Date: 9 April 2014
Remarks of Tony Tyler at a Press Conference in Doha
Good morning and thanks for joining us.
I am here as part of our preparations for the 70th IATA Annual General Meeting (AGM) and World Air Transport Summit taking place here in Doha on 1-3 June. For those three days, Doha will be the global capital of commercial aviation. We expect around 1,000 delegates, including a few hundred of your colleagues—the media.
Centennial of Scheduled Commercial Flight
This is only the fourth time that we are holding the IATA AGM in the Middle East. Previous AGMs in the region were held in:
- Amman, 1997
- Tehran, 1970
- Cairo, 1946
The AGM is the highest level event in the airline industry with many of the CEOs of our 240-member airlines in attendance, along with the top management of our industry partners and key government stakeholders.
This year, we are being hosted by Qatar Airways. The airline’s CEO, Akbar Al Baker, whom I am sure is well-known to you, is on the IATA Board of Governors.
This will be a big event for aviation in the Middle East, and particularly for the airlines based in the Gulf region. These carriers, including Qatar Airways, have been at the core of a major shift in global aviation. In just over a decade, the share of global traffic accounted for by Middle East airlines grew from 4% to 9%. Much of this growth has been realized here in the Gulf.
That trend is set to continue. For example, this year, we expect global passenger traffic to increase by 5.8%. But Middle East airlines will more than double that with 13.0% growth—again driven primarily by what is happening in the Gulf.
This AGM will be a special one because the commercial airline industry is celebrating its 100th birthday. On 1 January 1914 four visionaries teamed up to complete the first scheduled commercial passenger flight—a 23-minute trip across Tampa Bay, Florida.
- Percy Fansler—the entrepreneur
- Tony Jannus—the pilot
- Thomas Benoist—the aircraft builder
- And the hero of the day, Abram Pheil, who bought the first ticket
It is difficult to believe that from a single passenger, one route, one airline and one flight, we have evolved into the global industry that will meet in Doha in June. Every day there are about 100,000 flights. These operate on over 40,000 routes. And this year we expect airlines to carry some 3.3 billion passengers and about 50 million tonnes of cargo. That supports 57 million jobs and $2.2 trillion in economic activity.
It is an industry that has connected our amazing world and created a global community. Even Bill Gates recognized aviation as being the first true world-wide-web. It is a force for good in our world—connecting people, linking businesses, facilitating journeys of exploration, powering economies and driving development.
The governments in the Gulf are among those strategically using aviation as an economic catalyst. And I think that it will be a great place not only to celebrate our first 100 years, but also to look ahead to aviation’s next century.
Fortunately, we will be celebrating our first 100 years while the industry is making some money. Our latest forecast is for a global industry profit of $18.7 billion. That is improved from the $12.9 billion profit in 2013 and from the $6.1 billion in 2012.
It is still, however, a very thin net profit margin of just 2.5%. Put another way, globally, on average, airlines make about $5.65 per passenger carried. So, although the industry’s profitability is strengthening, we are far from the levels of profitability that we would call robust—at least at an industry level.
Airlines are susceptible to many forces which are beyond our control—oil prices for example. They account for about 30% of an airline’s cost structure on average. Every time the price moves—upwards or downwards—there are consequences. The main driver of profitability is the business cycle. And fortunately, that is moving in a positive direction. But anything that can influence the price of oil—including the current crisis over Crimea—can also have an impact. So our profitability is fragile.
Because large parts of the cost base are beyond the control of an airline, it is critical that we do well to manage efficiency in the parts that we can influence—often through strong partnerships across the value chain. That will certainly be a key theme of the AGM.
Focusing on the region, airlines in the Middle East are expected to contribute $2.2 billion to the industry’s $18.7 billion profit this year. In absolute terms, that is a record. And this figure gives some insight into the success of the region’s carriers in relative terms. If the region contributed to industry profits in line with its share of traffic, you would expect a contribution of $1.7 billion. It is not an exact comparison because many factors influence an airline’s profitability compared to the traffic it generates. But it does give an indication of the success that is being realized here.
