Ulrich Schulte-Strathaus, Association of European Airlines – AEA
Release Date: 2009-02-19
Since its origins as the Air Research Bureau in the 1950s, AEA has evolved into the airline-driven lobby group it is today. You’ve been Secretary General since the formalization of this lobbying focus in 2002; what have been the group’s major achievements in this new capacity?Clearly, changes in focus within the AEA have reflected the fundamental changes which are taking place within our industry. The 1990s were a period in which the European airlines were learning to compete with each other in a liberalised environment, and in doing so were becoming ever more efficient. Then the tragic events of September 11, 2001, played havoc with the economics of the industry. As it emerged from this downturn, it became more evident than ever that one of the major challenges facing us was to get to grips with external costs – and that required regulatory support.
Political activity has been incredibly intense in the last six years, and landmarks have been reached. We can now look forward to a genuine Single European Sky which fulfils most of the requirements which AEA has developed and refined over the years. We will shortly have an Airport Charges Directive – by no means perfect, but which was long thought to be a political impossibility. And we have an Emissions Trading Scheme from 2012, which is most definitely not perfect but which could have been far worse had it not been for a huge amount of work by AEA and its members to keep the process focused on attacking emissions, and not airlines.
Air France and KLM was the biggest M&A story of recent years, subsequently buying 25% of Alitalia this January. With Delta and Northwest in the US, and BA having eyed the potential of Iberia and Qantas, this trend is sure to continue, and with the financial crisis, industry consolidation can be expected to accelerate, not only in airlines but throughout the value chain. What do you foresee in this domain and what impact will it have on AEA’s mandate and constituents?
Europe’s major airlines have been experimenting with consolidation projects for about 25 years. Air France-KLM proved it could be done and Lufthansa-Swiss proved that AF/KL was not a one-off. So, the paradigm has shifted. Currently, or recently, half of AEA’s 34 members have been involved in talks, or rumours of talks, with other airlines, mainly each other. The process is a dynamic one but not all one-way. SAS is divesting itself of daughter companies in Spain and the Baltic States. British Airways has sold off its UK regional subsidiary.
I believe in the future – let us say in the medium term at least – will continue to see a proliferation of airline brands in Europe, each with a strong link to a particular country or region. The ownership of many of those brands may indeed be concentrated in the hands of a small number of major companies; I see no problem in that.
As for AEA membership, I believe that the strength of the organisation lies in its diversity, and the members recognise this. We are consensus-driven, so there is no worry about voting blocks. On average, it takes an airline just 24 minutes to earn its annual membership fee – we deliver value to all our members, regardless of their size and affiliation.
AEA lists a number of priorities in its mandate, including Environment, Airport Infrastructure, Safety and Operations, Security, Commercial Issues, and Cargo. With weak industry demand anticipated through 2009, has this changed at all the prioritization of these issues in the short term? What specific initiatives in these categories would you like to highlight as being most emblematic of AEA’s impact on the industry?
There is no doubt that the industry is in the most difficult situation it has faced for longer than anyone can remember. Any unnecessary or additional cost burden is all the more intolerable; any cost savings are all the more welcome. Politically, the realisation of the Single Sky can be anticipated with confidence now, but that does not alter the fact that the inefficiencies in the current system of air traffic management are costing the industry €5bn a year. We are paying the price today of political intransigence in the past, even though the future is still brighter.
Some airports today are openly raising their charges to protect their profit margins during this period of business downturn. In future, the Airport Charges Directive should address this kind of practice, but our problem is now.
A particular source of concern to us is a stream of proposals emerging from the newly-created European Aviation Safety Agency. “If it ain’t broke, don’t fix it” is a valuable maxim, but it’s not what a new agency wants to hear. So they are involving themselves in a wide range of topics where the perception of a safety issue might not necessarily reflect the reality.
Patrick Ky speaks of the paramount importance of unilateral industry cooperation around the SESAR initiative. Considering how much airlines stand to gain from such successful implementations, where is AEA’s focus in terms of SESAR and other industry initiatives?
First and foremost, Europe needs the Single European Sky to eliminate the structural inefficiencies inherent in the current patchwork system of airspace management. That is where the huge gains lie. Then, once we have an efficient framework, we need a new generation of technology to maximise the capacity of the system to meet future needs – that’s SESAR.
