2015 is a special year for the airline industry. Seventy years ago, the leaders of 57 airlines came together in Havana Cuba to form IATA. The goals of the Association were clear. IATA was to promote safe, efficient, and economical air transport. In doing so, it would create great value-benefitting the peoples of the world and fostering commerce. We would also be a vehicle to support the development of the standards and best practices necessary for the safe and efficient operation of the global air transport network.

The tag line for our 70th anniversary celebration is “Flying better. Together.” This reminds us that IATA was created to be a forum for industry collaboration and partnership. And we are flying better in 2015. Our milestone year is, by historical measures, a very good one for aviation. Demand for connectivity is strong and fuel prices have fallen significantly—although less so for airlines whose home currencies have lost value against the US dollar. Still, after many years of hard work and restructuring, the industry is on a path toward financial sustainability. For 2015, we expect an industry net profit of $29.3 billion on revenues of $727 billion, for a net profit margin of 4%, generating a return on capital of 7.5%.

For the first time, the industry on average will be creating value for its equity investors. Now, for any other industry, earning the cost of capital is the absolute minimum performance expected. So we should not feel the need to apologize for achieving a 4% net profit margin. I suspect future investors will demand more than that after so many years of the destruction of shareholder value!

They will do that as the demand for connectivity continues to grow. This year airlines will carry 3.5 billion passengers and that figure is expected to more than double in 20 years. The task before us is how to work together to accommodate that growth, while upholding customers’ expectations for their air travel experience.

What do customers expect? The fundamentals are safety and security. They demand that we are environmentally sustainable. And they want their travel experience to be pleasant, efficient and with choice among many options. It is a familiar list-and a challenging one. I believe that it is also achievable. Competition will certainly spark innovation, but for a global industry built on global standards, our 70-year anniversary tag line also holds some wisdom. We fly better when we work together.

Safety
There is no better example of this than safety, our top priority. By sharing expertise and cooperating with stakeholders to develop and adopt global standards such as the IATA Operational Safety Audit (IOSA) we have contributed to making aviation the safest form of long-distance transportation the world has ever known. Every day about 100,000 flights operate safely. We are not resting on our laurels, nor should we. From 2015 the two-year IOSA audit cycle is being succeeded by Enhanced IOSA with continuous compliance monitoring. And because not all air carriers qualify for IOSA owing to their business model, or type of aircraft, we developed the IATA Standard Safety Assessment (ISSA) to address this segment of the market. And when we have extraordinary challenges—as in the recent tragedies involving Malaysia Airlines and Germanwings, we come together to find solutions. Public confidence in aviation remains high and we must ensure it stays that way.

Security
Arm-in-arm with safety is security. Passengers expect to be kept secure. By and large the aviation industry has met that expectation since 9.11. However, it has come at the price of passenger convenience and efficiency – this is the area where passengers expect us to do better.

After investing billions in airport security processes, it is disappointing that our customers repeatedly tell us that the security checkpoint is a universal pain point. Lack of standardization across countries also hurts us. One in five travelers say they are not sufficiently informed about security screening procedures, according to our 2015 Global Passenger Survey.

Now, States are responsible for security but in order for it to be most effective, governments must treat us as partners. Yet too often we have been left out of decisions that will affect air travelers and airport operations. In doing so, governments are missing out on a valuable resource. After all, airports and airlines are experts when it comes to understanding passenger processes. And we are using our expertise through programs like Smart Security, our joint initiative between IATA and Airports Council International, to work with governments to make airport security more efficient and hassle free.

From a passenger perspective, voluntary known traveler programs are probably the most important security development in recent years. They have changed the security experience for millions of travelers for the better. And their potential is even greater if governments are able to share information across borders.

Of course there are issues with data protection. And maintaining cyber security is an added challenge when information is shared. In the social media world, sharing is the culture. And feedback on known traveler programs shows that passengers recognize the value that they get for sharing their information. So we need governments to listen to passengers—who after all are their citizens—to find ways to improve the security experience.

One thing is certain: we cannot accommodate a doubling of passengers through airports in the next 20 years using today’s processes and procedures without an unacceptable increase in customer inconvenience and loss of productivity at our airports. We’ve simply got to find more efficient ways to manage this challenge.

Sustainability
Our passengers expect aviation to be safe and secure. They also want aviation to be sustainable—alongside all other industries. Sustainability is the license to grow. As an industry we are committed to achieving carbon neutral growth from 2020, with a 50% reduction in net CO2 emissions by 2050 compared to 2005. And we will do that with improvements in technology, operations, infrastructure, and the implementation of a global market-based measure (MBM).
This too is a team effort. For example, the solid work that the industry has done to prove that sustainable aviation fuels are safe and effective must be followed-up by governments with measures to ensure that it is commercially viable in terms of supply and cost. And we are counting on governments to achieve a historic agreement at the 39th ICAO Assembly next year on a framework for a global and mandatory carbon offsetting scheme. As we saw with recent events at Volkswagen, customers expect companies to live up to their environmental commitments. As an industry we are transparent about our ecological impact and methods to manage it. We must remain united and true to our vision and commitments to support governments to do their part.

Infrastructure
Even if we get safety, security and environment right—and I have no reason to believe that we won’t—there can be no efficient future growth beyond what the infrastructure is capable of handling. Our progress in this area is mixed. While in some parts of the world—places like South Korea, China, and the Gulf region—governments recognize the importance of infrastructure, many other governments do not. And unfortunately, a lot of these are found in Europe. For example:
 – In the UK, the decades-long debate about airport capacity drags on with London Heathrow still edging only very slowly towards getting a third runway
– The continuing delays to the opening of Berlin’s new airport are a huge setback for the third-most-visited city in Europe. With the latest postponement until late 2017, cost estimates have risen from 4.3 billion euros to 5.4 billion euros, compared to the initially planned cost of 2 billion euros
– Furthermore, in more bad news for passengers, figures show that the airport will be operating over-capacity on the day it opens
– The categorical ban on night flights at Frankfurt means that flights that are only a minute or two late in departing for whatever reason have to return to the gate and unload, creating huge inconvenience and disappointment for our passengers and raising the cost of providing air transport to the city
– Meanwhile, air travelers must endure nearly 18 million minutes of annual flight delays owing to the lack of progress on the Single European Sky.

Notwithstanding these and other challenges to meeting future capacity, airlines and infrastructure providers are working together to deliver a more efficient and pleasant customer experience. I’ve already mentioned our cooperation on Smart Security. Another example is the Fast Travel initiative, which responds to customer demands for more control over their journey through six time-saving, self-service options. For 2015, IATA is targeting Fast Travel access for at least 35% of passengers and by 2020, 80% of air travelers should be offered a complete suite of self-service options based on industry standards.
Fast Travel itself is part of our eleven-year old Simplifying the Business (StB) campaign, which also has improved the customer experience through such things as e-tickets, bar-coded boarding passes and the baggage improvement program. Now in its second decade, StB is looking at delivering a more seamless travel experience. Better communication is central to this. Speaking for myself, I want the ability to be connected throughout my journey and I want to get updates from my travel providers that will affect my travel plans. And I’m not alone. According to our Global Passenger Survey, 35% of travelers prefer receiving their e-boarding pass over their mobile phone and over 90% of travelers expect to be notified proactively of changes to flight status.

As an industry, we need the ability to engage with our customers in real time via text message, email or social media, to update them on their flight status, gate changes, wait times at security and immigration, even what traffic is like to and from the airport. We also need to be able to communicate with other travel providers pro-actively so that, for example, car services and hotels are automatically informed when a customer is delayed or rerouted.

We call the concept Travel Communication. To get there we must move from a model of centrally-controlled, closely-guarded access to data, to a social media model of widely available, open and transparent communication of useful information. Social media already provides ways for large retailers to deliver personalized service. Travel Communications will provide similarly cost effective ways to engage and inform our customers. Stakeholders across the industry and air travel value chain need to work together to accomplish this. Adequate Wi-Fi infrastructure and bandwidth are crucial to this effort.

Innovation and Efficiency
Meeting future demand while satisfying customers’ expectations will also require transforming the shopping and purchase experience. As airlines develop bundled and unbundled fares, passengers need to be able to shop and compare the value of these options across airlines—just as they do when shopping for other consumer goods.

The New Distribution Capability (NDC) is intended to give them this ability through the development of a modern, internet-based data standard for communications between airlines and travel agents. As a result, air travelers will benefit from greater transparency and access to all of an airline’s offerings when shopping via a travel agent or online travel site, which is not the situation today. And airlines will be able to move beyond the mostly commoditized displays of fares and schedules in the travel agent channel, to present their products in a more attractive and competitive manner.

We are making strong progress on NDC. Some 24 airlines are undertaking pilots or implementations. A major milestone was achieved at the beginning of September when the first official set of NDC messages were approved by the IATA membership, with a second version to support interlining expected before yearend. We are also seeking to broaden the capabilities of NDC through the NDC Innovation Fund. A joint venture with Travel Capitalist Partners, the NDC Innovation Fund will foster innovation and creativity through investments in small and medium size companies seeking to develop capabilities and solutions using the NDC Standard. Later today, we will announce some important news related to the fund.

NDC has also inspired us to look more deeply into other out-of-date or legacy processes that are ripe for re-invention. An example is the order process that dates back to the era of paper tickets and that was never updated when the industry moved to e-tickets. One Order is an industry-led initiative intended to modernize the multiple and rigid booking, ticketing, delivery and accounting methods with a single, flexible order management process. The basic concept is a single customer order record holding all data elements required for order fulfilment across the travel cycle.

One order will greatly simplify the passenger experience as travelers will no longer need to juggle between different reference numbers and documents. All they will need is their order reference number to be easily recognized and served by all. Airlines and travel agents will also benefit from simplification, greater efficiency and reduced complexity, resulting in significant cost savings. It also has the potential to facilitate greater interoperability between traditional and ticketless carriers-bringing further benefits to air travelers in terms of network opportunities.

Value of Aviation
The final area in which we need to work together to deliver on customer expectations is in persuading governments that the real value of aviation lies in the value it creates, not in the fees and taxes that can be extracted from it.

I know that this sounds obvious. After all, over a third of global trade by value is transported through the skies; while aviation contributes some $2.4 trillion to global GDP and supports some 58 million jobs around the world when we include the benefits of aviation-related tourism. Yet too many governments take a short-sighted view of air travel as an easy target for revenue. An example is the German government’s one billion euro Air Transportation Tax that was ostensibly imposed to address aviation’s emissions. In reality, it goes into the general treasury and does nothing to support aviation’s efforts on the environment.

Concurrently, we need to take a new approach to regulation. Now, the industry does not oppose sensible, well thought-out regulation, developed with participation from all stakeholders. Indeed, regulation advanced in partnership with industry and based on global standards is a cornerstone of our success in making aviation so safe.

But when it comes to consumer protection legislation we are not seeing this partnership approach or reliance on global standards. Instead, we have a proliferation of prescriptive, unharmonized passenger rights regimes around the world that create difficulties for the industry and confusion for customers. Furthermore, the purpose of many of these regulations appears to be to defend passengers from airlines. This results in rules which reduce consumer protection and convenience – through higher fares, less choice, and more confusion—and which raise costs for airlines that must comply with a plethora of differing and often conflicting regulatory regimes.

