoids confronting thorny
issues.
The continents heads of state will meet for two days in
the upmarket business and retail district of Sandton under
the official theme of the Year of Womens Empowerment
and Development.
But the focus is likely to be on political events overtaking
the continent, including violence in Burundi over
President Pierre Nkurunzizas bid for a third term in office
and the threat posed by militants.
The summit in South Africas economic capital comes
two months after a wave of xenophobic violence swept
parts of Johannesburg and Durban as African immigrants
were hunted down and attacked by gangs.
At least seven people died in the unrest, which badly
strained relations between South Africa and many
countries in the region that were outraged at the targeting
of their citizens.
The subject of xenophobia will be tackled in a closed
session before the opening ceremony tomorrow morning.
The session will also discuss migration - and will likely
focus on the ood of African and Middle Eastern migrants
trying to cross the Mediterranean.
Mass drownings have claimed nearly 1,800 lives so far
this year, according
to the International
Organisation for
Migration (IOM).
At a brieng ahead
of the summit, Foreign
Minister Maite
Nkoane-Mashabane
was at pains to
emphasise South
Africas unity with its
neighbours after the
furore over the attacks on migrant workers.
Our future is inherently linked to that of the rest of
the continent. We are a member of the African family of
nations, the AU, and we are fully committed to the success
of the institution, she said.
The AU summit assumes much importance as it comes
in the wake of an agreement to create a free-trade zone
linking three economic blocs that would unite 57% of
Africas population.
Representatives from 25 African nations signed an
agreement in the Red Sea resort of Sharm el-Sheikh
this week to combine the Common Market for Eastern
and Southern Africa (COMESA), the South African
Development Community (SADC) and the East African
Community (EAC).
But the deal still requires negotiations and ratication by
national parliaments.
AU members have been debating the creation of the freetrade area for years, but simply havent been able to agree
on common standards, policies and tariffs.
Africa is home to a third of the worlds mineral reserves,
two-thirds of diamonds and a tenth of the oil, according to
the World Bank. For decades, the continents growth was
driven by the extraction industry. But since commodity
prices weakened in recent years, economies are forced to
diversify if they want to grow.
The 54-member union, at its summit tomorrow,
should give priority to the economic challenge facing the
continent while trying to tackle the political issues.

The 54-member
union, at its
summit tomorrow,
should give
priority to
the economic
challenge

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Global airline leaders gathered in Miami last week for their annual conference.

North American aviation

has never had it so good
The US aviation industry
has emerged as the star
performer transforming
itself from the lows of
the tragic events of 9/11
almost 14 years ago

By Updesh Kapur
Miami

he gures speak for

themselves.
The North American
aviation industry has never
had it so good and, to say impressive is
an understatement.
This year, over 50% of the global
airline industrys prots is expected to
be generated by carriers based in North
America.
At $15.7bn, its a healthy gure
against a record global level of $29.3bn
almost double the $16.4bn posted by
the industry as a whole during 2014.
The Middle East, after Asia and
Europe, is set to account for a relatively
minor $1.8bn of the projected 2015 net
prot numbers.
The signicant strengthening of
nancial performance in the space
of 12 months is the result of several
factors. Stronger global economic
prospects, a record number of
travellers, sharp rise in passenger load
factors, appreciation of the US dollar,
and more noteworthy, much lower fuel
prices which have fallen to below half
the 2014 levels.
According to the International
Air Transport Association (IATA),
the global airline industry governing
body, 2015 will see 3.5bn passengers
carried; almost 55mn tonnes of cargo
own; and a global network of member
airlines spanning 51,000 routes.
IATA states aviation supports 58mn
jobs worldwide, generates $2.4tn in
economic activity, while singling out
the US, the worlds largest travel market,
as supporting around 5.7mn jobs and
contributing $561.7bn to the GDP.
US airlines are leading the North
American charge and indeed the
industry in terms of protability
and the US is our industrys most
impressive turnaround story, says IATA
director general Tony Tyler, speaking
at the associations annual meeting in
Miami this week.
US airlines are investing more than
$1bn a month in their product and
adding service to meet rising demand
for connectivity.
In a nutshell, Tyler says: Aviation
stimulates growth and creates jobs.
Tylers words may well have created
a sense of buoyancy in a packed
conference room at the Loews Hotel in
Miami, but ones that were desperately
needed for an industry plagued over
the years by crippling costs.
Though there are variances in
performance region by region due
largely to economic disparities, the
outlook is positive.

