IATA, the International Air Transport Association, often gets treated as a voluntary airline standard-setting body rather than the lobby shop that it is. For instance governments (including the U.S.) frequently follow the advice of incumbent airlines in administering limited airport capacity which benefits those incumbent airlines at the expense of competition, when instead we should stop just giving these valuable resources to existing airlines keeping out competition.
One would hope that IATA’s call for governments not to make airlines refund tickets when they cancel flights would be enough to expose the role that this organization plays.
Their latest missive calling for government subsidies of airlines, though, is truly insane. The trade association warned that “”African airlines were on the verge of collapse unless governments urgently stepped in.” According to IATA Vice President for Africa and the Middle East, Muhammad Albakri,
Air Mauritius has entered voluntary administration, South African Airways and SA Express are in business rescue, other distressed carriers have placed staff on unpaid leave or signalled their intention to cut jobs. More airlines will follow if urgent financial relief is not provided
There are really two fundamental problems with this,
- Airlines like South African were fundamentally broken long before the current crisis. The government was pouring in cash in 2017, yet they will bankrupt in 2018 and they were so corrupt and inept they failed to catch one of their pilots working with a fake license for 25 years. There were travel agencies who refused to sell the airline’s tickets back in the fall worried they might collapse. South African needs to fail, freeing up resources like planes and gates to start a new carrier from scratch.
- Taking money from poor people in Africa to give to airlines is bat crazy. GDP per capita in Sub-Saharan Africa (2018) was US$1586. In some countries it’s much lower. 18 countries in Africa are already at their capacity for debt. Safe drinking water strikes me as a higher priority than airline subsidies, and in the current pandemic I’d focus more on lack of testing and lack of ventilators and personal protective equipment than giving it to failed airline executives.
Copyright: tupungato / 123RF Stock Photo
When this is all over airlines with good prospects will likely be able to access capital markets, and if they can’t and if there are resources left after governments have done their best so that more people do not die, then backstopping the capital needs to resurrect air carriers could be something to look at.
IATA, whose board includes American Airlines CEO Doug Parker and United Airlines CEO Oscar Munoz, is also calling for more subsidies for Middle East carriers by the way. Doug Parker and Qatar Airways have had their rapprochement, so subsidies are apparently no longer bad plus all U.S. airlines are taking them. Perhaps let Parker and Munoz know how offensive it is to ask African governments to prioritize airline industry subsidies over mosquito nets.