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Date: 29 October 2004

Congrès de Genève, ALFA-ACI, Geneva

Welcome to Geneva.  It is home for both ACI and IATA.  Not only are we neighbours, but our destinies are closely linked.  Although short-term gains may be possible at each other's expense, in the long term our prosperity can only be mutual.

Today I would like address four issues:

- The current state of our industry
- Efforts to "Simplify our Business"
- Areas where we are working closely together
- Areas where we must work to build mutual understanding.

State of the Industry

Efforts to gain efficiency and rebuild passenger confidence are paying off.  For the first 9 months of 2004, passenger traffic was up almost 18% over 2003.  Cargo was not far behind at 14%.  Load factors are nearly 75%.  Cost cutting is achieving results.  Non-fuel unit costs dropped by 2.5% in 2003.  We expect a further reduction of 3.0% for 2004.

That's the good news.

Competition continues to drive fares down, and fuel prices are at record levels.  So the bottom line for 2004 is another year of losses—likely more than of US$ 4 billion.  This is on top of over US$30 billion in losses since 2001.

I cannot over-emphasise the impact of fuel.  Each dollar increase in price of a barrel of oil adds US$1 billion in our costs.  We cannot influence the fuel prices, so we must make the industry more fuel-efficient.   For example IATA's campaign to improve air routes will realize US$ 500 million in savings this year alone.  Airports and governments must also play their part by reviewing their levies on fuel supplies.

Simplifying the Business

IATA's 270 members make up over 95% of scheduled international aviation.  We have built a great global network, which carries 1.6 billion passengers a year.  But it has become complex and costly.  We need to keep the convenience —but Simplify the Business.

Our first priority is 100% e-ticketing.  The target: the end of 2007.  This will save US$9 for each of the 300 million tickets IATA prints -- at least US$3 billion per year.

This is only the beginning.  Many of our initiatives involve airports: common use self-service kiosks for check-in. bar-coded boarding passes, and radio frequency ID for baggage tags.  Each of these will improve passenger service and save costs.  Both airlines and airports will benefit.  I look forward to your support to deliver a simplified business environment.

Working together on the environment

ACI and IATA have improved their relationship on environmental issues.  It is no secret that we have not always agreed. 

But aviation can be proud of its achievements.  We have reduced noise annoyance by 75% and are committed to a further reduction of 50% by 2020.  Average modern aircraft burn 3.5 litres per 100 passenger kilometers—even better than a small compact car.

Recently at ICAO we averted a major threat -  fuel taxes and emission charges for aviation.  Fuel taxes will only make it more difficult to invest in the new technology.  What's worse, they are punitive—reducing traffic, which is bad for all of us.

All these issues will be discussed at the first joint Environmental Summit on Aviation.  The organisers include ACI and IATA.  It will be held here in Geneva in March 2005 and you are all most welcome.

Need for better understanding on infrastructure cost and efficiency issues
 
There are areas where we need better mutual understanding.  I am outspoken on the need to improve infrastructure efficiency.  Many of you then ask "Why all the fuss?  Charges are a small part of airline costs".

The answer is simple.  For airlines, improved efficiency is a must for survival in today's competitive market.  No cost can be ignored.  The results are impressive.

If we put fuel and charges aside, unit costs dropped almost 30% since 1994.  So airport and ATC costs that remain the same are simply not good enough.  You need to keep pace with airline efforts on efficiency.

Many of you operate as monopolies, without strong commercial pressure to gain efficiency.  So it is IATA's job to remind you of the industry's needs….and to challenge you to establish targets for cost reduction.

Recently, the ICAO Assembly endorsed IATA's call to improve the efficiency of airports and air navigation service providers.  I am very pleased to note that ACI are now supporting our views.

Where do we go from here?

While some airports understand our needs, others clearly do not.  An example is Aéroports de Paris. It increased charges by 5.5% in 2003 and 2004, with plans for a further increase of 6.0% in 2005.  While investments are underway, this is a situation that we must protest. 

So IATA reacted strongly to French Minister Robien's plans to convert ADP into a public limited company.  This is a first step to privatisation.  The approach broke the first rule of the game—there was zero consultation with the airlines.  And no discussion about economic regulation to prevent abuse.

Governments must not turn public monopolies into private monopolies—with licenses to print money.  Partnership and transparency define the way forward. 

This approach is starting to work with European ANS Providers.  We are challenging them deliver a 20% efficiency gain.  So far, the response has been positive.  We have seen 4% decreases in 2004 and expect a further 5% in 2005.

Another issue of concern is accommodating low cost carriers.  To start, the term "low cost carrier" is not correct.  The cost-gap is narrowing—we are evolving to a "low cost industry."  In 2000 the top three European network carriers' unit costs were more than twice EasyJet's.  By 2003 the gap was cut by almost one half.

I will be clear. We like competition.  It drives our industry forward.  But it must be fair competition.  In this, there are two developments that we cannot accept.

First, we cannot accept differential charging for the same services.  It goes against all internationally agreed principles.  And the European Commission clearly understood this in the Charleroi case.

Secondly, we cannot accept facilities reserved for low cost carriers.  Infrastructure options must be available for all airlines.  All airlines need airport facilities to be low cost.  And airlines should pay for what they need, want and use—not for what the airport wants to offer.  And airports must charge appropriately with no cross-subsidisation.

Lastly, consult with us before you build.  It will avoid problems like Toronto.  Without meaningful consultations, they built their new terminal—Versailles with boarding bridges.  So my final message is to build facilities that meet airlines' real needs.


To sum up, our destinies are tied.  We must cooperate more effectively on all our common issues.

I appreciate the good work many of you achieve.  And I value the new approach that ACI Chairman Niels Boserup and CEO Bob Aaronson are taking.  Dialogue and understanding must be at the heart of our improved relationship.  Working together to Simplify our Business will be a great test of our renewed partnership.

"Airline-Airport Partnership" - ALFA-ACI Geneva
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