Let’s be clear: airlines, governments and passengers share a common goal of getting to destinations safely, reliably and on-time. Airlines already have many policies in place to ensure passengers are looked after, for instance the voluntary commitment to repatriate passengers in Europe. IATA members have also unanimously agreed core principles on consumer protection that are aligned with the International Civil Aviation Organization (ICAO). These examples, and others, show that the industry is able to safeguard passenger interests without the need for overly prescriptive and punitive government regulation. We are here to support this message, but to be truly effective it needs to be communicated by everyone in aviation.

Conclusion
I have said that aviation is a team effort. Airlines compete intensely for each passenger, but as an industry, we also work together to develop the global standards and best practices that enable connectivity around the world. Over the next few years, we have the opportunity and ability to transform the passenger journey, providing a more comprehensive and transparent shopping experience and a more pleasant and predictable trip. In doing so, we will also position the industry to manage the forecast doubling of air travel in the next two decades.

Aviation is a force for good in this world. It connects businesses to markets, re-unites families and friends and creates opportunities for greater cultural understanding. We have an enormous responsibility to ensure that we continue to make this possible. I’m confident we can achieve it.

Thank you.

The article Remarks of Tony Tyler at the IATA World Passenger Symposium, Hamburg first appeared in TravelDailyNews International.

2015 is a special year for the airline industry. Seventy years ago, the leaders of 57 airlines came together in Havana, Cuba, to form IATA. The goals of the Association were clear. IATA was to promote safe, efficient, and economical air transport. In doing so, it would create great value-benefitting the peoples of the world and fostering commerce.

The tag line for our 70th anniversary celebration is “Flying better. Together.” That reminds us of the fact that IATA was created to be a forum for industry collaboration and partnership, undertaking on a collective basis those activities that would be hugely expensive and inefficient for airlines to do individually. We would also be a vehicle to support the development of the standards and best practices necessary for the safe and efficient operation of the global air transport network.

Aviation today is very different compared to when IATA was formed in April 1945. This year airlines will carry 3.5 billion passengers-or around 9.6 million each day – which is more than were carried in the entire year of 1945. Over a third of global trade by value is transported through the skies; and aviation contributes some $2.4 trillion to global GDP. And the industry has evolved into a job creation machine, supporting some 58 million jobs around the world when we include the benefits of aviation-related tourism.

The vision to create value is being achieved. The connectivity provided by aviation enables globalized supply chains for agriculture and manufacturing. Thanks to aviation, you rarely are more than a 24-hour journey away from another population center on the globe. Additionally, we are a lifeline when disaster strikes. The earthquake in Nepal highlighted aviation’s vital role in helping to transport aid and rescue workers, as well as medical supplies and equipment, to those in need. Aviation also enriches the world in myriad non-monetary ways, reuniting friends and families, enabling journeys of discovery, and creating opportunities for greater cultural understanding.

Aviation’s ability to make the world a richer, more connected place rests on three pillars: We must be safe, sustainable and profitable. Safety is the number one priority for everyone associated with aviation. By sharing our expertise and working together through global standards such as the IATA Operational Safety Audit, we have made it the safest form of long-distance transportation the world has ever known.

Sustainability is our second pillar. It is our license to grow-and we have achieved remarkable progress over the decades in terms of reducing noise and emissions. The noise footprint of new aircraft is at least 15% smaller than that of the aircraft they replace and they provide fuel efficiencies that are at least 70% greater than jets produced in the 1960s. As an industry we are committed to further reducing aviation’s impact on the environment and have an aggressive target to achieve carbon neutral growth from 2020, with a 50% reduction in net CO2 emissions by 2050 compared to 2005.

Profitability is our third pillar -and historically, it’s been our weakest- I’m sure you’ve heard the joke that the way to make a small fortune in the airline industry is to start with a large one.  The good news is that after many years of hard work and restructuring, the situation is improving. For 2015, we expect an industry net profit of $29.3 billion on revenues of $727 billion, for a net profit margin of 4%. What this means is that the airline industry on average is finally earning its cost of capital.

Let me take a moment to observe that no one needs to apologize for the fact that in 2015 this industry at long last is performing above its usual level of barely-breaking-even. If profitability is not a dirty word when Apple turns in a 23% profit margin than it should not be when airlines achieve an average 4% result.

This result also needs to be put into perspective. Firstly, it is an average for the world, but there is a wide disparity among regions. More than half of the global profits are being made in North America. While the overall fortunes of the industry are improving, for many airlines the struggle to keep revenues ahead of costs is still a formidable challenge, as IATA Senior Economist Julie Perovic will examine in her presentation a bit later this morning.

Furthermore, we must recognize that for any other industry, earning the cost of capital is the absolute minimum performance expected. And we will have to continue this performance for the foreseeable future in order to attract the $5 trillion of capital required to support the doubling of air travel expected over the next two decades.

That’s why this symposium – with its focus on sustained financial health for the industry – is so important. Because if our industry is not profitable, we will not be able to satisfy future demand – and we will certainly not achieve our ambitious environmental targets in the desired timeframe.

We are working alongside our members through the IATA Financial Committee and all of our industry committees on a critical agenda to ensure the future of this important industry by placing it on a firm financial footing. Four strategic themes guide our activities. These are:

• Smarter Regulation
• Rebalancing the Value Chain
• Innovation and
• Efficient Processes

Smarter Regulation
Let’s begin with Smarter Regulation, which covers a wide range of activities including regulations addressing environment, consumer protection, flight training, fuel costs and so forth. Activities in these areas are discussed in depth in the Financial Committee’s White Paper Supporting Airline Industry Achievement of Sustained Financial Health, released after the 2014 Symposium, but I would like to highlight our activities in two areas: Consumer protection regulation and fuel costs.

Now, the industry does not oppose sensible, well thought-out regulation, developed with participation from all stakeholders. Indeed, regulation advanced in partnership with industry and based on global standards is a cornerstone of our success in making aviation so safe.

But when it comes to consumer protection legislation we are not seeing this partnership approach from many States, nor a commitment to embracing global standards in drafting regulations. Instead, we have a proliferation of prescriptive, unharmonized passenger rights regimes around the world that create difficulties for the industry and confusion for customers. Furthermore, the purpose of many of these regulations appears to be to defend passengers from airlines. This results in rules which reduce consumer protection and convenience – through higher fares, less choice, and more confusion-and which raise costs for airlines which must comply with a plethora of differing and often conflicting regulatory regimes.

Working with our members we have launched a campaign to Change the Debate by advocating for a more balanced perspective and demonstrating to policymakers that over-regulation is counter-productive. Let’s be clear: airlines, governments and passengers share a common goal of getting to destinations safely, reliably and on-time. Airlines already have many policies in place to ensure passengers are looked after, for instance the voluntary commitment to repatriate passengers in Europe. IATA members have also unanimously agreed core principles on consumer protection that are aligned with the International Civil Aviation Organization (ICAO). These examples, and others, show that the industry is able to safeguard passenger interests without the need for overly prescriptive and punitive government regulation. We are here to support this message, but to be truly effective it needs to be communicated by everyone in aviation.

Managing the cost of fuel is another priority for airlines. Even with the global collapse in oil prices, fuel represents the largest expense category for most carriers. In 2015, we expect airlines to pay some $191 billion for fuel, or around 28% of total operating expenses. And in many cases, airlines are not seeing the full benefit of lower costs owing to lack of competition among airport fuel suppliers, onerous duties and taxes and/or excessive fuel fees.

Our approach is four-fold:

• To support open access to jet fuel infrastructure and competitive jet fuel markets at airports and address unjustified fees, while supporting ICAO standards that discourage taxation on jet fuel sold for international flights
• To encourage transparency in the jet fuel price structure to insure that items impacting the final jet fuel prices are cost-related.
• To ensure that supply reliability issues are addressed
• To lobby for a political and legislative framework that incentivizes cost-effective large scale production of biofuels and to cooperate with biofuels producers to make it a viable alternative to conventional fuels.

Rebalancing the Value Chain
As we work to persuade regulators to embrace Smarter Regulation, we are also focusing on addressing imbalances in value chain profitability. Despite the improved performance discussed earlier, financial risk and reward are far from being equally distributed across the aviation value chain. In fact, airlines earn the lowest returns while bearing the second highest level of risk. In competitive markets investors would expect to earn a higher return on investment if they face a higher risk or volatility on returns. Apparently, aviation is different.

We are all in this together and agree on many things, but there are some areas where even teammates disagree. Airports and air navigation service providers are our closest operating partners. No aircraft can take-off or land or embark or disembark passengers without their cooperation. But we are also customers for their services. The industry position is simple: Airport and ATC charges must be cost-efficient, which means set at levels that enable airlines to satisfy demand for connectivity, that provide a reasonable return on investment, and that allow for sufficient investment in future developments and service quality.

Furthermore, since infrastructure providers often enjoy monopoly or quasi-monopoly status, governments and regulators have a vital role to play in maintaining vigorous oversight of charges and infrastructure development. Airlines also require a formal role in capital investment decisions, since it is airlines that ultimately pay for those investments. The industry has had success in 2015 in securing some $490 million in reductions in airport and ATC charges and fuel fees and taxes, while some 54% of proposed increases have been avoided, including $42 million in airport charges.

We also have excellent relationships with manufacturers and suppliers. The airframes, engines and systems we operate are technological marvels. They are also extremely expensive. Aircraft ownership costs represent 20 to 25% of total expenses. Airlines have slimmed down and restructured to squeeze unnecessary costs out of their operations. Unfortunately, certain OEM business practices drive up costs by blocking new entry into the market for maintenance, repair and overhaul services. As a result airlines often have little alternative but to sign onto long-term OEM maintenance and parts agreements containing pricing escalations that are often above the inflation rate. IATA is examining commercial, legal and economic options where we may be able to contribute to efforts to rein in runaway aftermarket-related costs.

Innovation
The third strategic theme for sustained airline financial health is the creation of new opportunities through innovation. For example, the New Distribution Capability (NDC) initiative will enable the travel industry to transform the way air products are retailed through the development of a modern, internet-based data standard for communications between airlines and travel agents. As a result, air travelers will benefit from greater transparency and access to all of an airline’s offerings when shopping via a travel agent or online travel site, which is not the situation today. And airlines will be able to move beyond the mostly commoditized displays of fares and schedules in the travel agent channel, to present their products in a more attractive and competitive manner.

A major milestone was achieved at the beginning of September when the first official set of NDC messages were published, with a second version to support interlining expected before yearend. To date, 18 airlines have publicly announced plans to use NDC. I encourage you to help transform airline retailing by participating in an NDC pilot or implementation.

IATA has also launched the NDC Innovation Fund in partnership with Travel Capitalist Ventures. The fund will support innovation in airline distribution by investing in small- and medium-sized companies seeking to develop solutions which support airlines and agents as they take advantage of the enhanced distribution capabilities enabled by the NDC standard. To date over 50 requests for funding have been received.

