Airline industry reps net supplier savings

14 June 2011

14 June 2011 | Lindsay Clark

Political lobbying and advice on supply chain improvements by the International Air TransportAssociation (IATA) saved the airline industry $17 billion (£10.4 billion) between 2004 to 2010.

Last week, Giovanni Bisignani, chief executive of the IATA, said suppliers such as airports and navigation providers had been “living in a different reality” because “they offset declining demand by increasing prices” during the economic downturn.

“Shouting politely, we instilled a new mindset that saved airlines $17 billion (£10.4 billion) in costs for airports, air navigation service providers and fuel suppliers,” he told the IATA annual general meeting held last week.

IATA spokesman Chris Goater said lobbying played a key role, particularly with state-owned and controlled suppliers, such as navigation providers. “A lot of them had a policy of cost recovery, so they have fixed cost for certain capacity,” he said. “That is shared out with the airlines. If an airline goes bust, then the same cost is shared between less airlines and the price goes up.

“Because a lot of that was enshrined in law and regulations it meant having to lobby governments to relax that law, particularly in the recent economic crisis. That did happen with a number of governments by providing bridging loan or allow them to run at debt.”

IATA had also been providing consultancy to airports, working with them to reduce supply chain costs and enable them to cut airport charges paid by airlines, Goater said. This programme - dubbed ‘simplifying the business’ - also worked on electronic freight systems and baggage handling improvement. It has a target of achieving $12.6 billion (£7.7 billion) in savings annually by 2015.

“There is a potential for significant further savings to come,” he said.

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