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Date: 16 October 2012

Remarks of Tony Tyler at the World Passenger Symposium Press Conference in Abu Dhabi

Good morning. And thank you for joining us today to cover the World Passenger Symposium.

The Middle East has been one of the bright spots in an otherwise difficult year for aviation. In our recent Industry Financial Forecast, we estimated that airlines globally will make $4.1 billion this year. Middle Eastern airlines will contribute $700 million of that total. This is a small decline from the $1.0 billion which airlines in the region made last year, but proportionally this is a smaller decline than we expect at the global level, where profits have more than halved from last year’s $8.4 billion.

More striking has been the growth in Middle East airlines in 2012. For the year to August, international passenger growth has been 16.9%, compared to a global average of 6.6%, and for cargo the difference is even more positive: 14.1% growth compared to a global decline of 2.6%. Clearly, the carriers in this region are doing something right.

For 2013, we expect global profits to climb a bit, to $7.5 billion, and in the Middle East we’ll see profits hit the $1 billion mark again – behind only Asia-Pacific and North America, both considerably larger regions.

But let’s not get too excited. As I mentioned in my speech, the global profit margin this year will be just 0.6%. Oil remains close to its record price. We have a tremendous amount of work to do to build a sustainably profitable industry.

One of the solutions airlines have been adopting to combat these price pressures is to merge or join alliances. And I am sure you are keen to ask me about the alliances and tie-ups which the big three – Emirates, Etihad Airways and Qatar Airways – have announced in the past couple of weeks. It is obviously not for me to comment on the specifics of each deal. But what I would say is that this shows that the Gulf carriers are now seen as an integral part of the global aviation system. Growth and capacity in this region are clearly going to continue to expand, so it makes sense for strategic alliances to make use of the connections and traffic that are establishing themselves into and through the region.

A consequence of this traffic is growing congestion. Not, of course, at the superb airport facilities developed here in recent years, but congestion in the sky. The need for more airspace capacity is well known and I am aware that there are some 30 different projects and plans in operation to improve the efficiency, capacity and safety of airspace out of Dubai, and similar projects in Qatar. I hope these projects will be concluded swiftly and successfully – it would be a shame if the potential of the investment in this incredible ground infrastructure was to be held back by a lack of progress in the air.

I am sure that will not happen. The governments of this region know and understand the transformative power of aviation. We recently commissioned Oxford Economics to calculate the economic impact of aviation in more than 50 nations around the world, and at the regional and global level. Their research showed that in the Middle East aviation supports 2.7 million jobs and $129 billion in GDP. That’s an incredible tribute to the foresight of the governments that have created a business friendly environment in which aviation has successfully developed.

Such an attitude is sadly not replicated everywhere. It is no coincidence that the weakest region in terms of profitability – Europe – is also the region plagued by high taxes, onerous regulation and critical bottlenecks in infrastructure.

Europe’s single-minded determination to implement the EU Emissions Trading Scheme is a manifestation of the continent’s failure to understand the industry. The unilateral and extra-territorial approach of the scheme is creating the risk of a trade war that nobody wants or can afford. Most recently Saudi Arabia has forbidden its carriers from participating.

The aviation industry is united and committed to environmental sustainability. We are the first global industry to set climate change targets to:

  • Improve fuel efficiency by 1.5% annually to 2020
  • Cap net emissions from 2020 with carbon-neutral growth
  • And cut net emissions in half from 2050 compared to 2005

Market-based measures—of which emissions trading is one option—will be critical to meeting these goals (even if only temporarily until technology provides a complete solution). And these are being discussed at the International Civil Aviation Organization (ICAO). We continue to hope that the Europeans will remove the roadblock which their unilateral and extra-territorial scheme has become and allow the ICAO process to be successful. That process is meant to conclude at the 2013 Assembly which is only a year away. There is no time to lose, but countries outside of Europe are preoccupied with protecting their sovereignty and opposing Europe’s plan. It is important for Europe to find a means to relieve the pressure and create the space for states to focus on finding a solution through ICAO.

I am looking forward to discussing all these issues with airline CEOs from the region when I attend the AACO AGM. Last year it was held here in Abu Dhabi. And I am anticipating a lively meeting in Algeria next month.

Now I’d be happy to take your questions.

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