Skip to main content

Test Home
You & IATA

Search

You are here: Home » Pressroom » Speeches
  • Print this page
  • Share this page

Date: 24 March 2010

Wings of Change Conference, Santiago

Two recent tragic events reminded us all of the importance of air transport. These are the earthquake here in Chile last month and the one in Haiti in January. In the immediate aftermath of both, aviation brings vital resources to help rescue efforts and is critical to re-starting the local economy. As an industry, we can be proud of our contribution of delivering critical relief supplies and bringing in global expertise.

We can also be proud of the amazing work that we do each and every day. Aviation now supports 32 million jobs and US$3.5 trillion in economic activity. This did not happen by accident. People with vision developed the policies, built the companies and created the technology that resulted in today’s air transport industry.

The question for today is how do we make Latin American aviation stronger?

The Global Picture

Let me begin by looking at the global picture. The last decade was the most difficult that we have ever faced. Airlines lost an average of US$5 billion per year. The worst is now behind us. 2009 ended with strong traffic demand and that has continued into the first quarter. We expect passenger growth of 5.6% this year with cargo even stronger at 12%. Yields will improve more slowly at about 2-3%. With this cautious optimism we cut our loss forecast in half to US$2.8 billion.

But there are risks. We are forecasting US$79 per barrel of oil, an increase of US$17 over last year.  Oil is a wild card and the risk is that the price increases faster than the recovery. With 1,400 aircraft to be delivered this year over-capacity is another risk. Lastly, labor is putting the recovery at risk with strikes and strike threats, particularly in Europe. The recovery depends on everybody sharing the burden of cost reduction including labor and our infrastructure partners.

Latin American Focus

The financial performance of Latin America stands out as positive. The economic situation has helped. Ties to China, facilitated by aviation, have kept the region trading and government deficits are under control. Passenger traffic was steady even as global volumes fell. This year we expect demand to grow of 12% in the region. It is the bottom line that is important and that too is impressive. In 2009, Latin America posted an US$800 million profit - the only region in the world in the black. We expect a similar profit this year second only to Asia-Pacific’s expected profit of US$900 million. Congratulations to all for a job well done.

Government Policy

Congratulations also to policy makers. The turnaround in this region over the last decade is a great success story because key governments had the courage to change. The greatest improvements happened where governments have liberalized, managed infrastructure correctly, regulated safety effectively and let the airlines operate on commercial terms. Particularly, our host, Chile is to be congratulated along with Panama and some other countries in Central America. But not all of the world’s regions are moving at the same pace.  The transformation of Latin American aviation is not complete. Some parts of the Latin America industry remain sick.

We must find ways to make Latin America an even better place for aviation to do business with enormous social and economic benefits. This is not just for airlines. Governments, airports, air traffic management, manufacturers and airlines must be partners.

Today, I will discuss my vision for how these partnerships could work in this region to address our top issues; safety, security, charges and taxation, liberalization, and environment.

Safety

Our top priority is safety. Latin America should be commended for having no jet hull losses in 2009.  This is an enormous improvement from the 2.6 accidents per million jet flights in 2008. The commitment of IATA’s members to safe operations through IOSA is making a difference. 35 Latin American carriers are on the registry, including all 25 IATA members. And five governments in Latin America - Brazil, Chile, Costa Rica, Mexico and Panama have mandated IOSA.

Despite this progress, we cannot become complacent on safety. Including turboprops and jets there were 90 accidents in 2009. Safety is still an issue. Earlier this week, I encouraged LACAC under the direction of my friend General Huepe to become the first region to make IOSA a standard requirement across the region.

Security

The Christmas day crisis in Detroit was a wake-up call. It put security back at the top of the agenda for industry and for governments. The approach of key governments gives me hope that we can find a solution together. The US Department of Homeland Security under the leadership of Secretary Napolitano is leading this new approach. She came to Geneva in January to consult with the industry at IATA.

We gave five recommendations:

  • Institutionalizing government/industry consultation so regulations are built with industry expertise
  • Finding practical implementation measures so we deliver real results
  • Making passenger data collection and sharing more efficient with standardization
  • Harmonizing requirements across borders so one country’s requirements don’t conflict another’s laws
  • And building a next generation checkpoint that combines intelligence and technology

Tomorrow, we will host a high-level meeting with DHS to focus on Latin American issues.  Among the challenges, we must make the airport experience more efficient and standardize passenger data collection.  I look forward to a good exchange of views to build a more effective and efficient process.

Charges and Taxation

Taxes and charges are another concern for this region. In Latin America aviation supports 700,000 direct jobs and US$22 billion in economic activity. And aviation supports a total of 2.7 million jobs and US$157 billion. Governments, airports and infrastructure providers must work together to maximize aviation’s economic benefits. We continue to have good news in Argentina.  ORSNA and AA2000 are continuing with their 30% discount.  But in other parts of the region, instead of partnerships to keep costs down, I see a contagion of rising taxes and charges. The Caribbean and Nicaragua are proposing new tourism taxes. Chile, Ecuador, Uruguay and Mexico contravene the Chicago Convention and tax international fuel uplift. Brazil and Chile use import parity pricing for fuel that artificially inflates our largest cost. What are the results? About 22% of the cost of a fare from Santo Domingo to New York is taxation!

We need a reality check. This is a price sensitive business operating on razor-thin margins. A 1% increase in travel costs drives away 1% of travelers. That impacts jobs not just for airlines but throughout the tourism industry and for any business involved with exports. In Holland, a EUR 300 million departure tax cost the Dutch economy EUR 1.2 billion in lost business. The government had to eliminate this embarrassment in less than a year.

How can we change the situation? We can change with transparency. Of the US$4 billion collected in Latin America for charges and taxes only one-third is re-invested in the industry. This meeting must send a strong message to government and infrastructure providers across the region. We must keep costs low and follow international ICAO guidelines.

