Date: 17 March 2005
Aviation and the Environment, Geneva
Welcome to Geneva, IATA's home in Europe. Our industry faces many challenges. We are growing. IATA forecasts 6% average growth over the next 4 years. But we are not making money. Airlines have lost over US$35 billion since 2001. And the high price of fuel—again over US$50 per barrel—will continue to challenge our profitability this year. Cost reduction is critical.
IATA is leading the industry in a campaign to improve service and cut costs by Simplifying the Business. Initially this means 100% E-ticketing by the end of 2007 along with
- common use self service kiosks
- paperless cargo
- RFID for baggage management
- and bar coded boarding passes.
Eventually this concept will run throughout our business. We are challenging our airport and air navigation service partners to become more efficient. And we are asking governments to truly give us the freedom to run our businesses like any other global business. In all these areas, the agenda is very clear.
Now let me turn to the topic of the day—the environment. All industries are being challenged to do better. But air transport is under particular attack. We must set the record straight on our industry's excellent environment record with facts and figures. Then we need to understand where we are going with respect to
- Technology advances
- Operational improvements
- Economic measures
Let me handle each of these separately.
First, we can be proud of our record on environmental issues. And we should not be shy in telling people about it. Modern aircraft have a fuel efficiency of 3.5 litres per 100 passenger kilometers. This equals that of a compact car, but with six times the speed. In the last 40 years we have reduced emissions per passenger kilometer by 70%. Black smoke has been virtually eliminated. Aircraft noise at source has dropped by 75%. The noise footprint of the newest aircraft is not wider than that of a high-speed train. And that is only over the length of a runway, not an entire journey.
When people talk about kerosene taxes, we must politely but firmly remind them of one important fact.
- Airlines pay for their own infrastructure
- The bill is US$40 billion per year for airports and air navigation services.
IATA commissioned a study on the level of taxation of various modes of transport. Air transport is a profit center for many governments. In Germany the government makes a net profit of 11 Euros for every 1,000 passenger kilometers traveled by air. But it pays 51 Euros for each 1,000 passenger kilometers traveled on rail.
In France the government makes a net profit of 67 Euros for every 1,000 passenger kilometers traveled by air. But it pays 78 Euros for the same distance by train.
Airlines pay when we park, fly, land or take-off. We should not have to pay for our rail competitors as well? The total result for Europe is US$ 50 billion per year in subsidies for rail. While at the same time airline pay for their own infrastructure and more.
Air transport is the backbone of global tourism—the number one employer in the world. Travelers—our customers—are among the most highly taxed consumers in the world. We are no longer a mode of transport for the rich. Over 1.8 billion people fly each year. Air transport is an essential service.
Travelers expect us to be a safe, secure and cost effective industry that is environmentally responsible. We have met and will continue to meet all these challenges. But governments must set the right parameters for the industry and they must avoid shortsighted populist actions or election posturing.
Every new aircraft that enters our fleet is more environmentally friendly than the one it replaces. Reducing noise and emissions is at the heart of any new aircraft project. Both the 787 and the A380 are targeting fuel efficiency that is below 3.0 litres per 100 passenger kilometers. Fuel efficiency is critical to airline's profitability. We need the money to invest in new technology.
Airlines have dramatically improved their efficiency in response to consumer expectations for lower fares. At US$40 per barrel (Brent) fuel is 18% of our total cost. The fuel bill last year was US$63 billion. Even a 10% improvement in fuel efficiency would deliver 2% to our bottom line. The case for investment in more fuel-efficient aircraft is compelling.
Governments must avoid burdening the industry with taxes that will make these investments impossible. Commercial common sense will achieve much more for the environment.
Here I must say that I am not pleased. The crisis in the price of fuel has made operational inefficiencies totally unacceptable. We have done some good work to optimize aircraft separation and area navigation. In many parts of the world more efficient routings are reducing flight times and fuel consumption.
But much more needs to be done. It is incredible that while Governments have a lot to say about the environment, it is the industry that is pushing. And they are not reacting fast enough. If we could save a minute on every flight each year we would save
- US$3.6 billion on total operating costs including$700 million on fuel
- 4.2 million tons of CO2 emissions.
- Not to mention the other pollutants and greenhouse gasses.
In 2004 IATA's route efficiency, fuel campaign achieved industry savings of more than US$1 billion. If we could eliminate delays in Europe, we would also eliminate:
- 15 million minutes of unnecessary flight
- US$1.5 billion in wasted operating cost
- More than 1 million tons of CO2 emissions waste.
Governments have failed to effectively implement the Single European Sky. Where is the political will and leadership? Europe can achieve one currency. So, why do we need 34 providers of air navigation services?
Let's remind the EC that an effective single sky would improve safety, cost efficiency and environmental performance. There is no excuse for the 15-year story of failure that it has become. Let's also remember that air navigation in Europe is 70% less efficient than in the US. Who pays for this? Airlines and their customers. And the environment suffers.
We must clearly tell governments that we can no longer tolerate their failure to act effectively.
When we come to economic measures, the story becomes more complicated. Air transport was excluded from Kyoto for a very clear reason. Our activity crosses boarders. We fly over the high seas and outside of national territories. We need a global solution for a global industry. Governments gave last year's ICAO Assembly the responsibility to find a solution by 2007.
Our industry actively contributes to this process. We must show results or face results being imposed on us. What are the options? The first is taxes and charges. We all know that these are not effective. Taxes and charges would take away our ability to invest in more environmentally friendly equipment. The impact on the environment is unclear and they unnecessarily curb the demand for travel. This is bad for our industry and for all our customers.
Remember the US$ 50 billion subsidy to European rail that I mentioned earlier. Imposing taxes and charges would only further distort competition. And it is bad for all the other industries that depend on efficient air transport.
Remember the facts:
- Air transport employs 4 million people and generates US$400 billion in output.
- Indirectly it creates a further 24 million jobs with nearly US$ 1.4 trillion in output.
- This is 4.5% of global GNP.
Let's not give the governments a further opportunity to mistreat air transport industry jobs. We must find a solution that eliminates disparities with other forms of transport, such as trains, that are competing with us. And let me be clear: we oppose environment taxes or charges. Some governments support emissions trading as a sharper solution.
We need further research into emissions trading conducted through ICAO and the CAEP process. So, I applaud the leadership of Dr. Kotaite. We support the conclusions of the last ICAO assembly and the search for a global solution by 2007.
I have only scratched the surface of the broad spectrum of environment related issues that we face. I have not even mentioned the many voluntary measures that we are all taking. …….and the environmental best practices we are using and promoting. This meeting however is long overdue.
As industry partners we—airlines, airports, ANSPs and manufacturers —must find solutions, together with the regulators. Finger pointing and passing-the-buck will get us nowhere. A united, realistic and meaningful industry-wide consensus is critical.
Environmental responsibility is a pillar of our industry, along with Safety and Security. Now we need to communicate effectively in order to:
- Counter mis-information
- Talk about our excellent achievements.
- Set the record straight on taxes and charges.
- And to draw government attention to their critical role in implementing efficient solutions.
We must move beyond the defensive. We must find the future solutions that are expected of us and of all industries—cleaner technology and more efficient operations.
I look forward to sharing a productive meeting with all of you.
'Aviation and the Environment', Geneva