Date: 18 November 2008
European Aviation Summit, Bordeaux
It is a pleasure to be here. And I thank the French Presidency for giving importance to aviation and the environment. Alongside safety and security, environment is a top priority for our 230 member airlines.
State of the Industry
These airlines are businesses that support over 4 million European jobs and US$ 811 billion of Europe’s economic output. For airlines 2008 has been extra-ordinary. For the first 7 months we had a cost crisis with skyrocketing fuel prices.
At our annual general meeting in June US$135 per barrel oil risked adding US$99 billion to industry costs over the following 12 months.
Our members sent out an urgent declaration from Istanbul asking labour to realise that jobs disappear when costs don’t come down. By telling our airport and air navigation partners that they need to contribute even greater efficiencies. And by demanding government action to stop crazy taxation, regulate monopolies and fix the infrastructure.
Oil peaked at US$147 in July and today it is below US$60. But that was little relief with looming world recession. In September passenger traffic was down 2.9% and cargo plummeted by 7.7%. For our European members, passenger traffic dropped by 0.5%, the worst performance since SARS in 2003. The enormous improvements since 2002 - fuel efficiency up 19% and non-fuel unit costs down 18% - delivered one year of profit, US$5.6 billion in 2007. This year airlines will lose around US$5 billion. Already at least 30 airlines have gone bust more than after September 11. We are in a crisis that is highlighting the need for urgent action to secure a sustainable future - both financially and environmentally.
Agenda for Freedom
To help build a more sustainable financial future for air transport, IATA took an extra-ordinary step. We invited 14 governments and the European Commission to an Agenda for Freedom Summit in Istanbul. The goal was to find ways to modernise the structure of the industry with the access to markets and equity capital that every other business takes for granted. Their response was very positive. You will be hearing more on this as we agreed to meet again in early 2009 to turn the positive discussion into action.
Today our focus is on environmental sustainability. Green business is good business. That is why IATA developed its four pillar strategy. To address climate change our goal is to achieve real reductions in the 2% of global CO2 emissions attributed to aviation. We will achieve that with investments in technology, effective operations, efficient infrastructure and positive economic measures. The strategy comes with a target: a 25% improvement in carbon efficiency by 2020 compared to 2005.
IATA’s strategy and target were endorsed by all 179 governments attending the 2007 ICAO Assembly and by all the major industry players. And the strategy is delivering results. Since 2004 IATA’s work saved 59 million tonnes of CO2 which represents $12 billion in fuel costs.
Today I will focus on two areas where, as Europe’s aviation leaders, you have the opportunity and the responsibility to contribute to those savings. These are a Single European Sky and global leadership on economic measures.
Single European Sky
The failure to implement a Single European Sky is a costly environmental embarrassment that undermines the credibility of Europe’s environmental efforts. Last year tells the story - 21 million minutes of delays, 468 million kilometres of unnecessary flight and 16 million tonnes of wasted CO2. Airlines cannot afford this inefficiency with a cost of at least EUR 5 billion. It is greater than the industry losses this year. And Europe cannot afford the impact on competitiveness as a comparison with the US illustrates.
The US controls 13.8 million square kilometres of airspace with one ANSP and 21 en route centres. Europe controls 10.8 million square kilometres of airspace with 36 ANSPs - 47 if you include the military - and 58 en route centres. So the average ATM cost for a European flight is EUR 771. That’s 75% more expensive than the EUR 440 cost in the US. We need solutions and the crisis means we need them quickly.
Vice President Tajani has understood this with the performance-driven approach of the SES second package. Your political leadership is needed to deliver at the national level. If people tell you that enough is being done, they are wrong. Defending the status quo of fragmentation, inefficiency and waste is a recipe for failure. I need your leadership to drive progress on the elements of the Commission’s SES proposal - performance targets, functional airspace blocks, a network manager, harmonised safety oversight and SESAR.
Today, performance targets are not being met. The EUROCONTROL target is to reduce average route extension by 2 km per year. There was no improvement in 2007. The en route delay target is 1 minute per flight. The 2007 average was 1.6 minutes. And in the first 9 months of this year average delays jumped to 2.5 minutes. This is not acceptable.
