Date: 8 April 2008
Aviation Day, Lagos
It is a pleasure to be here to meet with colleagues from across West Africa to discuss the way forward for aviation.
Let me start with the global picture. Efficiency gains since 2001 are impressive. Productivity improved 64%, sales and marketing unit costs dropped 25% and non-fuel unit costs reduced 18%. Strong demand helped. Global traffic increased 7.4% last year. Africa beat that at 8%. But while we saw a global profit of US$5.6 billion last year, African carriers had the biggest losses at US$400 million.
2008 will be even tougher. Costs are rising, oil is over US$100 per barrel and the spread of the US economic crisis is slowing demand growth to 4-5% levels. Global profits will drop to US$4.5 billion this year and Africa is the only region in the red. The US$300 million loss is an improvement but a long way from profitability.
Aviation is critical to Africa supporting US$9 billion in GDP and 430,000 jobs. Aviation is the only option for bringing tourists in and sending perishable products out to markets. With a few kilometres of runway, airlines connect even the most remote locations to the world. But to get the full benefit of aviation effective policies, efficient infrastructure and a commitment to safety and security are absolutely necessary. I am pleased to see that air transport is among Nigeria’s seven reform priorities in the National Economic Empowerment and Development Strategy (NEEDS).
I am here today to re-enforce IATA’s commitment to Africa and launch a new approach to West Africa. We have put people on the ground. Julius Kengara is our new country manager based in Nigeria and also covering Ghana, Sierra Leone, Gambia, Liberia and Cape Verde. Our Nigeria BSP goes live in a few weeks time after training 1,200 agents and airlines. And we are working with our partner bank United Africa Bank to set up global standard financial products tailored to local market needs. Importantly, it will be a paperless BSP handling only ET - one of the first in the world.
IATA’s office here is part of an Africa regional structure that is headed by Vinod Chidambaram, our first Regional Vice President for Africa. IATA’s regional team of 44 brings all of IATA’s experience to Africa through our Johannesburg office and sub-regional offices like Nigeria. Along with effectively handling the money in our BSP system our mission in Africa has four main priorities:
- Raising - and keeping high - the bar on safety
- Improving efficiency by Simplifying the Business
- Fighting for greater commercial freedoms with liberalisation
- And ensuring Africa plays a strong role in our approach to the environment
Safety is the top priority - not just for Africa but everywhere. The global safety record is excellent. Air is the safest way to travel with one accident for every 1.3 million flights. We are still trying to improve that with an aggressive target of 1 accident for every 2.2 million flights. I will be blunt with one accident for every 244,000 flights Africa is a problem. It has improved since 2005 when it was 1 accident for every 100,000 flights. And I have to congratulate my good friend Harold Demuren the Director General for Civil Aviation in Nigeria for the great work that we have done together turning the horrible years of 2005-6 when Nigeria had 6 accidents and 321 fatalities into a perfect safety record in 2007. But, safety is not a problem that you fix in a year. Constant vigilance and improvement is required. The tragic fact remains that the accident rate in Africa is 6 times the global average. That must change. IATA is serious about delivering results to raise the bar. I allocated US$5.4 million to African safety. That is 5.4 times the dues we collect from African members. What are we doing?
- Building safety culture and leadership
- Addressing the skills shortage and
- Improving infrastructure
At the top of the list is the IATA Operational Safety Audit (IOSA). IOSA is the global standard for airlines safety management. The standards are free for any airline and the results are on our web site. A transparent registry for all to see, IOSA helps build safety culture. Safety Management Systems—mandated by ICAO are incorporated into IOSA standards. IOSA is serious. We make it a condition of membership. By the end of the year all our members must be on the registry….or they are out of IATA. And we have already terminated 9 carriers that did not make the interim deadlines. IOSA is accessible. IATA is fully funding the audit for our members.
So where are we? 193 carriers are on the registry—covering 88% of traffic. This includes 20 African airlines. All of our member carriers in West Africa completed the audit and we are now closing findings. My goal is to improve safety not reduce our membership. So we are doing everything we can to bring all our members on board by the deadline.
Partnership for Safety
This means putting extra resources into Africa - where the need is greatest. In the first stage IATA’s Partnership for Safety brought awareness seminars and workshops, individual gap audits and specialised training courses. 45 African Airlines and 21 African CAAs have participated. Partnership for Safety is the core of our Partnership with the Nigerian Civil Aviation Authority to help all carriers - members and non-members - move towards IOSA. But with less than 8 months to the deadline we still have 15 African members with open IOSA findings. They must be closed before they can join the registry. So we added a Partnership for Safety Plus to help these airlines and others close audit findings and prepare for renewal audits.
Today I am pleased to announce a new initiative for Africa. Flight Data Analysis (FDA) is a critical component of Safety Management Systems. From today IATA is going to make its FDA tool available free of charge for up to 30 African airlines for a period of three years. In line with safety being the number one priority - for all the industry, we are making this available to both IATA members and non-members. This is an additional US$3.7 million commitment from IATA for African safety. But it must be matched with organisational investments by participating airlines. And to ensure that airlines get the maximum benefit, IATA will work with the airlines for successful implementation.
Governments and IOSA
Governments also have a role. A growing list of governments, starting with the US FAA, use IOSA. I want to see more governments in Africa using IOSA - incorporating it into their safety oversight standards. It is an internationally recognised, credible and transparent tool that is free to use. It is not a solution to the European Community lists but being on the IOSA registry is a strong argument that you have met the highest standards in safety. In Africa, Egypt and Madagascar are mandating IOSA. Tunisia is planning to do the same. Nigeria is recommending it for its carriers. I urge the NCAA to take a stronger position and it is time for all the remaining African Governments to make better use of this great tool.
