These are the most challenging times for our industry. Following US$35 billion of losses since 2001, massive change is critical. Traffic is recovering. 2004 passenger traffic was 15.3% above 2003 levels and 8.8% better than 2000. For 2004-2008 we expect 6% annual growth in passenger and cargo traffic. Consumers are demanding cheaper air travel. So traffic recovery is only good news if we can reduce costs. Airline restructuring resulted in a reduction of non-fuel unit costs by 2.5% in 2003. In 2004 airlines achieved a further 3.0% decrease. But yields declined by 10% over the past 5 years.

Unfortunately, ANSPs are not keeping up with this cost reduction. The unit cost of air navigation increased by 9.4% in the last five years to a total of US$8 billion. My message today is that ANSPs must contribute more to the industry priority of cost reduction. Harmonisation is key.

Simplifying the Business

Global standards, many coordinated through IATA, made a global industry possible. Today IATA is coordinating global cost reduction under the banner "Simplifying the Business". The headline Simplifying the Business projects are:

- Paperless travel starting with E-ticketing
- Paperless cargo
- Common use of self service kiosks for check-in
- Bar coded boarding passes
- and radio frequency identification for baggage management

E-ticketing alone will save US$3 billion, paperless cargo another US$1 billion. Global harmonisation brings efficiency and cost benefits that airlines need and that our customers demand.

Working together

ANSPs and airlines are partners in the same industry. Our customers' demands must be reflected in common goals for airlines and ANSPs. The message is simple:

- increase safety, efficiency and service levels
- ensure SUFFICIENT capacity
- and reduce costs.

Airlines live in competitive world. ANSPs are monopolies, so IATA is leading the dialogue to remind you of our commercial realities. We are beginning to understand each other. Faced with a crisis in fuel costs, and with your help, the IATA "Save a Minute" campaign achieved US$700 million in 2004. At US$100 per minute, the potential savings exceed US$2.7 billion. So we have a common US$2 billion cost saving target for 2005.

Also in 2004 IATA worked with ANSPs to achieve cost savings of nearly US$600 million. US$500 million of this came from reduced unit rates. In other words increased traffic was the driving factor, not efficiency gains. We need a meaningful reduction in the cost base. You need to get much tougher on costs. CANSO is uniquely placed to help achieve this. Together we must achieve greater efficiency by harmonizing infrastructure, operations and benchmarking.

Measuring Efficiency

Travelers benchmark airlines on many factors. Most passengers base their decision on the balance of price and convenience. Safety is taken for granted. Airlines benchmark themselves against their competitors to understand their competitive position. This is the reality of the industry. ANSP's are monopolies, so there is no commercial benchmarking.

So, IATA and CANSO must work together to measure the current level of ANSP efficiency. And we must set challenging targets for improvement. The starting point is agreeing to clear and credible criteria. Let's start simply by identifying good and bad performers on

- Safety
- Proactive Cost Reduction
- Transparency
- Capacity

From this we will get a common picture of where we are. The next step is set and achieve targets for improvement through

- Rationalised infrastructure
- Common procurement based on user needs
- Coherent multi-national regulation

Benchmarking at Work

Let me illustrate this in the context of Europe where potential savings are enormous. Our European bill is US$5.6 billion of the global US$8 billion charge. Overall European ANSPs are about 70% less cost efficient than the US. Within Europe, benchmarking points to huge potential efficiencies. Airlines pay a unit rates in the 25-40 Euro range in the Czech Republic, Ireland, Greece, Turkey, Hungary and Finland, among others. The Czech Republic is the lowest at 26.6 Euros.

The same service in Switzerland, Belgium, the UK, Germany and Spain continental costs us over 70 Euros. Switzerland is the highest at 86.4 Euros. The gap shows a level of inefficiency that is not acceptable. A key measure of the success of the European Single Sky initiative is common cost efficiency. With the current range in costs, I can only say that it is a failure. The last European Commission had no vision for our industry or for the support that it needs. Under Mr. Barrot we hope to see strong leadership and a clear vision. The European Provisional Council suggested a 14% cost reduction target by 2008.

We can do better. I challenge you to attack the cost base and achieve a 20% efficiency gain by 2008. As leaders, you can see the potential to take advantage of some great opportunities:

1. Improve the cost effectiveness of regulation.

The cost of regulation doubled from 0.6% in 2001 to 1.2% in 2004. An effective Single European Sky should reverse this with coherent regulation.

