Date: 10 February 2003

IATA Legal Symposium, Singapore

• Facing an audience of distinguished aviation lawyers, I feel that perhaps I should have taken legal advice before accepting this job!
• The fact is, I became Director General and CEO of IATA during the worst crisis in civil aviation.
• In two years, we lost $13 billion internationally and $31 billion including US domestic traffic.
• This extraordinary situation needs extraordinary measures by IATA.
• I should tell you about the direction I am giving to IATA.
• IATA needs to respond quicker to the needs of its Members.
• Speed is now the essence of anything IATA does.
• Speed must be supported by two additional qualities: Passion and commitment.
• Passion and commitment are a must to help our industry recover.
• "Speed, passion and commitment."
• I hope our Members are already seeing this at work.
• Our Members want IATA to take a leadership role.
• Safety, distribution, user charges policy, just are some key areas that need IATA leadership.
• IATA must be an agent of change.
• Air transport needs change but external obstacles make change almost impossible.
• These obstacles usually come from governments.
• They are called inadequate regulation, inconsistent policies and misplaced competition worries.
• IATA's must try to remove these barriers to change.
• Diplomacy if finished. We are shouting in a polite way to get things moving!
  

WAR IN IRAQ

• Before looking at what is going on in air transport today, I would like to make a couple of points about the threat of war.
• War is the last thing our industry needs.
• But we must be ready for it.
• Alternate routes and contingency plans are in place.
• IATA and ICAO are working closely together.
• Loss of revenue, capacity cuts and staff redundancies will be unavoidable.
• In one area, fuel, the impact of Iraq is already being felt.
• The industry's total annual fuel bill is over $40 billion.
• Fuel prices are now up 30% compared to last year.
• Every cent added to a gallon adds $600 million of costs to the airlines.
• The price of a gallon of fuel has reached 95 cents of a dollar in New York.
• It is difficult estimate the total cost of a war to the industry.
• But it will be severe.
  

REGIONAL PERSPECTIVE

• There are many ways to look at our industry
• Here in Asia, things may appear rosier than elsewhere.
• This region is still experiencing powerful growth at a time when others are struggling.
• China leads the way.
• Its government is planning for 10% annual traffic growth until the end of 2020s.
• By 2010, China could be the world's second civil aviation power.
• You will hear more about this in one of the panels today.
• China is not alone.
• Korea, Thailand, Singapore and Australia have fully recovered from the post 9/11 crisis.
• They are all growing at between 5 and 7% each year.
• IATA is following closely the Asian scene.
• This is part of our new approach to the region.
• We have regional offices in Singapore and Beijing.
• Our financial settlement services and our Safety, Operations and Infrastructure people are all present and involved.
• I visited this region four times in the last six months.
• This is a clear indication of how much Asia-Pacific matters to IATA.
• The European airlines showed great strength and speed in facing the present difficulties.
• A number of European airlines are performing well under difficult conditions
• The U.S. situation is severe.
• Carol Hallett, the outgoing CEO of ATA, said in her farewell speech in November:
• "The U.S. airlines have accumulated $100 billion of debt on their balance sheets and their total equity is only $15 billion."
• Many African and Latin American airlines are struggling…some facing bankruptcy.
  

MONOPOLY SERVICE PROVIDERS

• At the same time, many monopoly service providers, airports and ATC authorities, are counting their money.
• Their operating margins are spectacular.
• Between 23% and 28% in 2000-01.
• In our best year, airlines made a net profit of 2.9%!
• For some, the answer to falling volumes due to the recession has been to increase charges to make up the difference.
• We are concerned, because we pay the bill!
• Internationally, airlines pay $15 billion annually for airports and ATC.
• The figure over $40 billion if we add in domestic charges!
• I complained loudly over the past few months about this.
• Airports in Japan and Mexico are two of our biggest problems.
• Some Eurocontrol states, in particular Germany, abuse their monopoly position with annual charge increases over 20%.
• We are also fighting a complex battle with the CAA of the UK over Heathrow charges for the new Terminal 5.
• The airport is asking for 9% annual increases!
• I must say…some airports have been good partners.
• Singapore, Hong-Kong, some of the U.S. airports come to mind.
• The responded to our crisis with improved efficiency and lower charges.
• The real issue is the inadequate economic regulation and accountability of these monopolies.
• A number of airports have been privatised and this is not helping the situation:
• They have just become private monopolies.
• In many cases, these private monopolies act as if they received a licence to print money.
• Our message is getting through to some governments.
• I met the Minister of Transport for Thailand on Friday to discuss Bangkok's new airport and privatization.
• He took IATA advice on many issues and understood our concern that charges are reasonable.
• For those not listening, the time for diplomacy is over.
• It is time to bang the fist over the table.
• This is on my agenda…I discussed it Prof. Prodi, head of the European Commission last week.
• I am happy to see that this is on your agenda.
• This brings me to the central focus of this event – aviation law.
  