I know that improving performance is at the top of David McMillan’s priority list since joining EUROCONTROL. And he has been quick to deliver results. The recent reform of EUROCONTROL governance and freezing of the 2009 Agency budget are welcome signs of the new approach we seek. To help him, we support binding targets that are European Community-wide and national, independently validated and in line with ICAO policies for safety, environment, capacity and cost-efficiency. And to balance the fact that when ANSPs miss targets airlines suffer the cost, we need incentives with the teeth that drives ANSP business decisions and shifts the cost burden from airlines to those ANSPs that fail to perform.
FABs are critical building blocks for SES. The Europe Central FAB, signed today is an important step forward. Congratulations to all involved - states, ANSPs and military authorities. Now we need to push ahead with more ambitious efficiency targets and faster timelines that match the speed of the industry. In 48 months airlines delivered 100% e-ticketing to every corner of the planet, getting rid of 300 million paper tickets per year and saving US$3 billion in annual costs. By 2012 we need 9 FABs operating. And we cannot wait for 2020 to see the promised benefits from SESAR - a 70% increase in airspace capacity, average delays of one minute or less, a 50% reduction in unit costs and a 10% reduction in environmental impact per flight while maintaining or improving safety targets. We need to move much faster.
To give courage to governments, it is important to kill two myths. First, job losses for air traffic controllers are a misplaced fear. There is a global shortage of controllers and SESAR alone will create 200,000 highly skilled jobs in Europe. Second, FABs don’t reduce sovereignty. The independent National Supervisory Authority is the protection. Europe faced the same questions with the Euro. Today nobody questions the sovereignty of the Euro-Zone states. If anybody says that a Single European Sky is different, ask for an explanation. You will not get one…Why? Because it is simply not true. It’s time to move beyond myths and focus on delivering the benefits. That means full steam ahead for 9 FABS in 2012 operating to binding and tough performance targets.
At the same time we must also think bigger. Nine FABs acting like 9 independent kingdoms do not make a Single European Sky. A strong network manager is needed to deliver maximum efficiency and to ensure safety. I need your leadership to deliver a transition roadmap and ensure sufficient resources for European Aviation Safety Agency can extend European safety regulation to airports and ANSPs.
The final component is SESAR’s technology solutions to increase safety by a factor of 10, reduce the per flight environmental impact of aviation by 10%, decrease ATM-related costs by 50% and increase capacity by 300%.
I have two concerns. First, we need to fairly fund the EUR 29 billion investment that is needed. This year airlines will pay EUR 7.8 billion for ATM in Europe. Pre-financing is not acceptable. Today’s users should not pay for tomorrow’s benefits. A fair funding model requires a sound business case with financing from public funds or public private partnerships. Second, we need to deliver the benefits faster than the 2020 target date.
If you need inspiration on speed on SES or SESAR, look at how fast Europe plans to bring aviation into the ETS. ETS is a EUR 3.5 billion annual tax designed to punish airlines rather than improve environmental performance. And it won’t work. Positive economic measures are part of our strategy. But Europe’s unilateral ETS approach will create a legal mess just as it did with hush-kits in the 80s and its regional scope cannot solve a global problem.
We need an effective global solution that is fair and voluntary for States. Article 2 of the Kyoto protocol gives this responsibility to ICAO. In Japan, the G8 agreed.
Prime Ministers Berlusconi and Brown, Chancellor Merkel and President Sarkozy all signed the G8 declaration supporting ICAO’s role. The ICAO Group on Aviation and Climate Change (GIACC) is making progress. Europe has 44 ICAO members and 3 representatives on the GIACC. So Europe has a duty to ensure that ICAO delivers a global solution and to harmonise with it. In the meantime, don’t make a bad situation worse by including aviation in the General Review of ETS. It makes absolutely no sense to review something that has not even started yet, let alone consider raising the auctioning levels.
Europe’s Environmental Leadership
For Europe’s environmental leadership to be taken seriously, it must focus on making ICAO successful and delivering the environmental benefits of SES. If Europe chooses to ignore the inefficiency of its regional approach and risk the legal battles, the last hope it has for credibility is the SES. Airlines cannot accept to be charged for emissions when an inefficient national approach to air traffic management forces them to waste 16 million tonnes of CO2 a year. The target date for ETS is 2012. By that time the absolute minimum requirement is 9 FABs operating with binding performance targets and coordinated by a European network manager. Without this there is no deal to be had.
Thank you again for your invitation and congratulations on the EC-FAB. There is no time to relax. With a crisis re-shaping the industry as we speak, your leadership has never been more critical. It is time to rise high above national politics and deliver what we have waited decades for - a Single European Sky.