As the travel industry moves closer to voluntary adoption of NDC, new opportunities are emerging to leverage the capabilities of the standard in related areas. One Order is an industry-led initiative intended to modernize the multiple and rigid booking, ticketing, delivery and accounting methods with a single, flexible order management process. The benefits of the One Order standard will be far-reaching:

• It will greatly simplify the passenger experience as travelers will no longer need to juggle between different reference numbers and documents. All they will need is their order reference number to be easily recognized and served by all.
• Airlines will no longer need to resort to costly reconciliation exercises between PNRs, e-tickets and Electronic Miscellaneous Documents. This will greatly simplify back-office operations for existing and future products. It also will significantly enhance the capability for interlining between full service and ticketless airlines.
• And travel agents will benefit from One Order by being able to follow an identical process to book flights and products from airlines regardless of the airline’s business model or technology capability, greatly improving service and productivity.

The One Order business case is ready and will be presented to the Board of Governors in December 2015 for the final decision on whether to move forward.

Efficient Processes
The final strategic theme we are pursuing is Efficient Processes, which has been a mission of IATA since our formation. The industry has been able to save or avoid billions of dollars in costs through collaborative efforts such as e-ticketing, bar-coded boarding passes, Fast Travel, the baggage improvement program and its successor, InBag. Similar levels of savings are expected through the transition to paperless cargo via the e-freight initiative – so please help make it a reality by adopting the e-Air Waybill.

Expanding the vision of eliminating waste and inefficiency from airline processes is the project to make aircraft technical operations paperless. This will require a concerted effort by all stakeholders including OEMs, regulators, aircraft lessors and financiers to standardize such electronic records and ensure that they are secure and tamper-proof. It is a very exciting project that has the potential to create enormous value in our technical operations.

The article Remarks of Tony Tyler at the World Financial Symposium, Barcelona first appeared in TravelDailyNews International.

I am honored to join you here at Le Bourget on the occasion of this very important discussion.

I will make my comments in English, but I wanted to use the opportunity of being in France on a lovely summer’s day to take my French out for a little test flight!

The magnificent Air and Space Museum a few steps from here is a reminder of technologies from the past, but air shows like Le Bourget also provide us a vision of what is possible in the future. And, with commitment from across the aviation sector, we know that future can be bright and eco-efficient.

Ministers, I don’t need to remind you that you have a tremendous responsibility in the coming six months. The COP21 discussions are a key step on the road towards a sustainable future for citizens around the planet and it is vital that all governments give the December talks the same focus and dedication I know you have been providing.

As we are so often reminded, the private sector has to shoulder responsibility too and I want to take a few minutes to talk to you about the work that the commercial aviation industry is doing on this most important of tasks.

This year is not only vital for the international negotiations on climate change, but it also marks a significant milestone in another United Nations process – the formation of goals on sustainable development. The two issues are, of course, interlinked. We cannot have sustainable economic development without strong social progress and people cannot continue to live in a world with significant climate change risks. Pulling people out of poverty has environmental benefits and moving towards a more efficient lifestyle also brings about economic gains.

The aviation sector has long realized this also. We currently support 58 million jobs and $2.4 trillion in GDP. Over half of all international tourists and a third of world trade travels by air. Today’s modern world, for business, for families and for trade would look very different without the rapid connectivity that air travel brings.

Indeed, in some parts of the world, particularly for remote communities and small island states, aviation is the lifeline to the outside world. And the growth in air travel is benefiting the trade and tourism of developing and emerging economies the most.

So, how do we reconcile the need to serve all corners of the globe, to help boost development and support sustainable tourism, whilst also taking care to reduce CO2 emissions?

I am extremely proud to say that aviation took early action on this and, back in 2009 through the Air Transport Action Group, put together a comprehensive and ambitious plan. We have spent the last six years making that plan a reality. I will not go into great detail about our climate action framework, but it includes three key goals:

1. A short-term fuel efficiency goal, which I am pleased to say we are currently surpassing.

2. A mid-term goal to stabilize net carbon dioxide emissions from aviation at 2020 levels. Coincidentally, 2020 is also the date at which the Paris Agreement we are all hoping for is due to come into force.

3. And finally a long-term goal to halve CO2 emissions from the sector by 2050.

These goals are being pursued through a package of measures encompassing new technology, operational improvements, more efficient infrastructure and – perhaps most challenging – for the 2020 goal a global market-based measure for aviation.

If you allow me, I would like to make a few observations about that climate action agenda for the aviation sector.

First of all, business groups are often criticized for operating under ‘business as usual’ conditions. I would argue that, for aviation at least, business as usual is improving energy efficiency. It has always been that way. Even before we set our industry-wide goals, the sector has been improving our fuel burn, thanks in no small part to the efforts of our manufacturer colleagues displaying their latest models here at Le Bourget. In fact, for those of you who arrived in Paris today by air, your flights produced half the CO2 per kilometer flown than they would have done in 1990. And since we signed the industry goals in 2009, airlines have spent nearly a trillion dollars putting new energy-efficient aircraft into their fleets.

The fourth pillar of our climate action plan is the development of a global market-based measure for air transport. This is unusual – to have an industry enthusiastically pushing for such regulation on an international scale is not common – but it is a pragmatic response to the likely alternative: a patchwork of unilateral, unrelated and complex taxes and charges. A global industry such as ours requires a global solution and, since the world’s governments agreed to develop the MBM at the International Civil Aviation Organisation, ICAO, we have been hard at work with them and civil society putting in place the essential foundation for an international scheme.

We firmly believe that a simple, global, offsetting mechanism that ensures fair treatment of all airlines and simplicity of design will help deliver the greatest environmental integrity in the most cost-effective way. Progress is extremely encouraging and we are putting all of our efforts into achieving a final agreement in September next year. We are confident that, given the current pace of discussions, it will be possible for an agreement to be made at ICAO next year, with the implementation details being clarified in the lead-up to 2020.  This is not a process without challenges of course, but it is also the first time such a global mechanism for an individual sector has ever been attempted. Once again: aviation showing leadership.

Whilst the rest of the world is rightly concentrating on the COP21 talks in December, for us in aviation, the ICAO Assembly in September 2016 is the real focus. With all due respect for the significant progress that has been made in the UNFCCC discussions, the unique circumstances and international nature of air transport require a different approach than the UNFCCC is able to provide. I would be very concerned to see the excellent progress we see being made at ICAO impacted in any way by any wrong turns at COP21. The processes are equally important but need to be kept entirely separate. But I do believe that a good outcome in Paris at the end of the year can only help to provide momentum at ICAO too.

I would like to finish my remarks with a few thoughts on collaboration. In our sector, this is an everyday reality. But on the issue of climate change, that collaboration has grown even stronger. The goals I mentioned at the beginning were committed to not just by airlines, but also by our partner airports, air navigation service providers and manufacturers. This is an industry-wide effort. And it also goes beyond industry itself. Collaboration is taking place with governments, with civil society and with the research and academic community as well. It is an effort that requires all parties to be committed, much like the broader climate challenge. I am happy to report that we have commitment and energy and focus on the aviation front. In many ways, I believe that this is an example that other industries can follow.

We have some tough work ahead of us at ICAO and the negotiators meeting for COP21 in this very location in six months will also have a daunting task. But they can rest assured that, for one sector at least, climate action really has taken flight.

The article Remarks of Tony Tyler at the Aviation and Climate Change Special Event at the Paris Air Show first appeared in TravelDailyNews International.

In his first public comments since three US airlines launched a campaign against Etihad Airways and other Gulf carriers, Mr Hogan called for reasoned debate based upon facts. He also warned against action which would restrict competitive choice for millions of US and international air travellers in markets which the US airlines have chosen not to serve.

Mr Hogan’s speech laid out the key facts behind Etihad Airways’ growth and its competitive strategy.

“As one of the newest national airlines anywhere in the world, we’ve had to create everything from scratch: every bit of product, every bit of our operations, every bit of our infrastructure,” he said.

“Etihad is a David, a David who’s been facing Goliaths since 2003, when we started.  In virtually every market we’ve entered, we’ve had to face existing competitors, with established businesses, established infrastructure, established sales and marketing, established brands, and established customer bases.

“In many cases, those established airlines were gifted amazing infrastructure – airports, terminals, slots, landing rights – over decades.

“To take them on, we’ve had to work harder and we’ve had to work smarter. That’s called competition.

“We’ve been helped by our geographic position. The Gulf is at the centre of today’s trade and travel routes. Today’s aircraft technology and the changing patterns of world trade mean we are positioned strongly for many new and emerging markets.

“We’ve been helped by our blank sheet of paper – no legacy systems, no legacy aircraft, no legacy mindsets.

“And we’ve been pushed hard by the vision and ambition of our shareholder to create a globally competitive airline.”

Mr Hogan said the ‘secret’ behind Etihad Airways’ rapid growth was nothing more than incredible customer service, delivered on modern new aircraft, with world-leading product, at competitive prices, on routes people want to fly.

He also said that Etihad Airways had been more transparent about its business than other airlines.

“Etihad Airways has had a greater focus on reaching and delivering sustainable profitability – we believe – than any other national airline in history,” he said. “We set a timetable to break even within a decade and we beat that target. We’ve delivered a net profit in each of the last three years.

“I say ‘we believe’ because it is surprisingly hard to find financial information about the first one or two decades of national airlines around the world. We get criticized regularly for our so-called lack of transparency but we see few national airlines that were as open in their first stages of development, as we are being in ours.”

As a national airline owned by its government, said Mr Hogan, Etihad Airways is no different than scores of airlines around the world. The airline has always made clear it has received equity investment and shareholder loans, which have been supplemented by US$ 10.5 billion in loans from international financial institutions.

“Our shareholder believes in our business plan. They have increased their commitment as we have developed – they have invested in our success.

“They’ve seen the success we are delivering, both as a business in our own right and as a catalyst for other business, trade and tourism, in Abu Dhabi and the UAE. We are now not just an airline but a successful aviation group, incorporating handling, maintenance and distribution capabilities.

“Our shareholder, like any rational shareholder in the world, has made that commitment to us because it expects a return, and as it sees greater success from our business, it sees the opportunity for even greater returns in the future.

“The key word is return.”

Mr Hogan continued by outlining the economic contribution that Etihad Airways delivers to the United States, directly through its daily flights between Abu Dhabi and six US destinations, which the airline serves exclusively, and also through its extensive supply chain partners throughout the country.

“We regard ourselves as a friend of the United States,” he said. “Certainly, the bonds between the UAE and the USA are incredibly strong, and we believe Etihad Airways has always reflected that in our business operations.

“We are major customers of Boeing, of GE, of Sabre, and of many other American businesses. We work with strategic American partners – for example, with Atlas, on developing and improving global cargo operations. We work with US financial institutions, with US tourist boards, with US airports. Our commitment to the US economy supports more than 200,000 jobs.”