THE LEGAL SYMPOSIUM

• The title of this event is "The Airline Industry's Next 100 Years: New Destinations, with New Maps"
• A key navigator to these new destinations will be the well informed aviation lawyer.
• Lawyers must understand:
  • what is happening to this industry
  • where it's going
  • what the issues are
  • And be able to respond quickly
• Commercial, regulatory and legal issues are completely linked as you well know.
  

SECURITY

• The world has changed.
• Air transport security legislation has become ever more complex since Sept. 11.
• Every country seems to have created its own new regulatory regimes.
• In some, government agencies and responsibilities change so often, that it's like going to the theatre – You cannot tell who plays which role!
• This confusion is very costly.
• In 2002, this confusion added $3 billion of security costs to the airlines' bottom line.
• Governments must explain why air transport security is different from other types of security.
• Why don't they cover air transport security costs as part of their national security budget?
• We live in a jungle of security regimes.
• The penalties for non-compliance are severe….so your job is essential.
• International lawyers and the legislative drafter must push States to harmonise their security regimes.
• Let us look at the issue of privacy of passengers.
• What is the balance between passengers' rights and powers of governments?
• Some governments are sending conflicting privacy and security messages.
• API….

1. U.S. need for information
2. European concerns for pivacy

• Airlines will look to their lawyers for answers.
  

COMPETITION LAW

• Competition law remains a central area of focus for airlines, governments and consumer groups.
• The government focus on mergers, code share and other related issues will not disappear.
• Financial pressures within the industry will lead to rationalisation, mergers and new code share arrangements.
• All will be closely examined by regulators.
• Competition authorities are over cautious with air transport.
• Every other industry is more concentrated than ours.
• Many operate as oligopolies.
• Yet, this does not bother the regulators.
• Global harmonization of competition law is a key issue.
• What will be the consequences if the laws are not harmonized?
• GDS, e-ticketing, new products, nothing escapes the review of the competition authorities.
• Your skills are essential to guide us to successful outcomes.
  

ATC AND AIRPORT PRIVATISATION

• You have already heard my comments on this issue.
• We are subjected to increasing and often unjustifiable charges.
• With a few exceptions, this is a relatively new area.
• There is not much experience in the privatisation of infrastructure monopolies.
• Many laws and regulations are untested.
• Many fee regimes have not yet been challenged.
• You can be sure that soon, many will be.
• It could become an issue of life or death for airlines.
• After all, we spend over $40 billion for infrastructure charges.
  

LIBERALISATION

• Little has changed since the drafting of the Chicago Convention.
• The international air services regime is still that of the bilateral, nationality clauses and cabotage prohibitions.
• All of which complicates the life of our industry
• We are starting to see more activity.
• The recent European Court of Justice decision on open skies with the U.S. may signal a new chapter in this story.
• IATA will submit a proposal to the ICAO ATC5 Conference next month.
• It challenges some of the rules governing national ownership and control.
  

ASIAN MARKET DEVELOPMENTS

• It is fitting that this event will be looking at the legal issues in the Asian market.
• How will Asian States put their own mark on competition law, liberalisation matters and so forth? What next from Asia?
• China's accession to the WTO leads to a whole new series of implications.
  

CONSUMER RIGHTS

• In our post-industrial society, the consumers' rights lawyer has become the modern saint.
• Has the consumers' rights movement really been "the saviour"...
• Or are these saints merely creating confusion in air transport matters?
• There have been many new consumer protection laws such as:
• Passenger "bills of rights" and denied boarding compensation
• Are these initiatives are beneficial?
• Will price sensitive passengers accept the extra costs?
• At the same time, economy class legroom seems to be a new chapter in human rights for governments and legislators.
• The market is efficient at choosing winners and losers.
• The consumers of 2003 know how to shop!
  

CONCLUSION

• I look forward to hearing the results of this symposium and the Legal Advisory Council deliberations.
• The Board of Governors and I value the work you do.
• On behalf of IATA, and our Member airlines, I wish you and this event every success.

Singapore, at the IATA Legal Symposium: "Speed, Passion and Commitment"