We have to avoid that SESAR becomes a case of ‘technology for its own sake’ and remains focused on the objective, which is system performance. Then there is the question of funding – a programme as massive of this has to be reliant on public funding.
AEA counts members like Turkish Airlines, in a country not yet part of the EU, although this is just another indication your interests clearly lie beyond European borders. What international concerns are of most importance to AEA?
As I mentioned earlier, diversity is one of AEA’s strengths. We have always managed to keep at least one step ahead of EU enlargement! Obviously, EU matters occupy a large part of our work, but decisions taken in Brussels are of crucial importance to our non-EU members, and AEA membership gives them uniquely valuable information, insights and access.
The relationship between EU and non-EU countries on aviation matters will be of crucial importance as the global industry repositions itself to face the challenges of the 21st century. The European single-market process has proved that notions of an airline’s market access being limited by its nationality are outmoded.
The EU-US agreement, which since April 2008 has allowed any EU airline to fly any route between the two parties, shows how far we have come; such an arrangement is precisely what the old bilateral system of route authority is designed to prevent. And yet, the glass is only half full. EU airlines are not allowed to invest in their US counterparts, and vice versa. In the case of the EU’s other main trading partners, are much less advanced. And yet – I am not alone in believing that the old order will disappear, and a truly global market for air transport will take its place. My only concern is that those who are negotiating the new political infrastructure for aviation ensure that competitive disadvantage is not built in to the process.
In its 2006 yearbook, AEA estimated traffic at 250m for its airlines, 100m for ‘no-frills’, 100m for the ‘traditional’ leisure airlines, and 25m for the regionals. With almost half air traffic falling outside AEA members, what is the current strategy around courting a fuller membership?
All European airlines of a substantial size are welcome to submit their candidature for membership – the only hard-and-fast rule we have is that an airline has to be three years old, although there are other guidelines. We work extensively on specific issues with other European associations – the leisure carriers, the regional airlines and the no-frills operators – and their members have a chance to see who we are and how we perform. We don’t ‘court’ new members, although sometimes they come to us. In mid-2008 the two most important European Express carriers, DHL and TNT, mutually decided they would benefit from membership. At the beginning of the year, that same conclusion was reached by the two most important Ukrainian airlines. AEA is adept at moving in new directions.
At the moment, I have a remit from my Presidents to seek partnership agreements with non-airline companies within our sector. While this may involve some ‘courtship’ in the first instance, it will not be difficult for AEA do demonstrate its added value to potential partners. There is no question, however, that we will maintain our focus on the interests of our core membership.
Daniel Calleja, the European Commission’s Director of Air Transport, spoke about disseminating know-how outside Europe, and that a Beijing meeting in October represented the first of many planned forays abroad in 2009. What importance does China have to AEA and its members?
Within the last three or four years, Mainland China has overtaken Japan and Canada into third place among the AEA airlines’ most important external passenger markets, behind USA and India. Including Hong Kong, China is comfortably in second place. AEA airlines fly to seven cities on the mainland; not only have traffic volumes boomed, but new market opportunities are constantly being sought.
Clearly, China is high on the list of countries with whom the EU would like to establish a comprehensive aviation agreement, and this is of great importance to AEA. However, we have to realise that the Chinese aviation market has some specific attributes, in the same way the USA has specific attributes, or Russia, or Japan. Our political negotiators have to establish a balance between creating a harmonised set of international relationships and addressing specific concerns.
“Disseminating know-how” is important, but for the time being China is pretty comfortable with the ‘old way’ of doing business, through bilateral deals with individual states.
What future role do you wish countries like China to play in AEA’s development , other than merely as a source for double digit passenger growth (+55% since achieving "Approved Destination Status" in 2004), and what opportunities for cooperation do you perceive for Chinese companies and institutions?
AEA has, in the past, been happy to welcome delegations of Chinese airport and airline officials, on fact-finding missions. There can be no doubt that, as the Chinese air transport sector develops – at a remarkable pace – Europe is a natural place to turn to for insights into how the global industry may develop.
For example – here in Europe we are far ahead of the rest of the world in measures to address aviation’s contribution to climate change. However, it is generally agreed that a meaningful solution must be a global one, and that means China’s special position – as it develops form a very small base into one of the world’s biggest air-travel markets – has to be accommodated.
| Company: | Association of European Airlines – AEA |
| Position: | Secretary General |
| Country: | Belgium |