He used the example of the airline’s first Boeing 787 Dreamliner flight into the United States, which started on Sunday from Abu Dhabi to Washington DC. The aircraft is the second of 71 Dreamliners on order from Boeing, part of total orders of almost 120 aircraft worth more than US$ 36 billion with the American manufacturer.

In addition, he said, Etihad Airways delivered 180,000 travellers onto the networks of US airlines in 2014, and 50,000 in the first two months of 2015.

Mr Hogan finished his speech by saying Open Skies is about customer choice.

“This is ultimately all about consumer choice. Customers choose to fly Etihad Airways because we offer a great product, with outstanding service, on the routes they want to fly, at prices that are competitive within those markets.

“They choose us against many different competitors, depending upon which market we are in. But quite honestly, it is very rare that US carriers offer those alternatives. No US carrier flies into Abu Dhabi. There are very few US carriers operating to where we do in the Indian sub-continent, in south-east Asia, or in the wider Middle East.

“We make no apologies for offering new competitive choice for air travellers. We hope to continue to do so around the world.”

The article Open Skies is a model of success, says James Hogan (Etihad Airways) first appeared in TravelDailyNews International.

Good morning. It is a great pleasure to be here at the World Knowledge Forum. And I am particularly happy to be making my first appearance at the Forum in this year for a couple of reasons. First, this year’s theme-Invigorating the Global Economy-is particularly appropriate for a discussion of aviation and I will discuss that in detail a bit later. And secondly, this year is a very special one for the global commercial aviation industry. We are celebrating its first 100 years.

Before I get started into my remarks, I would like to play a short video that demonstrates the essence of what we are celebrating.

That 23-minute journey across Tampa Bay, Florida on 1 January 1914 was a momentous event. It changed our world immeasurably for the better. It all began as a partnership of three visionaries:

• Percival Fansler, an entrepreneur who saw commercial opportunity in the technology of flight
• Thomas Benoist, who built the aircraft, and
• Tony Jannus, who safely piloted the plane to its destination.

They could see the value in transporting people quickly over geographic obstacles. The journey across Tampa Bay would have taken a lot longer on land or water.

That value was seen by Abram Pheil. He became the real hero of the day when he purchased the first ticket. And he paid a handsome price: $400. In today’s money, that is the equivalent of $9,500.

Despite the price, Pheil’s journey would not have been very comfortable. He was seated next to the pilot and exposed to the elements. The aircraft flew no higher than about 15m above the water. So he probably experienced about as much spray as he did wind while traversing Tampa Bay.

Flying has changed a lot since then. It has become a lot safer, much more comfortable, and a lot more accessible. On this last point, I did a bit of searching on the internet yesterday and found return fares from Seoul to New York for about $1,200. So one could literally go the other side of the world and back about eight times for the price that Pheil paid to cross a rather small bay!

People caught the flying bug. The airline industry quickly grew from a single aircraft, one route and a lone passenger. This year we will connect 3.3 billion passengers and 52 million tonnes of cargo over 50,000 routes. Since commercial aviation began 65 billion passengers have traveled by air.

At a personal level, flying delivers great value. It brings people together-families, friends and business colleagues. It helps minds to meet and exchange ideas in forums like this. It gives people the freedom to be almost anywhere in just 24 hours. And it has turned our wonderfully big planet into a wonderfully small world of enormous and wonderful opportunities.

I truly believe that aviation is a force for good in our world. I have been in the industry for nearly four decades and have seen that demonstrated in front of my eyes. Last week we saw news that China is now the world’s largest economy. And then were counter-claims that if you looked at Purchasing Power Parity, the US still ranked first. In the 1970’s when I began working in the airline industry in Hong Kong we all knew of the potential for Chinese growth. But it was not even in the top 10. And it is very clear that air connectivity has played a key role in the rise of modern China.

Working for Cathay Pacific for many years, I had a privileged view of seeing many a poorly connected Chinese industrial town blossom into a modern metropolis with the establishment and growth of air links.

And we could say the same thing about South Korea, which is home to world-class airport infrastructure, two strong global network airlines and a growing number of point-to-point carriers. Air links bind the country together and link it to the world. Oxford Economics did some research for IATA on the impact of aviation on the South Korean economy. Aviation and aviation-related tourism support about half a million jobs in Korea. And that can be linked to about 2.2% of GDP.

But that is only the beginning. The global big picture is amazing!

Today, aviation connectivity is the life blood of the global economy. The industry supports over 58 million jobs and $2.4 trillion in annual economic activity. It creates jobs for Kenyan farmers who sell fresh flowers in world markets. It facilitates global supply chains so that workers in many nations can collaborate to build computers, cars and even airplanes. Aviation delivers many of the real world goods that are traded in the virtual shops of internet commerce. As a catalyst for economic and social development, aviation and the businesses that we support have spread prosperity and lifted countless people from poverty.

And if we focus that back down on South Korea, it would be hard to find a successful Korean company that is in some way not reliant on aviation. Equally, it would be hard to pass a day in a developed economy like Korea without touching on something that is transported by air-be it the food that you eat, the phones that you carry, the medicine that you take or many of the elements in your house that make it a home.

To illustrate the point, let me pause for literally a minute to look at two short stories. One is about aviation and the flower business and the other is about aviation and global supply chains.

My answer to Invigorating the Global Economy is connectivity. And I believe that policy-makers should pay more attention to the aviation industry as a catalyst for economic growth. Too often, we see governments eager to pillage the industry for taxes. A great example is the UK which has the largest single aviation tax in the world. Its Air Passenger Duty extracts some $4.5 billion from travelers every year. But by making connectivity more expensive, the UK is sacrificing its competitiveness and missing out on economic opportunities.

The other issue that we often face is infrastructure constraints.  Building aviation infrastructure is a strategic state investment. But for many countries, it is a struggle to ensure that there is sufficient airport and airspace capacity available to meet demand. It is a perennial problem in Europe. And a recent study shows that by 2035 there will be a 12% shortfall on capacity. The economic cost will be huge.

Normally, when I have opportunities to address a broad audience about the value of aviation I spend quite a bit of time trying to convince them to let the industry blossom and do its economic magic by lowering taxes and upgrading its infrastructure. South Korea, however, is a global leader in creating the environment for the success of aviation. South Korea is the 26th largest country in the world by population, but the 15th largest economy. The prosperity that indicates is at least partially enabled by policy decisions to ensure effective connectivity. That’s how Incheon managed to grow to be the world’s 9th most important airport in terms of passenger numbers and fourth for air cargo. Punching above its weight in aviation gives Korea a tremendous economic and competitive advantage.

My message to Korea is a hearty: Keep up the good work. And if you are visiting Korea, please use this opportunity to see and experience the key role that aviation plays in this economy and carry that message home to your government—particularly if you are from Europe!

And what I would like to do with the rest of my time with you today is to look at some of the challenges that we are meeting as we enter into the second century of aviation:

• Safety
• Convenience
• Sustainability

Safety
Flying today is extremely safe. It wasn’t always that way. In the early days it was a risky business. But right from the beginning there was an understanding among governments and industry that safety was not a competitive issue. And there has always been great cooperation among all the industry’s stakeholders in efforts to make flying ever safer.

In 2013 there were some 36.4 million flights and 16 fatal accidents. If you were flying on a jet aircraft, your chances of being involved in a major accident were one in 2.4 million. And among the three billion passengers that flew (the equivalent of about 40% of the world’s population) there were 210 fatalities. There is no safer way to get from A to B than by plane.

But accidents do happen. And this year we had some sad reminders of that reality. The two tragedies involving Malaysia Airlines are still fresh in all of our minds. And our hearts go out to the victims and their families. Every day some 100,000 flights take-off and arrive safely at their intended destination. What happened with MH 370 and then MH 17 is absolutely unprecedented in aviation history. And we will honor the memories of those involved by re-doubling our efforts on safety.

IATA is working with our partners towards some recommendations on how to track aircraft better. There is some promising technology that will become available in the near future. And we are also looking at some interim actions which will be considered by our Board of Governors in December.

MH 17 brought to light the need for better information for operations over conflict zones. Everyone in the world was angered that a civilian aircraft—an instrument of peace—could be shot down in airspace that was declared safe. The responsibility for improving the information needed to avoid a repeat of this tragedy rests firmly with governments. In fact, through the International Civil Aviation Organization (ICAO–IATA’s United Nation’s counterpart) governments are working on ways to fill the gap in an otherwise robust system.

In parallel, we are calling on governments to look even more broadly and develop an international protocol to manage the design, manufacture and deployment of weapons with anti-aircraft capability. We have it for other categories of weapons—chemical weapons, land mines, nuclear warheads etc. Anti-aircraft weapons should be no different.

These efforts are important. But I should emphasize that they are in response to very rare and I hope never-to-be-repeated events. But every day the industry is working to improve safety. For example, each of IATA’s 240 members is required to pass and maintain the 900+ crucial standards of the IATA Operational Safety Audit (IOSA). They are seen to be so important that even airlines that are not members of IATA are also on the IOSA registry which includes over 400 airlines.

As we look to the future, auditing will continue to be an important safety tool. But the real advancements in safety will be driven by data. An enormous amount of data is generated by every flight. Governments, airports and air navigation service providers also have data. IATA has data from our safety audits and reporting programs. Engine and airframe manufacturers have important safety data. There is probably no other industry on the planet that generates so much data.

IATA has invested to build the world’s largest database of safety information. We call it GADM for Global Aviation Data Management. As we (and others) develop the analytical capability to perform deep queries of the data we are coming up with the insights that will lead the next generation of safety improvements.
Passenger Experience

I hope that I have conveyed to you the deep sense of responsibility and commitment that the aviation industry has towards safety. For passengers, safety is something that you can take for granted. And that is the way that it should be.

You should also take a hassle-free and convenient experience for granted. I travel a lot, as I am sure many of you do. The experience of travel has improved tremendously over the years. The quality of airline products provides a huge range of choice from absolute luxury to a very basic seat. But I have certainly experienced moments of frustration with the processes that have been put in place around the actual flying experience.

We have a vision for the future flying which we are building today. Some elements already exist. In 2008 we made e-tickets the global standard. Just over six years later it is already difficult to remember the days when you had to worry about taking your ticket with you to travel. That was an important element in realizing our future vision.  And I would like to share that with you in a short video about a business trip to India that illustrates what flying could be.

Wouldn’t it be great if every trip could be hassle free? As you can see, we are very optimistic about mobile technology helping us to meet the passenger expectation to be constantly connected, well informed and in control of their journey. Some of what you saw is already in use. Other elements will take longer. Some of the challenges that we still face are:

• Finding a framework on which to share the crucial data among all those involved in the passenger’s travel.
• A smarter approach to security that is informed by what we know about the traveler.

The good news is that the future of travel is full of innovation.

Sustainability
Of course there can be nothing guaranteed about the future of aviation if the industry is not sustainable. And I would briefly like to touch on two dimensions of sustainability before I close – environmental and financial.

