Good morning from Montreal. We are here on the occasion of the 41st. General Assembly of ICAO. There are a lot of expectations for developments out of the Assembly. And certainly, we will be very interested to see how the global government community can come together to assist the industry in achieving our goals, particularly in relation to climate change.

But maybe just for context, I’ll remind you what the industry has gone through over the last few years and where we currently are. So if we can move to this slide, you can see we went through a dreadful couple of years. The good news is we are making progress. But when you see the losses in 2020 and 2021--and indeed, this year--where we are still expecting losses on the order of 10 billion US dollars, the industry will have lost around 190 billion US dollars in the three years since this pandemic started.

And it is interesting, but if you go back and just look at the chart between 2010 and 2019, I think that was the first time the industry had made profits at an operating level, consecutively. And these were the best 10 years of the industry's history. And interestingly, the average margin over that period was five and a half percent. And you compare that to the margins over the last three years - minus 29% - and minus 1.8%, is expected in this year, so very, very tough times. But I think great credit goes to airlines that have been able to manage through this crisis and it demonstrates the resilience of the industry.

Moving on, if you look at what we’re seeing this year, it’s expected that the US industry will be profitable. Again these are net margins, so margin as a percent of revenue; the rest of the global industry is lagging behind the US. But we’re making good progress.

I think, Asia Pacific, unfortunately, will continue to lag the rest of the industry, given the ongoing border restrictions that exist there. This chart highlights the impact of border closures apart from the US, because the US industry as many of you will know, has a strong domestic network, which was largely untouched by government regulations or closures through the period. It is mainly international travel that has significantly suffered.

And moving onto the next chart, you can see that cargo has been resilient throughout; we’ve highlighted this on a number of occasions. The importance of the industry being able to pivot its operations from primarily a passenger-focused industry to a cargo-focused industry, to ensure that critical supplies remained available throughout the period, demonstrates how important this industry is to the global supply chain. The demand for cargo has been quite strong, remains resilient throughout the period, although slightly down in July. I would expect that to be in the same in August, about 3%.

We've seen domestic recovered strongly in July, and the same would be true for August. And that is principally the recovery of the Chinese domestic market as the internal restrictions within China were relaxed. So good progress being made on international travel. You can see we’re at about 68% of where we were in July of 2019. If you consider that in 2021, international travel was at about 25% of where we were in 2019, it shows that international travel has been recovering strongly through this period into the northern summer period where you would expect traffic demand to be strong.

This chart really does reinforce our view that border closures did nothing to prevent the spread of the virus but had a massive impact on international travel. As soon as those restrictions at the border were removed, we saw a strong recovery. Now as mentioned, the Asia Pacific region is lagging behind. We see international travel within Asia Pacific still only about 25% and that plays into the pace at which it will recover.

This shows our latest forecast in terms of when do we get back to 2019 passenger figures. So you can see for Africa we are expecting in 2025, Asia-Pacific, 2025, Europe, 2024. We should be ahead of 2019 and 2020 for Latin American / Caribbean in 2024, Middle East in 2024, North America the strongest, 2023, and globally 2024. The biggest impact going into next year will be what happens in China and whether China starts to relax the situation.

The situation in China, coupled with some of the economic headwinds that we are witnessing at the moment has made our latest forecasts slightly less optimistic than what we had previously looked at. But in the main. we are still looking at a global recovery in 2024, with good progress being made in 2022 and 2023.

The next slide shows just one of the headwinds that we’re facing at the moment. I think everyone will be familiar with the rising oil price and the impact that energy prices will have on consumers. Starting at the beginning of this year, we saw what we call the crack spread, the difference between Brent or crude price, and the price of jet, widened very significantly.

Although we have seen crude prices ease in recent months, we are still seeing elevated prices for jet fuel, and some of that is understandable, given that the demand reduced significantly in 2020 and 2021. So refining capacity moved away from jet. As that capacity came back online, we would have expected to see this crack spread narrow significantly.

It is still at rates that are significantly elevated from historical rates, which you can see there going back to 2015. Between 2010 and 2019, the average spread was about 18%, so Brent averaged $80 a barrel throughout that 10-year period. We have seen that spreads go over 60%. At the end of September, it was at 56%. Now it has eased a little bit, but still a very big difference between crude prices and jet prices, which means that we will see costs continue to challenge the industry in 2022, and in 2023.

Now, just to comment briefly on what we expect from the Assembly, the main focus for us will be on what ICAO calls their long-term aspirational goal. As most people are aware, the industry has agreed at our AGM in October of last year to target net zero in 2050. A very significant and ambitious target for the industry.

We have now aligned ourselves with the science and with the ambition of the Paris agreement. We will be looking to ICAO to get the global governments and regulators equally aligned and to agree on their long-term aspirational goal of net zero by 2050. I think anything shy of that, and this Assembly will be viewed as a failure.

While you know some of these targets are ambitious, and the expectation is high, we have to be realistic that in the current environment, anything short of ICAO agreeing to that long term aspirational goal of net zero by 2050 will be a huge disappointment. It is not going to stop us continuing on our roads to net zero by 2050. But I think it would send a very important signal to governments and help ensure that we get the right policy framework in place to assist the industry in its ambition.

Clearly, sustainable aviation fuels has been a key driver in achieving our goals. We need to see more production and widespread availability of sustainable aviation fuels. I’ve said on many occasions that it is absolute nonsense to believe that you need to incentivize the industry or force the industry to buy sustainable aviation fuels when we are buying every single drop of sustainable aviation fuel that we can get our hands on.

What really needs to happen now is governments need to incentivize the production of sustainable aviation fuels. We need the traditional fuel suppliers to turn their attention to sustainable fuels. It is great to see some new entrants in the market, companies like Neste, who are producing sustainable fuels at volume and have ambitions to do so going forward. But we do need to see greater emphasis on the production of sustainable fuels.

We need governments to come together to incentivize and provide the right framework to ensure that we get greater production of sustainable fuels and that will be absolutely key, given the time available to achieve net zero by 2050. Sustainable fuels really do represent the best opportunity--and a very exciting opportunity--not just for us in the airline industry, but it should be seen as an exciting opportunity for governments and countries right across the world.


Related: High Expectations on Sustainability and Pandemic Preparedness at 41st ICAO Assembly