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Date: 8 December 2003

AFRAA Annual General Assembly, Tripoli

AIR TRANSPORT'S FUTURE: THE VIEW FROM TRIPOLI

It is a great pleasure to be with you today in Tripoli. Last year I had the opportunity to meet most of you in Harare.

I would like to focus on some of the important challenges that the airline industry faces today.

Our industry is just now beginning to emerge from the worst crisis in its one hundred-year history.

Total airline losses since September 11 total 35 billion dollars.

Today I will try to sketch out briefly how the international situation influences the specific challenges faced by African airlines.

OUR VISION

Since joining IATA, I have stressed the importance of responding with speed, passion and commitment to these difficult times.

IATA is now acting as an agent of change for our industry. I am sure you are already seeing the concrete results of IATA's new, aggressive approach.

Our purpose is simple; to have our industry recognized by governments for what it is: a mass transit system that provides vital global economic benefits to travelers, tourism and industry.

In Africa, our industry is a powerful factor of development and economic integration. For the past year we have asked governments and our industry partners to look at the new reality of air transport.

Safety and security require government regulation. But much of the commercial regulation is outdated. National ownership limits should be liberalized whenever and wherever governments think it is feasible.

Don't get me wrong, we are not trying to push national governments to do things they don't want to do. We ask them to liberalize whatever they feel they can.

IATA has no dogmatic blueprint for the regulatory future of air transport. We would like to move to a "business-like" environment at different speeds in different regions.

Let us all recognize that Africa is not Europe and that Asia is not North America.

We need horses for courses!

The bilateral system of air traffic agreements should give way to regional "wide open skies" wherever governments deem it feasible.

Airlines should be free to form alliances and merge to achieve the needed economies of scale.

However, the normal rules of global business consolidation do not yet apply. Cross-border acquisitions are virtually impossible.

Until the rules are changed, airlines have come up instead with the system of global marketing alliances.

The next US-EU round of open skies negotiations will be the first concrete example of this new approach.

A decade ago, Africa stood as a pioneer with the Yamoussoukro Declaration. It called for the most far-reaching liberalization to be proposed at the level of a continent.

And in spite of what the pessimists could have thought, many positive steps have been taken to implement Yamoussoukro.

The US and the EU are single markets.

It is not unconceivable today to imagine for the near future an African single market? This would be the natural outcome of the Yamoussoukro vision!

LATEST STATISTICS

We have, on the business front, some encouraging news.

Traffic recovery is underway. The October figures show traffic compared to a year before but still below August 2000.

Africa shows positive figures compared to a year ago with traffic up 6.36%.

Capacity in Africa is growing fast, perhaps too fast, with +11.47% over October 2002.

As far as the first ten months of 2003 are concerned, Africa is still in negative territory with –0.44%.

Europe is now in positive figures and Asia/Pacific is continuing to recover.

However, the recovery is not uniform. N. American carriers' international traffic is still down from October 2002 levels.

Overall international passenger traffic levels in 2003 will be 1% lower than 2002, and still below year 2000.

Our most recent IATA forecast indicates a rebound of international passenger traffic in 2004/05. Increases will likely reach about 7% for 2004 and 2005. Domestic traffic will grow more slowly at 4-5%.

A solid recovery is vital to the world economy.

But we will face many challenges on the way to that recovery.

COST CONTROL: AIRLINES

Cost cutting has become an obsession for all airlines.

In North America, in Europe and now in Asia, network carriers are under pressure from low cost carriers.

Here in the Africa, you probably don't feel this kind of pressure yet.

However, it would be unwise to say: "It can't happen here!"
COST CONTROL: PARTNERS

Airlines aren't the only ones who need to control costs.

40 billion dollars are paid annually by airlines to airport and air navigation service providers.

On international traffic, it represents about 10% of airline costs.

Africa is no exception to the rule.

Airport and air traffic control charges in Africa are often excessive and some specific problems must be addressed.

