Stakeholders from across the aviation industry are meeting in Orlando, FL this week at the Americas GHI Conference, where topics of critical importance are being discussed. One of the highlights on Tuesday, June 3, was a panel discussion which touched on whether air fares are currently priced appropriately to allow profitability for all players.
Conference Chairman Max Gosney, Ground Handling International, asked the panel if air fares are perhaps priced too low, considering airlines see only 2.8% margins, as noted earlier in the day by John Meisterl, an economist with the International Air Transport Association (IATA).
Countering that point of view was panelist Waleed Youssef, director general of ASA World, who stated airlines are in complete control of fare pricing and their downstream effects.
"I find it hard to be sympathetic... airlines decide which markets to fly to, which aircraft to fly. They decide on a daily basis what the prices should be, and it's really their decisions that determine their profitability," he said. "To say that 'we are suffering,' and therefore everyone else - all suppliers - need to suffer, is a bit disingenuous."
He pointed out, for example, "There's a full network of low-cost carriers that are making a lot of money."
In spite of this, airline suppliers are being pinched, and the result could lead to a negative outcome for all.
"We all know the law of unintended consequences. When everyone suffers, safety suffers. You cannot find the right people, you cannot retain staff, you cannot train, you cannot invest in technologies... that is really not fair to the ecosystem.
"What I would suggest is the only solution is [for airlines] to go back, take a look at your networks, cut out those routes that don't make money, come back more profitable, and then we can change the dynamic. The paradigm shift has to take place between us as ground handlers and airlines, because this is really not sustainable.
"Our industry is used to volatility. It's used to wars. It's used to famines. It's used to many things so we all know that we recover. But if you take a look at who's recovering last, it's the suppliers to the airlines, and that's not fair. Somehow we have to rebalance the relationship, or balance actually, because it never has been balanced. And I think a lot of these problems will go away if we think differently about our industry and its role within the ecosystem."
He continued, "It's absolutely not sustainable. If I was a young person and I had a choice between working on the ramp at 5 a.m. under very bad conditions, or working at a Starbucks, the choice would be obvious. I think everyone has an interest in improving the way we operate, and I think the primary interest should be with the airlines. But unfortunately, we're not seeing that yet, and I hope we don't wait until it's too late for things to change."