Environment
Any business is expected to be sustainable. But it is particularly challenging for airlines that burn fuel to propel their aircraft. Nonetheless, the industry (not just airlines but the whole value chain) has committed to some very ambitious goals. From 2020 we will cap our emissions and our growth will be carbon-neutral. And by 2050 the aspiration is to cut our net emissions back to half the levels that we emitted in 2005.

We also have a plan.

A key driver will be technology. Modern aircraft entering into airline fleets today bring with them fuel efficiency gains of 20-30% over their predecessors. Billions of dollars are being spent on this each year.

Another example of the role of technology is the development of sustainable biofuels. Over 1,500 commercial flights have been fueled by sustainable biofuels. The challenge is that biofuels are in short supply and expensive. It’s a chicken-and-egg situation. The high cost is being driven by the small quantities being demanded. And demand is low because of the high cost. We are calling on governments to incentivize the use of sustainable biofuels as they have done for other alternative power supplies such as solar. The good news is that distribution will be relatively easy. If we can get biofuels to just 190 airports, we will cover about 80% of potential demand.

The second pillar of our strategy is infrastructure. We’ve all probably been on a flight that has to circle an airport before it is cleared to land or has to reduce speed before entering a busy air corridor. In both cases, the aircraft is burning more fuel than it should have to because the infrastructure cannot handle the demand. Estimates are that there is about 12% efficiency that could be gained if air traffic control systems worked at their optimum level. And every minute that is saved, reduces fuel burn and emissions.

The third pillar is more efficient operations. A very simple example of this is a program that we are working on worldwide so that airlines can land in a continuous descent. Traditionally, aircraft have been guided to land in a series of descending steps. There is nothing wrong with the procedure, but it burns more fuel than the alternative.

And lastly, we are asking governments for a global mandatory carbon offset scheme. Airlines recognize that we will have to pay for at least some of our emissions until the other pillars of our strategy fully mature. This important work is being done through ICAO. We hope to have the framework agreed in 2016 and to be able to implement from 2020 – just in time for our carbon neutral growth commitment.

Profitability
The other vector of sustainability is profitability. Over the last century airlines have just broken even. Despite all of the value that they bring to the world – as we have discussed – they have basically destroyed a vast amount of capital. It is a very competitive and very tough business.

That is not to say that people have not made money on airlines. Stocks are volatile – just look at what is happening now with the threat of Ebola. And some people make money on that. There are also some solid performers operating in aviation-friendly environments that generate significant profits year on year. There is a great turn-around story in the US where the industry is now leading the world in profits after a very difficult decade that began with the 9.11 tragedy.

But, on average, airlines make less than $6 per passenger. On about $750 billion in revenue, we expect a net profit of just $18 billion. For those of you who are good at arithmetic, you will have calculated that it is just a 2.4% profit margin.

The good news is that this is an improvement on the recent past. And continuing strong demand for passenger travel—despite economic uncertainties—shows that the world’s thirst for connectivity that only aviation can provide is still growing. I am an optimist about the future and I hope that you are too.
The Future

As we embark upon commercial aviation’s second century, airlines carry an important responsibility. Aviation is crucially important to our humanity and to invigorating the economy. And so the industry is continuously trying to make flying safer, increasingly efficient, and sustainable.

Among those who witnessed the Benoist Air Boat carry a single passenger across Tampa Bay in 1914, who could have imagined what aviation would look like today?

At least one person could see that something incredible would evolve. “What was impossible yesterday is an accomplishment today, while tomorrow heralds the unbelievable.” Prophetic words from Percival Fansler, the visionary entrepreneur who launched our industry.

A century later, aviation is powering economies and lifting the human spirit. We have broken the bounds of speed and distance with ubiquitous global mobility. This very day, 100,000 flights will take nine million people to somewhere that they want to go…to do something that they want to do. Aviation’s greatest contribution is the freedom it gives people to follow their dreams and change their lives.

And I will leave you with one last video clip from a film that will be released next year. It’s called Aviation: The Invisible Highway. It captures well the incredible contribution that aviation makes to modern life. In 100 years aviation turned our enormous planet into a small world. In doing so, we have created a very big future for us all.

The article Tony Tyler, IATA: Safety, Convenience, the three challenges in the second century of aviation first appeared in TravelDailyNews International.

First, in a few weeks Italy will take on the important role of Presidency of the European Union. This is a critical opportunity to influence the direction of the European Union as it continues to emerge from the financial crisis.

Secondly, the global commercial air transport industry is celebrating its 100th anniversary. This year airlines will safely transport 3.3 billion passengers and 52 million tonnes of cargo. This activity supports jobs for 58 million people worldwide. And airlines deliver over a third of the goods traded internationally by value – worth some $6.8 trillion. Having built global connectivity over the last century, aviation is a critical component of the modern global economy.

And lastly, is the fact that European aviation is financially the weakest amongst the world’s major regions. Witnessing first-hand the plight of Alitalia – among the worst cases – this should not come as a surprise for you here in Italy. We expect European airlines to realize a post-tax net profit of $2.8 billion this year, for an average net profit margin of just 1.3%. Put another way, they will make about $3.23 per passenger. That’s less than a third of the $11.09 per passenger that their counterparts in North America will earn.

To re-cap, over the last century aviation has become a cornerstone of the global economy, the European industry is struggling, and Italy has an opportunity to deliver positive changes.

Let me be a bit provocative. As the International Center for Competitiveness Studies in the Aviation Industry is hosting this event, I would like to reflect on the concept of competitiveness. You may expect me to say that a strong aviation sector is an important component of Europe’s competitiveness. But I take a different and stronger view. A healthy aviation sector is a pre-requisite for competitiveness and growth-in other words, an economic necessity.

A modern economy cannot survive and develop without the global connectivity that only aviation can deliver. Italy is no exception. And neither is Europe.

Europe has an impressive air transport sector. The 200-plus airlines in the EU28 support 9.2 million European jobs and about $660 billion of Europe’s GDP. They connect a continent that accounts for 10% of the world’s population, is the largest single economy on the planet, and which is home to impressive world heritage sites, cultural assets and academic institutions.

So, how is it that Europe’s airlines are not more successful? I believe that it is because of the competitive disadvantages that Europe’s governments place in their way. The industry here is over-taxed, onerously regulated and suffers from a chronically mismanaged ATM system, insufficient airport capacity and overall costs for infrastructure that are too high. Let me elaborate.
Taxation

On taxation, the poster child for onerous taxation is the UK’s Air Passenger Duty. Alone it collects nearly $4.5 billion. But it is not the only one. Germany and France also have counter-productive passenger taxes. And we were dismayed that Italy may add to the burden with its proposed regional noise tax -IRESA- which could not be more wrong. It does not comply with ICAO policies, international agreements or even EU law.

This year the European tax bill for airlines and their passengers will reach nearly $40 billion. For perspective, that is more than double what is paid in the Asia-Pacific region where many governments value aviation more for the long-term economic value that the industry makes possible, than for short-term tax receipts. Some European governments are coming to this realization. The Irish government has removed a departure tax because of the economic damage that it was doing. During its Presidency, I hope that Italy will help focus European governments on the economic value that aviation can deliver.
Regulation

European regulation of the aviation industry generates several competitive disadvantages. First is that Europe is developing a tendency to over-regulate -often even when global standards already exist. And this often comes with unintended consequences. Passenger Rights is a good example. EU regulation 261 seeks to “protect” passenger rights. But its draconian measures compete and conflict with some 60 other passenger rights regimes. From the passenger’s perspective, all this “protection” is just a confusing mess.

Airlines are committed to providing safe, comfortable and quality services to their customers. IATA’s members last year even adopted a resolution outlining a set of fair and consistent global best practices on passenger rights. And we are encouraging governments to do the same by working through ICAO.

ICAO is the forum where governments agree global standards to support global air transport. That is why it is has always been the focal point of our approach to managing aviation’s carbon footprint. The industry is asking governments to agree on a mandatory global carbon offset scheme through ICAO which we will need to achieve our commitment to carbon neutral growth from 2020. And earlier this year we had a reminder of how successful the ICAO process can be when governments agreed on revisions to the Tokyo Convention which will modernize the rules for dealing with unruly passengers.

What does all this mean for the Italian Presidency? I hope that Italy will be a strong voice for aligning EU Regulation 261 to global principles on passenger rights and that it will encourage European governments to ratify the changes to the Tokyo Convention. Moreover, we are counting Italy to be a strong supporter of the ICAO process to develop a global framework for market based-measures to manage carbon emissions.

There is also an urgent need to address the failures of “light touch” economic regulation of infrastructure providers. For example, earlier this month the German air navigation service provider announced that it was putting up its charges by $300 million a year from 2015. Italy provides another illustration. There is a mismatch between actual demand and CAPEX expenditure at Italy’s main airport which is generating large-scale inefficiency. This is arising from the 10-year “contratto di programma” framework which does not include the opportunity to adjust CAPEX or charges to real market conditions. The result was a massive increase in charges last year. Fiumicino, with a 70% increase, is the most egregious example. So far, the regulatory structure has not been able to provide an acceptable result.

These examples show why we need a counter-balance to the market power of many infrastructure providers. Effective independent regulators must apply well-established international norms to bring about fair charging regimes—regimes that will facilitate enhanced connectivity that can drive economic growth.

Over the next months, there is an opportunity to take meaningful action as the Airports Package is refined. And I am pleased to see that Italy is starting a consultation process to look at the economic regulation of airports. I hope that this a good sign that Italy will be a strong voice in driving cost-efficiencies at the European level during its Presidency.
Infrastructure

And lastly, I call on Italy to be a strong supporter of much-needed infrastructure improvements. The problems are many. By Eurocontrol’s own estimation, there will be a 12% shortfall in Europe’s airport capacity by 2035. That is a major concern for Europe’s economic growth. But the severity of Europe’s infrastructure constraints is evident in that there is an even higher priority issue – delivering the Single European Sky (SES).

The costs of inadequate air traffic management to Europe are enormous – at least EUR 3 billion for airlines and EUR 6 billion for consumers in lost time and productivity each year. On top of that, there is the environmental cost of 7.8 million tonnes of unnecessary carbon emissions.

Europe needs the SES. But member States -Italy included- are not delivering. They are pandering to local interests and sacrificing social and economic gains to the frustration of the European public. I cannot put this too strongly. The failure to implement SES is the biggest infrastructure issue that the aviation industry faces. The next six months will be critical in determining the adoption of the “SES2+ package”-something that Europe urgently needs.

We must seize this opportunity to evolve European air navigation service monopolies into customer-focused and cost-effective members of the air transport value chain. The most important contribution that Italy could make to Europe’s air transport sector over the next six months is to push forward SES2+.

Over the last 100 years, commercial aviation has demonstrated its ability to be a catalyst for economic activity and a driver of prosperity. Europe’s air transport sector-including Italy-is in desperate need of leadership to alleviate the tax burden, improve regulation based on global standards and develop infrastructure to enable success. We are counting on Minister Lupi to be a strong force for much-needed progress and set the stage for aviation to make an even greater contribution to European development in its next century.

Thank you.

The article Tony Tyler, ΙΑΤΑ: From air navigation service monopolies to customer-focused members of the air transport value chain first appeared in TravelDailyNews International.