IATA will continue to address these issues in the coming months and will require your active cooperation in order to achieve success.

Airports and air navigation service providers need to achieve efficiency and savings.

IATA has been tackling this issue of user charges for decades.

It is extremely interesting however that for the first time, our message has been heard loud and clear by many governments and partners.

19 airports reduced their charges in 2003 for a total savings of 196 million dollars.

After an average increase of 7.5% for 2003, Eurocontrol will decrease its rates by –2.2% in 2004.

In this case, increased volumes of traffic also helped.

Africa cannot afford to stand out as an exception.

We have achieved significant savings and this is a very encouraging sign for the future.

REGIONAL ISSUES

Since we met in Harare, the IATA African landscape has continued to evolve.

I am glad to say that we have three new African members: Albarka from Nigeria, East African Safari Air from Kenya and Rwanda Air Empress.

Safety, a key concern worldwide and a specific regional challenge will be soon the object of a new IATA initiative.

Last week, in Nairobi, IATA launched the AFI Safety Enhancement Team (ASET). ASET's bold objective is to help this continent achieve international safety levels.

In concrete, this means to reduce by 50% the African accident rate by 2010.

The ASET initiative is supported by may organizations. The list is long, including ICAO; AFCAC, ACI, JAA, FAA, ASECNA, ATNS, IFALPA, Airbus and Boeing. We are all committed to achieve these safety goals.

Last year, in Harare, I pledged IATA's firm commitment to help African airlines live up to the Yamoussoukro Declaration. Living up to Yamoussoukro essentially means to develop the African airlines' human capital.

To this end, IATA initiated, in cooperation with AFRAA, AASA and the support of the African CEOs, the IATA/IATF African Airlines Training Needs Survey.

From the survey findings, two thousand five hundred managers, more than a thousand professionals and over thirteen hundred other staff require urgent training.

It is urgent to do something quickly about it.

There are a number of critical issues.

African airlines are confronted with old leadership structures, a lack of commercial skills and a shortage of financial resources.

As a result, African airlines are not focused on the development of their human capital.

We must therefore all work together: IATA, AFRAA, AASA and the individual airlines.

I am pleased to say that initial discussions have taken place with NEPAD, in Johannesburg, about financing such an ambitious program.

There are already positive signs and encouraging signals as far as funding is concerned. But it is not enough. The matter is urgent.

In order to keep up the momentum created by the survey, IATA and IATF have decided to immediately provide bridge funding to get the program going.

IATA and AFRAA are working to identify a Project Coordinator who can start immediately with the first phase of the project while awaiting funding.

But this program must be driven by the African airlines themselves.

It is your commitment and your involvement that will help bring the program to fruition.

IATA is just here as a facilitator, you have to pick up the ball and run with it.

African aviation is slowly but surely being marginalized.

AFRAA and IATA must cooperate to implement this project in the best interest of developing and supporting African air transport.

CONCLUSION

Despite almost two years of non-stop crisis, we are working hard to secure aviation's future.

We have had the worst financial losses in aviation history.

But we are a resilient industry and our global economy needs air transport.

One hundred years after the Wright Brothers, the world is inconceivable without aviation.

Airlines must continue doing their part in cost-cutting, modernizing labor relations and making their business more flexible and sustainable.

Governments and our commercial partners need to play their part in the recovery.

Along with bilateral "Open Skies", governments should explore regional liberalization—and what I call "wide open" skies.

Airlines need the freedom to merge, acquire and go to the international financial market.

In short, we need to operate like any normal business.

Our commercial partners must move away from monopolistic practices and implement effective cost-cutting measures to increase efficiency and share the benefits.

That is what, in the end, will be the basis for a healthy industry that will produce real benefits for consumers.

Thank you. Shukran, Merci.

IATA Director General & CEO, Giovanni Bisignani, addresses the AFRAA Annual General Assembly in Tripoli.
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