Liberalization

We must also work together with governments to liberalize the archaic restrictions on ownership and market access of the bilateral system that keep the industry financially weak by preventing consolidation. These are unique to aviation. Auto manufacturers, pharmaceutical companies and telecoms are strategic industries that have consolidated into global brands. 

Latin America is pointing the way to a more normal future with the innovations of LAN, COPA, TACA, TAM, and Avianca. Their successful cross-border ownership structures show that brands are important not the flag on the tail. Unwanted protectionism serves no public policy goal.  Working with LACAC, IATA is studying country by country the impact of liberalization in Latin America. The findings are dramatic and convincing. For example, in Peru liberalizing ownership and control could boost passenger numbers by 56% and generate 77,000 jobs.

In November last year, IATA’s Agenda for Freedom initiative facilitated a multinational statement of policy principles addressing ownership, market access and pricing. Seven governments - Chile, Panama, the US, Switzerland, the UAE, Malaysia and Singapore and the European Commission signed it. And, in the Agenda for Freedom process we have already seen liberal bilaterals in this region between Chile and Brazil, Panama and Colombia.

The next test for ownership will come in the second stage talks between the US and Europe. Ownership is on the table. If short-sighted politics does not impede long-term good sense we could see a breakthrough. But we cannot just wait-and-see what will happen.

The statement is open for any government.  Bahrain, Kuwait and Lebanon have just joined the group.  I invite every government in Latin America to recognize the benefits that liberalization has brought to this region and to sign on the Agenda for Freedom.

Environment

We must also build partnerships to move forward on environment. Aviation was the only industry in Copenhagen with a common position that included all industry players; airlines, airports, ANSPs and manufacturers. Even more impressive were our aggressive commitments. These were to improve fuel efficiency by an average of 1.5% per year to 2020, to cap our emissions with carbon-neutral growth from 2020 and to cut our net emissions in half by 2050.

Strategy and Results

The industry is also united with a four-pillar strategy: investing in technology, building efficient infrastructure, flying planes effectively and positive economic measures. The strategy is delivering results. Look at the progress that we have made on alternative fuels. They have the potential  to reduce our carbon footprint by up to 80%. They offer the greatest potential to meet our targets. This is not a dream. Already five airlines have tested them and certification is expected next year at the latest.

In the interim, we continue to look for every efficiency possible. By shortening routes and improving fuel efficiency we saved 71.4 million tonnes of CO2 since 2004. We continue to move forward with the IATA carbon offset program. TAP started offering it to passengers last June. In the region, the four carriers of the LAN Group are committed to implementing.  I look forward to others joining.

Latin America Focus

Latin America contributed to our results.  Nine RNAV routes were implemented in 2009 saving nearly 30,000 tonnes of CO2 and US$8.5 million.  New performance based navigation (PBN) procedures introduced at nine airports saved a further 50,000 tonnes of CO2 and US$13 million in fuel costs.

But not everything is moving quickly.  Venezuela has potential to generate US$750,000 in fuel savings by shortening one route through the country by 26 miles and four minutes, but are moving far too slowly.

We also have problems with countries that don’t work together. The route between Montevideo and Buenos Aires wastes 4,000 tonnes of CO2 because the countries have not reached an RNAV agreement. Argentina is willing but there is no urgency in Uruguay and incredibly unions are stopping progress. I raised this with President Mujica of Uruguay last week for an urgent resolution. Our efforts should be on the radar screens of political leaders. In 2010, we are targeting 19 new RNAV routes and PBN at 16 additional airports. The numbers for each are modest but when repeated across the region year-after-year the impact is big.

Towards COP-16

Back at the global level, we the biggest challenge is COP-16 in Cancun.  The failure of Copenhagen to agree a global framework for dealing with climate change was a disappointment. But the industry remains united in its commitments. Our task is to bring governments on board with a global solution that reflects our targets. At COP-15, Chile and Colombia were among the most vocal and supportive nations of IATA. We are now working closely with ICAO to develop a global framework for economic measures in time for the ICAO Assembly in September.

The biggest task for COP-16 is finding ways to accommodate developed and developing nations in a sectoral approach for aviation. With the effective cooperation between IATA and ICAO under the leadership of President Kobeh-Gonzales and Secretary General Raymond Benjamin, I am confident that we will make progress. The history of the ICAO agreement on noise tells that aviation can find solutions to accommodate the needs of the developing world. With the right spirit of partnership, the ICAO process can deliver solutions.

With COP-16 taking place in Latin America, the global spotlight will be on this region. Nearly all delegates will arrive in Cancun by air. We must prepare to use their time with us to demonstrate our approach and our achievements showing that we are a model for governments to look to for global solutions. That means staying united in our commitment and working together to deliver results.

Conclusion

Aviation is a great industry, the result of a complex value chain working under the guidance of governments. Turning the US$50 billion loss over the last decade into profitability will need industry and governments to work together. IATA will continue to play its critical role. Since 2004, our efforts have saved the industry US$47 billion and we are targeting much more.

I am confident that we will be successful with the growing support of governments who understand the great value of a strong aviation sector. Over that same decade Latin America has emerged as one of the most profitable regions of the world built on an improving safety record and innovation. Today, Chile faces the immense task of recovery from the tragic earthquake. The effectiveness of this industry will be tested as a means to speed the recovery by keeping the economy connected.

Turning to the future, the challenge is to make Latin American aviation even stronger by spreading the aviation success story from a handful of airlines and governments to every corner of the continent. The goal is to gain maximum economic stimulus from an aviation industry that is sustainable, safe and profitable.

ADVERTISEMENT


Additional information

© International Air Transport Association (IATA) 2014. All rights reserved.