Billions of people increasingly want to take a plane.

Aviation is true connectivity, on a global scale. It drives economic growth, creates jobs and brings the citizens of the world together. We rely on aviation for the international links that make Europe a global hub of social and economic connectivity, and allow European companies to compete on the world stage.

Aviation supports 5.1 million jobs in Europe, directly and indirectly. It provides one billion euros of European GDP every day, generating trade and tourism.

With more than 800 million passengers using 450 airports, and with 150 scheduled airlines, the European Union is a key player in global aviation: a third of the world market.

Europe is also home to some of the world’s largest airlines and airports. It is a leader in aircraft and engine manufacturing, and in air traffic management research and technology.

Since 1992, the number of flights within the EU has more than doubled. Flights operated by more than two airlines have quadrupled. It’s no surprise that passengers are happy: over that time, their numbers have gone up by 300%.

That’s the good news.

But we should also remember that none of this can be taken for granted. European aviation is facing serious challenges, internally and externally.

If we study the economics, its overall profitability is fairly low as a transport sector. Several factors are in play:

• the high sensitivity of demand to the economic cycle;
• the impact of fuel costs;
• and the increasingly fierce competition in world aviation – fuelled by a shift of growth towards Asia, particularly to new Middle East airport hubs.

Due to their below-average growth rates, EU carriers operating internationally are likely to lose market share to non-EU airlines in most regions.

In 2003, EU carriers had a market share of 29% of all inter-continental capacity in the world. By 2025, this share is expected to fall to 20%. If we do nothing, this trend means that the profitability of EU airlines will be eroded – and threaten their ability to generate growth for the European economy.

I would say Europe today has three groups of airlines. Low-cost airlines/limited service/, on the whole, are doing relatively well. Starting from a market share of just 1%, they have boomed to take almost half the market, despite the weak economic outlook.

Then there is a group of/ full service /carriers trying to adapt to new market conditions and going through some difficult but necessary restructuring.

And there is another group of airlines fighting for their very survival. They are mostly providing regional connectivity!!!

Between 2000 and 2011, there were more than 100 insolvencies of EU airlines providing scheduled services. Since the economic crisis started, at least ten European governments have bailed out flag carriers to rescue them from mounting debts and bankruptcy.

The market clearly needs some consolidation. And while there are high exit barriers in the airline industry holding back the necessary restructuring process, that doesn’t mean that we should “help” EU carriers by subsidising them.

I appreciate that national governments have concerns to maintain jobs and connectivity.

But, as with any commercial operation, an airline is responsible for its own business. That’s why many airlines are now trying to cut costs and improve services – just to stay competitive.

It is not, however, all doom and gloom.

Let’s remember that aviation remains a growth industry – also in Europe.

Granted, the European market is not like that in the Southeast Asia. But there are still significant prospects for aviation growth in Europe: Eurocontrol predicts 14.4 million flights by 2035, 50% more than in 2012.

And the growth of air transport in emerging markets has a large development potential for other industries in Europe, such as Aeronautics in general and of course Tourism with a big T.

The current downturn in traffic is driven by economics, not by market saturation. So when economic growth returns – as it is slowly beginning to – demand should start growing again.

Ladies and gentlemen

Europe is already doing a lot to maintain a strong and competitive aviation industry. But this is not only about increasing flight traffic and cutting costs.

It’s also about Safety, Security, Aviation products like: air traffic management, exporting European regulatory excellence and: the entire value chain that aviation represents.

Firstly, European airlines must have the chance to get access to new markets and business opportunities. They need to be at the centre of the global network that connects the EU with the rest of the world.

For that, we need EU airports to remain at the heart of world traffic flows, and avoid becoming restricted destinations with only limited onward connections. Let’s also remember the extremely positive impact that airports have on other sectors of the economy.

Secondly, the Single Sky project needs to succeed and be implemented – as soon as possible. It will allow us to shorten flights, reduce delays and emissions, and save about 3 billion euros each year, out of a total annual cost of 8 billion euros.

Progress has been less than hoped, it’s true.

Finally, Europe could make more of the economic potential offered by international aviation. We need to be where the growth is, as well as export the “value chain” I mentioned earlier.

This is not only about securing traffic rights or access to new markets. It also means our high standards of safety, successful approach to regional cooperation, airport management and logistic, open and fair competition.

What do I mean by that?

In aviation regulation generally, the European Union is recognised as a world leader. The legislation that set up the Single Sky, the creation of EASA to take responsibility for the safety of our skies, have put Europe at the centre of global aviation regulation. We also have a freedom of establishment across nations (unprecedented in the world), coupled with common competition and aid rules this makes the circle complete.

These are examples of what Europe does best: examples that others can follow.

We recently developed a more ambitious external policy to unlock the full contribution that aviation can make to the European economy.

Our aim is to conclude EU air transport agreements with major partners such as Southeast Asia, China, Japan and India. Collectively, the EU can achieve more and also offer more to partner countries than Member States can individually.

There is huge potential here for the consumer: the total benefits of all these agreements are estimated at €12 billion per year. With Morocco and the Western Balkans, for example, we have seen 40% price falls on flights since 2005.

Ladies and gentlemen

It has been a difficult few years.

But there are significant prospects of growth for Europe’s aviation industry and market. If we can make the most of them, our wider economy will gain as the sector raises its performance, efficiency and takes new market opportunities.

Modernisation and competitiveness are vital, as is the need to optimise what Europe already has in terms of its airspace and airports.

It is how Europe can remain a vibrant and natural crossroads for global aviation.

Thank you for your attention.

The article Siim Kallas, European Commission: first appeared in TravelDailyNews International.

This year we are celebrating the centennial of the first scheduled commercial airline flight, which took place between St. Petersburg and Tampa, Florida on 1 January 1914. From those small beginnings, commercial aviation evolved into the global air transport system that will safely connect some 3.3 billion travelers and 52 million tonnes of air cargo this year. This activity drives economic growth, creates jobs and facilitates business opportunities. By value over a third of goods traded internationally are delivered by air and some 57 million people owe their livelihoods to aviation. In the Latin American/Caribbean region -which I will refer to simply as Latin America- aviation supports more than 4.6 million jobs and $107 billion in GDP according to the most recent figures.

It is particularly gratifying that commercial aviation is expected to be profitable in our centennial year, which is certainly not something we can take for granted -at the industry level we have made a profit in only six years since the end of 2000. But things are looking up for 2014. Our current forecast is for industry earnings of $18.7 billion- an improvement on the previous two years. And it is the same trend for airlines in this region. We expect them to contribute about $1 billion to the industry’s profitability which is more than double the $400 million that they earned last year.

While this is a positive trend, profit margins -the real measure of business success- are still razor thin. An $18.7 billion profit for an industry that generates $745 billion in revenues equals an average net profit margin of just 2.5%. Put another way, the average fare is about $200 (including ancillaries but excluding taxes) and airlines will make about $5.65 for every departing passenger. So, running an airline remains a very tough business.
Charting the Region’s Future

With that as background, let’s turn to the theme of this year’s event, which is “Charting the Region’s Future.”

I am passionate about aviation and about the opportunities that aviation creates. Latin America is ripe with possibilities. It has a dynamic airline industry that has embraced cross-border consolidation to boost efficiency and competitiveness and deliver more value to customers. And it has a geography that is particularly reliant on air transport owing to the great distances between population centers, soaring mountain ranges and nearly impenetrable jungles.

But too many States in Latin America are at risk of missing out on the economic development that aviation connectivity fosters, because instead of seeing aviation as a catalyst, they treat it as a luxury item. While some -such as Chile and Panama- recognize the value of aviation, others are erecting physical and financial barriers to success, ignoring the lessons of places like South Korea, the Gulf or Singapore, which have placed aviation connectivity at the core of their development plans.

While there is no one-size fits all formula for aviation success there are firmly established principles that have stood the test of time, beginning with the Chicago Convention. As we are celebrating 100 years of commercial aviation, the Chicago Convention is marking 70 years since it was signed in 1944. It laid the groundwork for the post-World War II development of aviation with internationally recognized standards and practices developed through ICAO. Also important was the creation of an atmosphere that encouraged working together and that identified partnerships as fundamental to moving aviation forward.

The benefits of global standards and working together are apparent in all aspects of aviation but for the purposes of my discussion today, I would like to focus on some areas where I think Latin America needs to chart a new course in order fully to reap the benefits of aviation’s connectivity.

These areas are:

• Taxes and Charges
• Infrastructure
• Regulation

Taxes and Charges
Before starting into this discussion, however, I would like to address the extraordinary situation in Venezuela, where almost $3.8 billion in airline funds are being blocked by the government. I need hardly remind anyone here that this is not the government’s money—it is money the airlines earned by providing air transportation to the citizens of Venezuela. The situation has caused airlines to cut service. Within the past year, 11 airlines operating in Venezuela have reduced operations between 15% and 78% -and a few have ceased flying altogether.

Airlines are committed to serving the Venezuelan market but they cannot sustain operations if they can’t get paid for the services they provide. While the Caracas government has made promises recently to allow the airlines to repatriate their funds, it is crucial the government now take the next step and release the airlines’ money-and that it do so at fair exchange rates.

The situation in Venezuela is unique. But even were airlines to receive all their funds tomorrow, Latin America would remain an extremely challenging place to do business owing to the high level of aviation taxes and fees in many countries. For example, a number of States in the region apply VAT and other taxes on jet fuel for international flights, which is in conflict with the Chicago Convention and ICAO agreements.

Overall, fuel expense across the region is around 14% higher than the world average. Brazil is even more extreme at 17% above the global average. Above average fuel expense is just one of many challenges. The World Economic Forum’s Travel and Tourism Competitiveness Report shows that Brazil ranks 118 out of 140 economies in terms of the competitiveness of its ticket taxes and airport charges. Colombia is 125. Venezuela and Peru are nearly at the bottom at 134 and 135, respectively. High fees and charges impact a country’s attractiveness as a destination and its competitiveness as an exporter.
Infrastructure

Charting a successful future for Latin America also depends on having sufficient airport infrastructure to support demand, which certainly is not the case today. Lack of capacity is widespread. In fact, only two economies, Panama and Barbados, rank among the top 35 countries for the quality of their air transport infrastructure according to the World Economic Forum. Among some of the larger economies, Brazil is ranked 131, Colombia is 105 and Mexico is 64.

While governments are gradually recognizing the need to improve infrastructure, there are many examples of where efforts are too slow or miss the mark.

• The new international terminal at Bogota is modern and efficient. Unfortunately, it was built too small and already is at capacity.
• Demand at Santiago exceeds the terminal capacity. Expansion is not expected to be finished until late 2019 at the earliest.
• Quito inaugurated a new airport in early 2013, but it is actually smaller than the one that it replaced.
• The Mexican government has decided to build a much-needed new airport for Mexico City, but construction will take five years at a minimum.

