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Date: 14 November 2005

AFRAA, Sun City

It is good to be here in Sun City at my third AFRAA annual meeting. Working closely with AFRAA to serve your needs has never been more important. Last month I was here to open our regional office in Johannesburg with a team of 50 staff that cover all areas of expertise. At that time I met with President Mbeki of South Africa and President Kibaki of Kenya. I was impressed that both of these leaders were so attentive and interested in our industry. Aviation is a critical issue for Africa and we are investing strategic resources.

Under Vinod Chidambaram's leadership, it oversees 4 sub-regional offices. IATA is a global association of 265 airlines representing 94% of scheduled international traffic.

We have never been closer to our 39 African members. Today I want to highlight two main areas of concern for Africa:

  • Safety and
  • Efficiency

First, let me review in broad terms:

  • the situation of the global industry and
  • the performance of Africa

Between 2001 and 2004 airlines lost US$36 billion. Despite impressive efficiency gains and cost reduction our US$97 billion fuel bill robbed the benefits of the upturn in the demand cycle. And it is killing our profitability. We expect over US$7.4 billion in industry losses this year. Passenger traffic for the first 9 months of the year was strong—8.3%. But the 3.0% growth recorded for freight indicates that the global economy is slowing. And we expect this slow growth to be reflected in passenger numbers by the end of the year.

How do we evaluate the situation in Africa?

First, African traffic is expanding above the world average:

  • 11.2% for passenger and
  • 7.5% for cargo

Air transport in Africa:

  • Generates 470,000 jobs and
  • Contributes US$11.3 billion to African GDP

The African Development Bank recognised that transport systems here are poorly integrated and inefficient. This has a large and negative effect on Africa's trade competitiveness and ability to participate in the world economy. NEPAD has set aside over US$30 billion for investment in Africa's transport infrastructure. But less than 3%--US$800 million was allocated for air transport projects. Africa is a huge continent. 15 African countries have no access to sea shipping. Land transport, even with significant investment, will not be able to provide adequate connectivity. Governments must pay more attention to our industry. We connect products to markets and people to business. Air transport is as important to investors as education, telecommunications or stable legal and political systems. In short we facilitate economic growth. We are concluding a study of air transport connectivity to benchmark the impact on key markets. The study rates the quality of air services at one location to connect to markets around the world. The results show that Africa has a long way to go. If London ranks as 100, then Johannesburg is at 13.3 and Nairobi at 4.7. If Nairobi could achieve Johannesburg's connectivity level, this alone could support a 10% GDP expansion in the medium term. We must shout loudly and clearly to remind governments of the need for:

  • Adequate investment in infrastructure
  • Rules of the game that promote growth

At the same time, airlines must move quickly in areas that are within our control—safety and efficiency. Safety is the most urgent. 2004 was the safest year ever for air transport and our hull loss rate was 0.78 per million sectors. And we are committed to a 25% improvement in the accident rate between 2004 and 2006. Africa has made some progress on safety. Compared to a 10 year average of 10.84 hull losses per million sectors, in 2004 African carriers achieved a rate of 5.2. This is progress, but it is still 6.6 times worse than the global average. And let's remember that 25% of the accidents in 2004 occurred in Africa—a region that accounts for only 4.5% global traffic. We must do better in Africa.

In 2003 IATA's AGM committed to the IATA Operational Safety Audit—IOSA. IOSA is the first global standard for airline operational safety management. It complements ICAO's audit programme. The common goal is to raise the bar on airline safety. IOSA standards were set in cooperation with ICAO and key regulatory authorities. IATA manages the audit programme free of charge as part of our commitment to safety. 7 independent accredited audit organisations conduct the audits in a competitive commercial environment. In fact, ICAO has encouraged states to make use of IOSA in their safety oversight programmes.

You will be aware of the current European discussion of airline blacklists. We do not support blacklists, but they are a political reality. And IATA is discussing IOSA among regulators as a transparent benchmark. Meeting IOSA standards will be difficult for many African carriers. To assist our members, at our AGM in Tokyo, IATA launched Partnership for Safety with a US$3 million investment. The purpose of the programme is to identify the gaps between IOSA standards and the current practice in airlines. With this knowledge we will work with carriers to lay down concrete plans—including training and consultancy—to bridge the gap. African airlines are IATA's first priority and we are moving fast to assist. Partnership for Safety seminars have already been held in Nairobi, Johannesburg, Dakar and Lagos. And we will do one in Libreville next month. IATA is committed to the success of African carriers meeting IOSA standards. And now I must be frank and tough. I need to see more commitment from you—the airlines.