2. Allocate costs fairly and transparently

Transparent allocation of German met costs saved airlines over US$25 million in 2004. We will pay our fair share, but so must other users of the system. For example clear allocation of costs for VFR aircraft could reduce the ANSP commercial cost base by up to 10%.

3. Improve worker productivity

There is a 1000% gap between the highest and lowest composite flight hour performance of controllers across the CANSO membership. We have Skyguide with a performance measure just above 1 composite flight-hour per ATCO hour – but still being the most expensive ANSP. While Moldavia, Ukraine and Romania are far behind with some performances as low as 0.1. There is no justification for this range. And there is no justification for the inflated staffing levels. 30% of the ANSP European workforce is technical support. Your colleagues in Australia and New Zealand function with 20% levels. And within Europe Ireland manages with a level of 10%. You must do better. Your challenge is to match the best-in-class performance of your colleagues.

Harmonising the Infrastructure

We need cost effective solutions for ATM infrastructure that will:

- accommodate growth
- eliminate delays
- improve safety
- and reduce the industry's environmental impacts.

Harmonisation provides much of the answer. We need a plan with global agreement on standards and technology.

The Plan

Our vision is pure harmony: one sky with a global ATM system. To make our message as clear as possible, we named our efforts the IATA One Sky… Global ATM campaign. ICAO bought into this vision and challenged us to deliver a concrete plan. In five months IATA delivered the Global ATM Implementation Roadmap. This year we will change the ATM operational Concept with a global CNS Implementation Roadmap. As partners IATA and CANSO need to work closely. There is no time to lose and your cooperation is essential.

Global Standards

We all speak of the need for global standards. We need results, not discussion or words. Globally harmonised standards must result in globally harmonised systems. This will allow open and fair competition for applications including radio and service. The actions of the US FAA and Eurocontrol are completely disappointing. You are industry leaders, but your vision sees only local politics and regional manufacturers. Just look at the unrealistic and conflicting approaches towards VDL Mode 3 and 4. Can anyone justify two systems in airspace that is so closely linked?

I challenge you to go beyond the words in this and other issues. If the door is open, I assure that IATA will support you with full and accurate representation of user needs.

Approach to Technology

We don't need more technology. We need better performance driven solutions. The first step is making better use of the capabilities of existing and purchased technology. And when the users and providers decide to move to another level of technology, let's make sure we agree to a cost effective solution.

Airservices Australia is implementing ADS-B with the full support of the airline community including QANTAS—it's largest customer. It is a model for other providers to follow. Contrast this to the US FAA and Eurocontrol situation. Eurocontol's LINK2000 program will provide tremendous datalink benefits with VDL Mode 2. All new aircraft carry the needed technology—ADS-B (out) and VDL Mode 2. Why is the US FAA searching for another solution?

Again, we must work on solutions that provide benefit including cost reduction. We are facing decisions on WAAS and EGNOS. There is no doubt that they are great technologies. But we cannot agree until they are also great business cases.

The Bottom Line

The bottom line is that:

Airlines cannot support changes that are not harmonised across borders, and airlines will not agree to pay for technology without a positive cost benefit analysis.

The Future

I have been talking about what is possible with existing technology and ideas. As industry leaders and partners, we must also look beyond traditional ways of doing business. Airlines like Air France, KLM, Qantas and many in Latin America are moving beyond the current industry regulatory framework. They have a vision of a global industry to match global commercial realities.

Some ANSPs have similar visions. Africa, Latin America and Europe have transnational bodies providing coordination. AirServices Australia and the airlines have a completely open and transparent relationship that is re-defining partnership. The unique partnership that is UK NATS, along with a strong regulatory framework is beginning to show some positive results. Airways New Zealand provides ATM services on a commercial basis beyond its borders. CANSO is taking on new leadership among ANSPs in a way that did not exist before.
We appreciate very much the joint work that is underway in the Co-operation Working Group.

Now we must deliver concrete results. We can shape some of the future by learning from our achievements and experiences. I challenge you, your regulators and your governments to put together our collective experiences in gaining real efficiencies through

- Trans-border operations
- Cross sector partnerships and
- Joint planning agreements

This should lead us to a future ATM system with

- Fewer borders
- Improved safety, efficiency and environmental performance
- Reduced costs
- Common technology, standards and procedures

Harmonisation is the first and most critical step. Overall, today's ANSP level of cost efficiency is not acceptable. The challenge to CANSO is to strengthen our partnership and to achieve significant progress on costs and efficiency. Let's make sure we have real achievements to discuss when we meet again next year.

'ANSP Harmonisation—An Airline Perspective', CANSO Meeting, Maastricht