AGM topics and themes
Air Traffic Management (ATM) in the Gulf
The success of the Gulf carriers will certainly be among the topics discussed at the AGM. We will also address one of the threats to that success—air traffic management.
Airspace is finite. So capacity can only grow with efficiency. Each country in the Gulf has invested in impressive technology. But effective management requires regional and international teamwork.
That teamwork needs to address how to fit a growing commercial aviation sector into airspace when between 40% and 60% of it is reserved for the military. One solution is developing partnerships and trust with the military to open more flexible use zones. That is happening progressively—but not nearly fast enough to keep pace with demand for air travel.
The other challenge is to address the complexities that we have built into the system. For example, historically there was one Flight Information Region or FIR for the Arabian Peninsula—Bahrain. From the early 1980s it began to be fragmented and today there are six FIRs. For an airline, the important thing is to get from point A to point B as smoothly as possible. The challenge for the air navigation service providers is to work together to make that happen as seamlessly across six FIRs as if there were one.
Congestion is a real and rising problem. And it grows with each aircraft that is delivered. Unless it is dealt with quickly, the efficient hub operations which are supporting the region’s success will begin to unravel. I expect that this will get much attention at the AGM.
The AGM will also focus on global issues. And certainly the delegates meeting will have MH370 on their minds. Air transport is safe. As I said, almost 100,000 flights operate each day. And last week we announced our 2013 safety performance. Airlines last year had one major accident for every 2.4 million flights.
But when an incident or accident does occur, our thoughts go to the families and friends of all those on board, and we rededicate our efforts to make this industry even safer.
MH370 is unprecedented. It has been over a month since the aircraft disappeared. We need to find the aircraft in order to understand what happened and learn how to prevent something similar from occurring again. Speculation cannot be our guide. We need to base our efforts on evidence and the conclusions that will come out of the accident investigation process.
But, quite separate from the cause of the accident, there are two issues that have emerged which we can address.
The first is to find a way to ensure that it never takes us this long to find a missing aircraft. Last week, I announced that IATA would convene an expert industry task force to come up with a united industry position on how we can better track aircraft. We will coordinate our efforts with governments through ICAO—the International Civil Aviation Organization. By year-end we will build consensus to input into their efforts.
It is also clear that two people boarded MH370 with stolen passports. Investigators have largely discounted that this had anything to do with the aircraft’s disappearance. But I think that we were all shocked that this could happen. Passport checking and security is the responsibility of governments. Many governments—60 or more—ask airlines to provide advance passenger information which includes passport information.
It is clear that they need to use this information more effectively. And we will be asking governments that require advance passenger information to harmonize around the global standards which are set by ICAO.
That is the last thing that I wanted to mention today—global standards. They form the language that helps stakeholders work together efficiently. The IATA Operational Safety Audit—IOSA—is a good example. Qatar Airways was the first carrier to complete the audit. E-ticketing is another example.
IATA is a staunch promoter and defender of global standards and much of the discussion that you will hear at the AGM will be focused on them. Why? Because they are the foundation for global connectivity.
Some of the global standard or global approach discussions that you will no doubt hear are:
- E-freight, which will deliver similar benefits for air cargo as e-ticketing did for passengers
- Fast Travel—global standards for self-service options to move passengers through airport processes more efficiently with online check-in, kiosks to read identity documents and self-tag bags as well as options for self-boarding, re-booking and baggage tracing
- Smart Security, a joint project with Airports Council International (ACI) to modernize how we screen people at airport checkpoints
- New Distribution Capability—or NDC—which will help to modernize how airlines distribute their product through travel agencies
- Environment—the aviation industry is asking governments to agree on a global mandatory carbon offset program in our pursuit of carbon neutral growth from 2020. ICAO is working to reach agreement on a framework by 2016. And airlines are supporting this important work.
As you can see, it will be an exciting and important event—with these and many more discussions taking place. I urge you to attend….and I am happy to take your questions.