Our 2003 AGM resolved that all members would seek IOSA registration by January 2006. By the end of the year we will have audited 140 airlines representing neatly 70% of total traffic. But so far, only three African airlines—SAA, Egyptair and Kenya Airways—have completed the audit. I am worried and disappointed.

The Board will review this in Montreal next month and the deadline is likely to be extended for the last time. I can assure that the extension will be a challenging final target. But you need to get on board—fast. I want to see all of Africa's carriers in the IOSA process by our next AGM—June 2006. And I encourage Africa's Governments to make good use of IOSA to strengthen their regulations and to pay more attention to safety. It is our top priority.

In the same way, IATA is helping airlines with efficiency gains. Let me highlight two areas where we are taking a leadership role:

  • Fuel Efficiency
  • Simplifying the Business

With fuel now accounting for an average of 25% of industry costs, fuel efficiency is critical to profitability. IATA's approach has three dimensions:

First: Spread industry best practice in Africa:

  • We compiled best practices and freely distributed our technical manual to all of our members.
  • Additionally we have GO teams that visit airlines to help them adapt best practice to their own operations.
  • Air Seychelles was among our first visits.
  • We identified nearly US$3.5 million in potential fuel savings.
  • That is 8% on a their total fuel bill which is US$42 million.
  • Seven other African carriers have asked for similar consultation.

Second we work with service providers for efficient route infrastructure:

  • In Africa we developed the Red Carpet express North South Route system to eliminate bottlenecks.
  • This also maximises the availability of economical flight levels.
  • This means total savings of US$7.6 million.
  • This map shows more of our route improvement activity in Africa.

Finally, we are working with suppliers to reduce fees and charges:

  • African airlines benefit from the US$290 million that we have saved globally in fuel charges and taxes this year.
  • And this is part of a total user charges savings of US$1.5 billion for 2005.
  • On a global scale, we hope to achieve US$2 billion in savings on fuel in 2005.
  • And we will achieve even more next year.

Finally, I would like to discuss IATA's biggest project ever—Simplifying the Business. This is a programme of 5 core projects aimed at achieving US$6.5 billion in savings while making travel more convenient for the passenger.

Using existing technology more effectively is at the core of:

  • 100% e-ticketing by the end of 2007
  • taking the paper out of freight processing
  • radio frequency identification for baggage management
  • bar coded boarding passes and
  • common use of self service kiosks for check-in.

Philippe Bruyère, our Programme Director, is here to explain the details of the projects and where we are in Africa. And he is available to address your concerns in separate one-on-one meetings. But before he starts, I want to ring a warning bell for African carriers.

By the end of 2007, IATA will no longer print paper tickets. This is a firm deadline. And the savings are enormous—US$3 billion annually. For many airlines the deadline may seem too soon. But for many others it is too late. Without ET many of you will lose your interline revenue. That is anywhere from 10 to 30% of your revenue.

To keep our global system working, IATA took the lead in bringing the industry to an achievable compromise. And we are investing US$10 million this year to ensure that we bring all carriers successfully on board. Philippe has a team of 140 staff worldwide to push Simplifying the Business forward.

  • As of today, globally 37% of the tickets IATA issues are electronic.
  • At 37.7% sub-Saharan Africa looks good.
  • When you add in North African carriers, that drops to 28%.
  • And the majority of these tickets are issued by two carriers – South African & Kenya Airways.
  • The other 37 IATA member carriers are far behind.

IATA is paying special attention to Africa—with seminars, a buddy system and individual consulting. I am determined to keep African air transport in the global system. And I have come here to ask for the one key ingredient that only you can provide—your personal commitment. I have a strong commitment from Christian and his AFRAA team to work together. SAA and Kenya Airways are sharing their expertise. IATA is doing the maximum to make sure no carrier is left behind. Now I need you—the leaders of aviation in Africa—to start moving fast. Sitting on the sidelines is not an option. I personally fought to have the original date of 2005 extended to 2007. We gained two precious years but we are in the final stage. There will be no extension. 100% ET will be a reality in 775 days.

My message to you is to: Remind your governments to pay more attention to safety and effective infrastructure. Use IATA's resources to drive efficiency gains. Move fast to meet the 2007 ET deadline. Use IOSA to drive improvements in safety. The goal is to build a successful African air transport industry that is globally integrated, efficient, and that delivers widespread benefits throughout the economy.

IATA has never before mobilised more staff and funds to assist our African members. IATA is your association and your partner in achieving these goals. Having you all on board will be our biggest satisfaction.

AFRAA, Sun City, South Africa
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