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17 Oct, 2005

Some Aviation Statistics May Be “Fabricated”

Some of the statistics and figures being touted by the aviation industry may not “correspond with reality” and may even be fabricated, according to the chief statistician of the International Civil Aviation Organization (ICAO).

Writing in the latest issue of ICAO Journal, the quarterly publication of the Montreal-based organisation that regulates the global aviation industry, Attilio Costaguta said that in comparing the statistics presented by different organisations, “it is wise to bear in mind that ‘all that glitters is not gold’.”

Clearly stating that it reflects a personal view, and not that of the organisation, the article by Mr Costaguta, Acting Deputy Director, ICAO Air Transport Bureau and Chief of its Statistics Section, was headlined “Lies, Damned Lies and Statistics” and urged “more savvy users and the specialised press to challenge dubious claims or poorly written statements.”

Mr Costaguta cited a number of areas in which statistics should come under closer scrutiny, depending on the terms used and their definition, reporting of direct operating costs (DOCs), air traffic passenger data, financial results after calculating currency exchange rates, different statistics reported by air carriers and airports, changing regulatory environments and even the figures reported by different aviation organizations and economic blocs.

The article noted that “the problem with statistics is that they can indeed lead to different conclusions, depending on the use one makes of them. Moreover, by careful and selective use of statistics, one can often give different impressions of their meaning.

“When comparing figures from different sources, misunderstandings may arise because items that appear to have the same name do not necessarily have the same definition, and differing names may in fact share the same definition. In some cases, the meaning of data can vary according to one’s perspective.”

It added, “Many a discussion has bogged down simply because of statements made without the facts to back them up. More serious, perhaps, are meetings where individuals fabricate evidence but remain unchallenged because no one else has any data at hand.

“Clearly, it is important to have supporting data, for without such information one is merely another person with an opinion. It is just as important to be familiar with the data presented, and be able to recognize data that may not correspond with reality.”

Amongst the many examples cited, Mr Costaguta referred to direct operating costs (DOCs), one of the most common terms used in aviation.

He wrote, “What is understood by this term depends, however, on whether one comes from the United States or not. The most common understanding in the US is that DOC covers those items associated with the aircraft operating expenses reported to the U.S. Department of Transportation (DOT) on Form 41. The items covered by this form, however, differ from those identified as DOCs by the International Air Transport Association (IATA), whose definition is generally accepted by the rest of the world.”

He said that another little known aspect of the air carrier data collected by the U.S. DoT involves its definition of domestic services.

“In Form 41, traffic and financial data are shown for domestic and international services, the latter being divided into three entities: Atlantic, Pacific and Latin America. A review of the groups involved would reveal that no room has been left to report data for the services to/from Canada. In fact, under Form 41, transborder services to Canada (and sometimes those to Mexico) are classified as ‘domestic’.”

In the area of exchange rates, Mr Costaguta noted that although airlines earn and spend in multiple currencies which are then translated into the relevant national currency, the US dollar is used as the common currency for analysis of data among airlines, the industry and international organizations.

“This may create a problem not only when examining data for a single year, but also when comparing data over time, as the change in costs and revenues will differ according to the proportion of the currency mix in each of them. This is also the case when analysing the impact of cost increases of particular items, as they will change according to the currency used.

“The price of certain consumables or services such as fuel, ground handling and, in some cases, landing charges and other related airport services as well as air navigation charges, are established in U.S. dollars regardless of the currencies used to pay for them.

“Lately, much has been said about the increase in the price of fuel, but the impact it has on the individual air carrier may differ significantly.

“In 2004, for example, the value of the U.S. dollar showed decreases against several important currencies. While air carriers whose national currency is the U.S. dollar (or a currency linked to the U.S. dollar) would have seen the reported increase in the price of fuel, air carriers in strong currency areas would have seen somewhat lower changes in price.”

Mr Costaguta also noted the potential for distorted perceptions when looking at traffic trends.

In Europe, many of the low cost carriers (LCC) are among the top ranking airlines in terms of passenger-kilometres performed. But because they are not members of groups like the Association of European Airlines (AEA) and IATA. “the traffic growth tracked by AEA and by IATA may no longer be considered as representative for the region.”

Amongst his conclusions, Mr Costaguta referred to the “selective use of data or unsubstantiated figures to promote a particular point of view. In the air transport field, it is quite easy to make use of creative statistics since industry data are difficult to verify.”

Well worth reading by airline financial analysts, the full article is posted on the Internet, ICAO Journal Vol 5 for Sept-Oct 2005 [http://www.icao.org/cgi/goto_m.pl?icao/en/jr/2005/index.html]

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