African governments must also get their act together on infrastructure safety. Infrastructure costs that airlines pay in the region are not cheap. But the infrastructure in many parts of Africa is poorly funded and not up to international operating standards. Transparency is a real issue that is impacting lives. IATA supports the creation of Special Infrastructure Fund mechanisms to ensure that what the airlines pay in charges stays in the industry. Progress has been slow and we have major safety deficiencies. In Western Africa IATA has addressed shortfalls in 10 States. Political will also an issue. The RVSM project, which would enhance efficiency and safety, is being held up by Gabon and the Central African Republic. They are the only states who have not signed their National Safety Plans.
Human skills are also critical. Aviation is competing in a global market that has a shortage of licensed personnel. To meet projected demand in 2026 we need to train 19,000 pilots a year. The current capacity is about 16,000. If we do not act the shortfall will be 54,000 in 2026. And it’s a similar story for engineers, maintenance staff and controllers. Airlines - Africa included - are competing for scarce skills in a global market. We must broaden the pool of qualified candidates without compromising on safety. IATA’s Training and Qualification Initiative - ITQI is working on a comprehensive approach - from recruitment to training, standards and technology. In the meantime, governments in the region can help by cooperating to jointly provide and recognise standards, licensing and training. It would help airlines in this region use scarce resources more efficiently while enhancing safety.
To conclude my remarks on safety - it’s a team effort. IATA is committed and working with our members to deliver results. The NCAA has done an impressive job. Now we need to take that leadership and momentum to support coordination action - not talks - to achieve the targets and goals of the ICAO Safety Plan for Africa and the Safety Road Map. IATA will be in Abuja later this month at the ICAO meeting on African safety pressing governments for greater commitment, resources and leadership to make Africa’s skies even safer.
Simplifying the Business
Efficiency is also critical. That is the goal of IATA’s Simplifying the Business Programme, making travel more convenient while saving US$6.5 billion. Africa is the only region in the red but it is slow in taking action to achieve the cost benefits that go directly to the bottom line. E-ticketing is a good example. In 54 days the paper ticket disappears and airlines start saving US$3 billion annually. Globally the industry is at 93% ET, Africa is at 86%. This number is skewed by the strength of a few advanced airlines - 8 African carriers have not even started and 23 are below the 86% African average. Let me ring the warning bell. The deadline is serious. The business case makes sense. A US$9 savings per ticket recovers system development costs quickly. Failure to meet the deadline puts interline revenues at risk and makes using the BSP very difficult.
The global industry is moving ahead quickly with technology. ET, CUSS and Bar Coded Boarding Passes are critical capabilities to compete. The good news is that the technology is accessible and cost effective. IATA is committed with Simplifying the Business managers around the continent to help airlines implement. But I need the strong commitment from the top to identify Simplifying the Business as a key component of competitiveness that will improve the bottom line.
The flags on the aircraft tail are sinking the industry. To be successful, airlines need commercial freedoms to serve markets where they exist and to merge or consolidate where it makes business sense. 98% of African traffic is subject to restrictive bilateral agreements. This must change. Progressive liberalisation is the future. Protecting airlines is an expensive hobby. It creates weak players and limits the economic benefits that aviation can bring. Governments must anticipate and lead change setting targets in a staged approach so carriers can prepare for the competition. What are the benefits? A study by ComMark showed the liberalisation Southern Africa would create 37,000 jobs and bring a half million more foreign tourists who would spend US$500 million. 20 years ago Yamoussoukro was a beacon of progress. But with no results, it has become a symbol of failure to change. The industry in this part of the world is financially sick, so we need to find a pragmatic way forward - like AFRAA’s CREW initiative that would liberalise the continent in bite-sized chunks. The next big chance for change is the ICAO conference later this month. It must deliver a platform of greater commercial freedom to put the airlines on a stronger financial footing to contribute even more to economic development.
The last issue that I want to address briefly is the environment. It may not be headlines in the local papers but climate change is at the top of the global political agenda. Aviation contributes 2% of manmade CO2, so we must be a part of the solution, And, as we are a global industry, that includes Africa.
IATA’s four pillar strategy is leading industry efforts:
- 1. Invest in new technology
- 2. Build and use efficient infrastructure
- 3. Operate planes effectively
- 4. Economic measures that encourage technology investment and an emissions trading scheme that is fair, global and voluntary
This was accepted by all 179 states - Africans included - at the ICAO Assembly last September. Along with a target to improve fuel efficiency 25% by 2020 we are going beyond that with a vision to achieve carbon neutral growth on the way to a zero emissions future. In line with our strategy, what are we doing in Africa? We shortened 2 routes and optimised 21 approaches and landings saving 80,000 tonnes of CO2. Our Green Teams have worked with African six airlines identifying savings of US$87 million. These contributed to global savings of US$4 billion and 25 million tonnes of CO2. Paul Steele will discuss in more detail tomorrow but I have just two important thoughts that I want to leave you with. First, environmental responsibility is also good business. Every kilogram of fuel saved reduces costs and saves the environment 3.16kg of CO2 emissions. Second, we must fight together for global solutions. Environmental standards must be global, so African growth - critical to development - must be supported by an environmentally responsible industry. Together with governments we must find solutions that preserve the planet and support sustainable economic development.
African aviation has made great progress and has tremendous potential. To realise this potential leadership and cooperation are essential in the areas of safety, Simplifying the Business, liberalization and the environment. This is a tall order but our passion and vision for a brighter future is a powerful force. And this event is a great forum to harness it. I wish you a productive meeting. Thank you.