Air traffic strikes in Europe bigger threat than fuel prices, IAG says
Air traffic control strikes at Europe’s airports are the biggest threats to its airlines, followed by a jump in fuel prices this year, the head of British Airways parent IAG said.
The airline is “well-hedged” for 2018 and is more concerned about the effect of weekly air traffic control protests that are “destroying” traffic in Europe, Willie Walsh, chief executive of IAG, told a CAPA Centre for Aviation summit for airline chief executives in Sydney yesterday. “From a European context, the thing that’s really impacting us is the air traffic control strikes and the ongoing air traffic control environment, which is a mess.”
The International Air Transport Association has cut its forecast for global airlines profit in 2018 by 12 per cent because of the rise in fuel prices, but European airlines must also grapple with the added costs of flight cancellations due to frequent air traffic control protests.
The cost of ATC strikes in the EU between 2010 and 2017 has reached €13.4 billion (Dh57.39bn), according to the A4E, a European airline body. France has been the biggest problem for airlines as public sector employees have gone on strike against the government’s economic policies. Extra costs from paying compensation to customers for delays and increased fuel burn to bypass French airspace are costing IAG tens of millions of pounds, Mr Walsh said.
IAG’s airlines include Vueling, Iberia and Aer Lingus.
“The ATC system in Europe is really breaking at the seams,” Mr Walsh said. “It’s one of those things that hits our industry and it’s impacting millions of customers.”
If the increase in ATC delays continues, then airlines will be unable to plan for operational performance in 2018 and 2019, he said.
IAG is 70 per cent hedged for fuel in 2018, but the threat from fuel costs will definitely be a challenge in 2019, he said. Air France-KLM Group, Europe’s biggest airline, warned last month that rising costs for jet fuel and a stronger euro will exacerbate problems caused by a string of walkouts by staff demanding higher wages.
Crude oil prices, which touched $80 a barrel last month, are trading at threeyear highs amid global oil output curbs.
The oil deal struck between Opec and a group of producers led by Russia has been in place since January of last year and has culled 1.8 million barrels of oil from the market, pushing down oil inventories to their five-year average.
Potential supply losses from Iran following the US withdrawal from a nuclear deal with Tehran, and from Venezuela where political upheaval is taking a toll on output, are expected to keep prices high throughout 2018.
Opec and its partners in the oil deal are meeting later this month to decide on the fate of the output cuts, which are in place until the end of this year.
It’s one of those things that hits our industry and it’s impacting millions of customers WILLIE WALSH Chief executive, IAG