Several governments are looking to airport privatization and concessions to speed up infrastructure improvements. Creative ways to finance airport development are always welcome, provided they align with ICAO’s policies on charges. According to ICAO policies, States are ultimately responsible for the economic oversight of commercialized or privatized airports. They must ensure that key charging principles of non-discrimination, cost-relatedness, transparency and consultation with users are followed. And that applies to both public and private airports.

It is no secret that Latin America has seen more than its share of privatizations that failed to deliver better and more efficient infrastructure because they did not follow global standards and practices.

As the region looks at a second round of privatizations or concessions, let me make clear what I see as the most important lessons:

• Governments must define a robust regulatory framework with price caps, an index of future fee increases linked to efficiency gains, firm deadlines for infrastructure and service improvements and a single till model
• Governments should not participate in privatizations as investors or owners to avoid any conflicts of interest
• Bid criteria should include an experience factor for the new operator
• Airlines must have a role in capital investment decisions
• Governments also need to enable competition among service providers, particularly for fuel concessions.

It is also clear that whatever actions governments take, the capacity shortage in the region will not be solved overnight. The IATA Worldwide Slot Guidelines (WSG) is the standard at 165 slot-constrained airports. And because slot-constrained airports around the world apply the WSG, any local proposals that deviate from them have a major impact on airline operations and schedule planning. An airline operating from Sao Paulo to London needs a consistent set of rules at both ends of the route. A global system is critical. That is why we are concerned to see some governments in the region tinkering with slot regulations in the misguided hope of extracting additional capacity from congested airport infrastructure.

On the plus side, we have had a success in Mexico, where the government has committed to bringing Mexico City fully in line with the WSG in 2015. But that is balanced by proposals in Brazil to create a local punctuality requirement for slot allocation following the World Cup. We will be working with the government to demonstrate how the WSG can help ensure punctuality without local criteria which could cause global inefficiencies.

Adequate infrastructure is not just a challenge in Latin America; it has been with us almost as long as we have had an industry. This is why we have global standards and practices that have stood the test of time to manage new development and existing capacity. Latin American regulators and governments should follow these well-tested standards and policies to chart a path to a richer future.
Regulation

The global standard approach also is a good model for other areas of commercial regulation-passenger rights among them.

Already some 50 countries have implemented passenger rights regimes. And what has resulted is a mess of complex, conflicting and unmanageable rules. And in the worst case, they are so prescriptive that airlines cannot take extra steps to help their passengers.

Governments should certainly set some simple guarantees. But the Latin American approach to passenger rights has been among the most prescriptive, with proposed compensation among the highest in the world. For example:

• A proposal in Mexico would increase compensation for cancellations to 300% of the ticket price, with compensation of US$1,500 for extended delays on long-haul flights.
• In Peru the law dictates that passengers can change reservations for any reason without penalties, which limits airlines’ ability to tailor their products and raises airline costs that have to be recouped.
• And here in Chile, legislation is pending that would provide compensations in the case of cancellation or delay, regardless of whether the airline caused the delay. We have made our concerns known to the government and I am pleased to note that the response we have received has been supportive.

These are just a few examples of the kinds of regulations proliferating across the region. ICAO Member States at the 38th Assembly recognized that the glut of passenger rights regimes is not creating value. There is a need for high-level, non-prescriptive principles that are consistent with international agreements and that strike a balance between protecting passengers and maintaining industry competitiveness. IATA supports those conclusions and agrees with the need for greater convergence and compatibility. In fact, the industry core principles on consumer protection – unanimously adopted by IATA’s membership in June – will serve as an input into this important discussion.

In summary, my message to governments is to:

• Recognize that airlines want to get their passengers to their destinations with their bags, on time, all the time
• Understand that we operate in a highly competitive industry in which customers can and do vote with their wallets
• Seek industry input and conduct a rigorous cost-benefit analysis before considering new commercial regulations.
• Where global standards exist, use them

Global standards and working together are crucial in addressing another significant challenge facing air travel: unruly and disruptive passengers.

IATA began collecting data about such events in 2007 and has recorded more than 15,000 incidents. One of the more colorful examples happened in Brazil this year. Bad weather delayed a GOL flight on the tarmac. Seven passengers got tired of waiting and decided to leave the aircraft by opening the over-wing emergency exit.

For international travel, such incidents are governed by a treaty known as the Tokyo Convention. This is a 1960’s document that was designed for a different age and urgently needs updating. This week governments are gathering for a diplomatic conference at ICAO in Montreal to discuss revisions to the Tokyo Convention. The revisions would enhance the ability of law enforcement and other authorities to prosecute the small minority of passengers who are violent, disruptive, abusive, or acting in a manner which might endanger safety.

IATA supports the text of the updated protocol prepared by ICAO, in which a number of States including Argentina, Brazil, Chile and Mexico were involved. I would urge all governments in the region to support the revisions. And it is also an opportunity for governments to review their own domestic laws and regulations covering these events to ensure that they are aligned with global standards and best practices.
Environment

We also rely on ICAO for global solutions when it comes to managing aviation’s carbon footprint. Governments and industry are aligned in our goal of achieving carbon neutral growth from 2020. The ICAO Assembly committed governments to developing a global market-based measure by the 2016 Assembly that will be critical to achieving that goal.

Europe has continued to pursue a regional scheme, although the majority of ICAO member states clearly rejected this approach at the last Assembly. Recently we had seen some movement in Europe to postpone including international aviation in its Emissions Trading Scheme in order to allow ICAO enough breathing space to work on achieving a global agreement at the next assembly. But as of today, the situation on the future of the ETS in the European Parliament remains unclear. We remain convinced that ICAO is the forum to reach a viable solution and hope that States throughout the world will join together towards that goal.

Latin America has been a strong supporter of the ICAO process on market-based measures. And airlines such as LAN have been very active in taking steps to reduce aviation’s carbon emissions by introducing sustainable biofuels. LAN is also the first airline in the region to sign up for implementation of Stage 2 of the IATA Environmental Assessment Program, which has been developed to deliver a world class environmental management system for the airline sector.
Safety

Probably the most important example of global standards in aviation is in the area of safety. Flying is the safest form of transport in large part owing to global standards. Of course tragedies do happen. Our thoughts are with all of those involved in the loss of MH370. We hope to find out what happened and the cause so that we can continue to make flying even safer. That is how—over the last 100 years—we evolved flying from the world of daredevils to an everyday experience we often take for granted.

Examples of global standards that contribute to safety include ICAO’s Universal Safety Audit Program and the IATA Operational Safety Audit (IOSA).

As you know, IOSA is a requirement for membership in IATA, as well as in ALTA. In the 11 years since it was created, IOSA has become the global benchmark for airline operational safety management. Of the 391 airlines on the registry, 151 are not members of IATA. And of the 45 Latin American airlines on the IOSA registry, not one has had a fatal accident in more than five years.

At the same time, we are not becoming complacent. We are rolling out Enhanced-IOSA, which will incorporate continuous safety monitoring. The response from airlines in the region has been very supportive with agreement to participate in Enhanced-IOSA from every airline we have approached. To support these efforts, IATA will host a two-day seminar in Bogota on Enhanced-IOSA at the end of May. We also have developed free online courses.
Conclusion

Aviation has come a very long way since the very first commercial flight 100 years ago to deliver the finest transportation system the world has ever known. For most of that time, international aviation has been guided by the principles of global standards and working together. It is long past time for all Latin American governments to adopt policies that are well-suited to aviation so that aviation can deliver the documented benefits of connectivity to the region.

At the beginning of my remarks I noted that we are celebrating 100 years of commercial aviation. Aviation changes lives for the better, contributes to global economic development and builds bridges between cultures. To help focus people on the contribution aviation makes to their lives, we have asked them to share their memories and thoughts on flight on the flying100years.com website. People—and airlines—are also tweeting on #flying100. I encourage all of you to participate in these activities. Join us in celebrating 100 years of connecting people, cultures and businesses and contribute to the conversation on how to make aviation even better in the next 100 years—in Latin America and the rest of the world.

Thank you.

The article Remarks of Tony Tyler (IATA) at the Wings of Change Conference, Santiago first appeared in TravelDailyNews International.

On 1 January we will celebrate the centenary of the first scheduled commercial flight. It was a short hop between St. Petersburg and Tampa, Florida. But it launched an industry that changed our world in a very big way. From how we trade and do business to how we spend our leisure time or interact with our families – whether at work or at play, aviation has had a profound and positive impact.

In Africa the air transport industry plays a crucial role. A few kilometers of runway can connect even the most remote community to the global mass transit system. In a continent of vast distances air transport is often the only viable option to provide the connectivity that drives economic and social development. Already African aviation supports some 6.7 million jobs and $68 billion in economic activity. And I believe that this continent holds the greatest potential for aviation to grow as a force for good – changing peoples’ lives for the better.

But it is a tough business. We made a profit in only half of the years since 1947. Fortunately this year will be profitable – but only just. We expect the global industry to make $11.7 billion this year, increasing to $16.4 billion in 2014. These may seem like big numbers. But we will carry over 3.3 billion passengers next year. And a very rough calculation show that the average airline profit per passenger carried will be somewhere around $5. With high oil prices and struggling economies in many parts of the world, this is an achievement that speaks to the efficiencies that the industry has gained over a decade of business transformation.

African airlines have been a part of that transformation. But you have many unique challenges. And the performance of airlines based in this continent has hovered around breakeven for several years. So the industry is surviving, but is that enough to attract and support the investments needed for African aviation to seize emerging opportunities and play a greater role in stimulating the continent’s development?

And I am concerned that actions by some governments are making success much more difficult to achieve. Why? Because many governments have forgotten – or take for granted – the pivotal role that air connectivity plays in growth and development and the global standards that support it.

In that context, this meeting’s theme, Challenging Times – Africa’s Strategic Alignment, is particularly appropriate. Better alignment to global standards is needed. This is not a message just for Africa. It is a message I have delivered around the world.

Global standards are the foundation upon which a safe, secure, efficient and integrated global air transport system has been built. A passenger can buy a single ticket, pay for it in a single currency and expect the ticket to be recognized by any of the team of airlines that will get him to his destination. The system is so reliable that we don’t often think about the enormous coordination that makes it possible. That is why we need to remind governments of the value of global standards – to support aviation and their economic vibrancy.

African aviation has a new voice on global standards. Last week Dr. Olumuyiwa Benard Aliu was elected as President of the Council of the International Civil Aviation Organization. Benard is the first African and only the fifth person to hold this important post. We look forward to working with him on global issues and on those with a special focus on Africa as well.
Safety

The most obvious role for global standards in Africa is in safety. And improving safety is the biggest issue on the African agenda.

Over the last century, global standards transformed air travel from a high risk adventure into a routine part of daily life. And when it comes to operational safety management, the IATA Operational Safety Audit (IOSA) is the gold standard. IOSA will not eliminate all accidents, as shown by the recent tragedy in Russia. The first airline was audited a decade ago. In 2009 it became a condition of IATA membership. And the numbers on safety performance clearly show that airlines on the registry perform better.