The US aviation industry has

emerged as the star performer
transforming itself from the lows of
the tragic events of 9/11 almost 14
years ago through mass restructuring,
consolidation, and both eet and
product investment, to the highs of
today.
The nancial might of the US
majors, in particular, will encourage
them to grow and further develop their
business, says a condent IATA.
Yet the irony here is the US fears its
share of the protability pie is under
threat. It wants, and rightly so, to
maintain and increase prot margins in
line with any business strategy.
The thorn in the side are the relative
minnows thousands of miles away
with the onslaught into American
territory of the three burgeoning Gulf
carriers said to be eating into their
market share.
As highlighted in recent weeks in
this column, the key US players
Delta, United and American have
mounted a joint scathing attack
on the Gulfs Emirates, Etihad and
Qatar Airways over billions of dollars
of alleged government subsidies
received that they claim provide unfair
competition and an uneven playing
eld in global aviation.
The US majors are pushing their
governments to restrict Gulf access
to American shores. Strongly denying
the claims, the Gulf carriers have
hit back, arguing the US aviation
industry has beneted from tax rebates
and government backed Chapter 11
bankruptcy protection over the years
to keep their businesses aoat.
And thousands of US jobs have been
created through deployment of ights
from the Gulf to the US and the mass
orders of US-made aircraft placed by
the Middle Easts key operators.
Collectively, these factors have
helped shape the US aviation industry
to what it is today healthy, buoyant
and protable.
In Miami last week, the US-Gulf
spat was not on the IATA agenda at its
71st AGM.
IATA remained neutral on the issue,
saying it had no mandate to interfere,
not wanting to support, nor defend
either side in the bitter row. Hence,
none of the six airlines in question
faced each other in a panel debate. This
would have created reworks for sure.
Hundreds of delegates from across
the world were eager to hear rsthand
the arguments from both sides in
a conference attended by scores of

airline CEOs and industry bodies.

The panel debates during the
two-day conference featuring
airlines, aircraft manufacturers, cargo
operators and airports, were expected
to rouse many talking points. They
didnt.
Instead, much of the rhetoric was
left on the sidelines of the conference.
Only Qatar Airways Group CEO Akbar
al-Baker, in open session, was quick to
raise concerns of protectionism from
certain circles in the US and Europe.
Any rollback of liberal market
access and open-skies policies will
reverberate across the whole world and
will lead to retaliatory protectionism
that will affect all aspects of trade, he
said.
There is no olive branch on this
issue. Under government agreements,
we can deploy as much capacity as we
want in the US and the US carriers can
deploy as much capacity as they want
in my country. Its a two-way street.
Whats the problem?
American Airlines CEO Doug Parker,
one of the bosses behind the antiGulf charge, said this was an issue
about being able to compete against
airlines instead of competing against
governments. Our dispute is not with
any of those three airlines. Were just
trying to get the US government to
enforce fair policies, he said.
IATAs Tony Tyler went on: It is
no secret there is underlying tension
in our industry, often described as a
rift between state-owned airlines and
those owned wholly or predominantly
by private shareholders.
Others see it in terms of
government protectionism. Some
interpret it as a clash between aviation
business friendly countries and
those less focused on maximising
the economic and social benets of
connectivity.
Regardless of your viewpoint, IATA
is not the battleground on which any
resolution will be achieved, he told
delegates.
IATA supports fair and free
competition, but market access is an
issue for governments to address, not
industry. We are very much in favour
of liberalising and the whole issue of
opening up the skies is good for the
industry, its good for everyone, but
within that description, theres room
for sensible people to disagree about
what fair competition means.
US Secretary of Transportation
Anthony Foxx steered clear of the
issue during his address to conference

IATA director general Tony Tyler: The US is our industrys most impressive
turnaround story.

delegates, clearly not wanting to add

fuel to the already raging re in both
quarters.
Industry bosses expressed their own
thoughts on the issue which could have
ramications across the world.
Kenya Airways Group managing
director and CEO Mbuvi Ngunze
agreed in part with Tyler that IATA
ought not to be seen as an open
battleground for the US Gulf spat
that has dominated the aviation
industry news agenda for the past six
months.
This issue will have implications
for those countries it will touch, but
I think this will have to be dealt with
internally within the connes of the
regulatory committees, he said.
Malaysia Airlines new CEO
Christoph Mueller said the tone of the
US criticism levied at the Gulf carriers
was a bad surprise to me.
Our industry has suffered from a
lack of liberalisation for a very long
time. What is happening is a setback.
I am particularly amazed because
it was US carriers such as Pan Am
and TWA in the past that enjoyed
the most liberalised aviation regime
which allowed them to operate hubs in
Europe.
The initiative we have seen
brewing over the past few months
is anachronism. I have not heard
similar calls in Asia where there are
a lot of steps towards furthering
liberalisation.
According to Athar Hussein Khan,
CEO of the Association of European
Airlines, the debate needed resolving
sooner rather than later.
A dispute of this magnitude needs
to be resolved. It would be in the
industrys interest. The issues on the
table cannot be resolved bilaterally or
regionally. A neutral stance might be
needed.
Lufthansa CEO Carsten Spohr
believes the airline industry should
take a closer look at how the World
Trade Organisation has dealt with
trade disputes in other industries and
try to learn from them.
He also stated that the dispute
made the discussion more credible
on a bigger scale and had merit
to become a global discussion.
Germanys Lufthansa had spearheaded
earlier claims from select European
neighbours that the Gulf players
provided unfair competition in their
own markets claims which have now
stretched to the US onslaught.
Air Canada CEO Calin Rovinescu
stressed that the solution had to rest in
the hands of policymakers.
We can talk as much as wed like
about liberalisation and airlines
wanting to have greater access, and
I think thats overall a very good
thing, but fundamentally air traffic
agreements are trade agreements like
so many other parts of the industrial
landscape.
This is a debate which is set to linger
on. But it is the end game that most are
interested in trying to understand.
If the US airline industry is keen
to protect its healthy prot margins
as outlined at the beginning of
this column, it has to accept open
competition and embrace the spirit of
competition in the interests of all.
zUpdesh Kapur is a PR &
communications professional,
columnist, aviation, hospitality,
tourism and travel analyst. He can be
followed on twitter @updeshkapur