Africa is no exception. None of the 25 IATA members here (17 in Sub-Saharan Africa and 8 in North Africa) had an accident in 2012. That aligns with that of all airlines on the registry. But the overall safety record for Africa remains a problem that we must fix. African aviation – including non-IOSA carriers – accounts for about 3% of global airline traffic. And last year it accounted for nearly half of the fatalities on Western-built jets.

I believe that much of the solution can be found in global standards. African Governments recognized this in the Abuja declaration which aims to achieve world class safety performance in Africa by 2015.

The Declaration focuses on concrete initiatives:

• The establishment of independent and sufficiently funded civil aviation authorities
• Implementation of effective and transparent safety oversight systems by all African states
• Completion of IOSA by all African carriers
• Implementation of accident prevention measures focused on runway safety and loss of control
• Implementation of flight data analysis
• And implementation of safety management systems by all service providers.

Each of these is about implementing global standards. In close cooperation with AFRAA, IATA is actively contributing its expertise and resources to all the Abuja Declaration’s commitments – with special attention to IOSA.

For example, through the International Airlines Training Fund we are sponsoring in-house training for 10 airlines to complete an IOSA gap analysis.

IOSA is a standard that is constantly evolving. By September 2015 we will be implementing Enhanced IOSA which includes a component of constant quality management. In this region, South African Express, Kenya Airways and Egyptair have completed a trial Enhanced IOSA audit. And I encourage all airlines on the IOSA registry in this region to join an Enhanced IOSA workshop in February that we are hosting in collaboration with South African Airways.

We are also developing an audit program for airlines that are outside of the IOSA criteria – either because of aircraft types operated or the nature and scale of their operations. The Basic Safety Audit Program (BSAP) will be rolled-out by the end of 2014. This is not an IOSA alternative. I stress that it is only for airlines that cannot be audited under IOSA. The goal is to give such airlines an opportunity to also benefit from a core of global safety standards.

Governments must also “up their game” with more effective safety oversight. As of the end of 2012 only 11 African states had achieved 60% implementation of ICAO’s safety-related standards and recommended practices (SARPS) according to the Universal Safety Oversight Audit Program (USOAP). There has been some significant progress. But, to be very frank, overall I have not yet seen sufficient urgency in dealing with this fundamental issue. Meeting the Abuja Declaration’s 2015 commitment will require a major acceleration in the pace of implementation.

This also includes capacity building among regulators. IATA is a committed partner in all these efforts. We work with many governments across the region, for example, to provide training. If we are going to deliver world-class safety in Africa by 2015, we must work together as a team of stakeholders.

I cannot leave the subject of safety without commenting on the European list of banned carriers. The banned list is not transparent and it is not an effective way to improve safety. Its implementation was driven by political concerns over Africa’s safety performance. Despite a clear difference between IOSA and non-IOSA carriers, the entire African industry has been painted with the same brush. The perception driving that view will only change with an improvement in overall performance. And global standards are the key.

By working together we can deliver world-class safety performance in Africa – the Abuja Declaration’s 2015 target. Europe will not be able to ignore that.
Regulation

Global standards, of course, go beyond safety. Consistent application of global standards in the regulatory world can also add tremendous value. Unfortunately, that is not what is happening. Today – possibly without realizing it – governments are weakening the integrity of the air transport system by introducing different and sometimes conflicting passenger rights regulations.

At least 60 governments have introduced such rules and several more are considering imposing them. These go beyond the simple guarantees that governments should provide and what is imposed on other industries. The result is a patchwork quilt of different rules which are costly for airlines and confusing for everybody – including passengers.

ICAO Member States at the 38th Assembly recognized the issue. They agreed to work towards high-level, non-prescriptive principles that are consistent with international agreements and that strike a balance between protecting passengers and maintaining industry competitiveness. IATA is fully supporting this important work with our inputs being guided by our AGM resolution in which airlines agreed on core principles for consumer protection.

It is also important that where global standards exist, governments follow them. The Montreal Convention 1999 (MC99) governs the rules relating to airline liability during international carriage by air. It delivers many benefits to passengers, shippers and airlines. One of the most important benefits of MC99 is that it provides the legal framework for the use of electronic documents in air cargo such as electronic air waybills (e-AWB’s) with all the cost, efficiency and data-sharing benefits this brings.

This is very important for African states that rely on air cargo to transport high value, time sensitive cargo to markets around the world. But in order to use e-AWBs airlines need to ensure that both the origin and destination countries have ratified MC99. This is not the case in many parts of the continent. In fact, of the 88 countries that have not ratified MC99, the majority are in Africa. The African Civil Aviation Commission has urged states to ratify MC99 as did the recent 38th ICAO Assembly. We need airlines in Africa to engage their governments to ensure they understand that MC99 is a win-win for all stakeholders.

In sum, my message to governments is to:

• Recognize that airlines want to get their passengers to their destinations with their bags, on time, all the time
• Understand that we operate in a highly-competitive industry in which customers can and do vote with their wallets
• Seek industry input and conduct a rigorous cost-benefit analysis before considering new commercial regulations
• Where global standards exist, use them

Taxation
Global standards and recommended practices for fees and taxes also exist, particularly with regards to fuel for international flights and infrastructure charges. Unfortunately, many governments in Africa ignore them – treating aviation as a luxury rather than as a vital enabler of development.

Ethiopia, for example, imposes a tax on fuel uplift for international flights to support its stabilization fund. This contravenes the Chicago Convention and ICAO principles.

One of the key principles to ensure reasonable taxation is the need for consultation. Mozambique and Botswana recently implemented significant increases in air traffic control charges without consultation. We believe that these will eventually have detrimental effects for both. By engaging in a dialogue, we can often come to win-win solutions. Tanzania provides a good example. The Tanzania Civil Aviation Authority proposed steep increases in both air navigation and safety oversight charges. By engaging in a dialogue we agreed on a much more reasonable increase. And by working together going forward, I am confident that we can strike the right balance so that such charges deliver value for money.

A more robust dialogue on fuel charges and taxes is urgently needed. The latest example of a misguided charge is right here in Kenya. The new rail levy tax applied on jet fuel for international flights adds an estimated US $13 million to airlines’ fuel bills every year. The VAT applied on the KPC pipeline from Mombasa to Nairobi is another example that directly affects airline costs.

We need to engage governments in a more robust dialogue so that they understand the consequences of such actions on the industry and ultimately on their economies. Buying aviation fuel in Africa is about 21% more expensive than the global average. So, for African airlines fuel accounts for some 44% of their costs – much higher than the global average which is about a third. That’s a heavy burden for airlines – limiting their competitiveness and their ability to provide efficient connectivity to people and businesses that depend on air transport.

Airport security charges are another example. Many are used to fund national security responsibilities such as intelligence gathering and immigration. This breaches ICAO policy. While IATA has been successful opposing many such proposals, Senegal, Chad, Côte d’Ivoire and Equatorial Guinea are among nations that are collecting security charges which more than recover what it costs to keep aviation secure. In Chad, for example, passengers pay $80 round-trip. Private companies are lobbying African governments to develop national security services and make the airlines pay for it. And it is critical that we make sure that the airline voice is heard in a consultation process.

I won’t discuss in detail all the various other taxes and charges that African governments impose on aviation – solidarity taxes, VAT, and infrastructure development fees among them. But I would like to make the point that this plague of fees and taxes has real world consequences for the region’s competitiveness.

Across Africa I have heard many comments about the stiff competition that the Gulf carriers are bringing. I would urge governments in Africa to look at one of the factors that makes the Gulf carriers so competitive. In places like Dubai, Abu Dhabi and Qatar, governments recognize the economic benefits of connectivity made possible by a dynamic and thriving industry. They build infrastructure to accommodate demand and maintain it at world class standards. And they ensure that the industry is not shackled by heavy taxes and regulations. I would encourage governments in Africa trying to stimulate their economies to follow this example. By aligning with global standards, Africa can create the conditions for success for its airlines.
Liberalization

Access is another key condition for the industry’s success. Aviation has the potential to open up new markets, bring in new ideas and technologies, create jobs and lift people out of poverty. As just mentioned, the access to long-haul markets into Africa by the Gulf carriers has raised many competitive challenges. It’s tough, but I see African airlines rising to the challenge through various means, including partnerships and alliances.

Leaving long-haul access issues aside, I do see a fundamental challenge to build connectivity within the continent. In my experience, it is much easier to reach Africa from other continents than it is to travel within. Some 25 Africa states have broadly liberal agreements with the US. But how open are Africa’s markets to African airlines? There are 13 flights a week to Nairobi from London. But there isn’t a non-stop from Nairobi to Dakar. You can get to Istanbul daily from Mombasa in less than seven hours. But to go from here to Cairo takes at least 9 hours and one stop.

Africa’s economic success will depend as much upon internal integration as on doing business with long-haul markets. Aviation connectivity needs to be able to support both.

The African Union (AU) is celebrating its 50th Anniversary in this year which is dedicated to Pan-Africanism. The AU’s vision is for an integrated, prosperous and peaceful Africa. The Yamoussoukro Decision provides a visionary platform for aviation to play a key role in fulfilling that important mission with connectivity among the people and markets of Africa. But that is only possible if African governments recognize the collective benefit that it will bring and implement it.
The Environment

Before I conclude, I would like to give one powerful example of how governments can make decisions in the collective best interest of all. The ICAO Assembly reached an historic agreement on climate change to introduce a global market-based measure (MBM), which is a key tool that will set the industry on the path to achieving its target of Carbon Neutral Growth from 2020 (CNG2020).

Governments agreed that the next Assembly in 2016 will look at a detailed proposal. And the industry – having called on governments to adopt a mandatory global carbon offset scheme to manage growth post-2020 – will be fully supporting ICAO in this effort. Reaching this agreement was not easy – it required states to put aside self-interest to achieve a harmonized global approach.

Everybody – Europeans included – returned home with a sense of great accomplishment. So it is no exaggeration to say that the European Commission’s proposal basically to ignore the work at ICAO and include the portion of international flights within European airspace in its emissions trading scheme from January next year was greeted with shock and disbelief.

Governments will need to sort this out. And we call on them – particularly European governments – to keep the global and long-term view that underpinned the success at ICAO. The big prize is a global agreement to manage aviation’s emissions post-2020. As an industry we should remind governments of this at every occasion. In parallel we must keep unified and focused on driving the other pillars of our strategy – technology, operations and infrastructure improvements. Ensuring environmental sustainability is our license to grow. And we must stay the course and keep focused globally and for the long-term.
Conclusion

Africa is the second most populous continent and home to an estimated one-seventh of the world’s population. Yet it represents just 3% of global airline traffic. I view this is as a tremendous opportunity. Other air markets have matured or are in the process of maturing; for Africa, the future of aviation is still being created.

My message today is that by keeping and defending global standards at the core of our amazing industry we will build a future that is successful. There is no reason why the next 100 years of commercial aviation cannot become Africa’s century of flight. And we look forward to working with the industry and governments across the continent to make that a reality.

Thank you.

The article Global Standards for Africa – Strengthening Safety and Boosting Connectivity first appeared in TravelDailyNews International.

The article Siim Kallas: The Single European Sky: time to make the vision a reality first appeared in TravelDailyNews International.