The ALTA Leaders Forum is one of the highlights of my year but I regret that I cannot be with you.

State of the Industry

The global economy is starting to do business again. We see this in cargo statistics. Volumes are 12% better than December, but we are still 16% below pre-crisis levels. Passenger traffic is similar, it is 6% better than the bottom but still 5% below the peak. Planes are fuller but yields are a disaster. US$80 billion in revenue will disappear from the industry top line in 2009 and we face another year of big losses -- US$11 billion.

Latin American Focus

Against this grim backdrop, Latin American carriers are the best performers and are expected to break even for this year. This accomplishment comes even with the impact of Influenza (A) H1N1 starting in April when the region’s carriers generated US$500 million in second quarter profits. What is behind this? The banking system was solid and the economy was strong. At the carrier level I see two realities: Some are doing exceptionally well but others are struggling.


What defines the difference? One common thread is liberalization. Chile, Brazil and Panama are among the most liberal countries and have the strongest carriers. The multinational brands developing in this region are a role model that inspired similar developments in Asia’s low-cost sector. Aviation is not a diplomatic function. We are businesses. Our success must not be limited by archaic rules that restrict access to markets and to global capital.

This crisis makes it absolutely clear that progressive liberalization is the way forward. Next month, Latin America will play a leadership role at our Agenda for Freedom Summit in Montreal. Our goal is to help governments develop effective tools to make this a normal industry capable of generating sustainable profits.

Latin America is a developing role model on liberalization. But there are many areas where we must send strong messages to governments including taxes and charges, safety and environment.

Taxes and Charges

Working together we eliminated Brazil’s PIS/COFINS tax and achieved a 30% discount at Aeroportos 2000 in Argentina. But Quito, for example, is ignoring ICAO principles collecting inflated fees today to pay for a future airport. Brazil artificially inflates fuel prices and cross subsidized airports with the 50% ATAERO tax. Mexican airport privatization without strong regulation resulted in poor service and high costs. These are only some examples of the problems in the region.

What are the solutions? First, money collected from the industry must stay in the industry to fund infrastructure including advanced air navigation. Second, partners must become more efficient. There are some positive examples around the world. Singapore reduced landing charges by 25%, Malaysia by 50%, and Toronto delivered a third consecutive year of efficiency gains and cost reductions. Where are our Latin American partners? And our message to governments is that effective economic regulation needs to be in line with ICAO principles and must drive efficiencies.


Safety is always our top priority even in this industry crisis. We achieved 100% IOSA registration, which was a historic milestone. Congratulations to all. Because of our efforts flying is about the safest thing that anyone can do.

Over the last few years, the Latin American accident rate has been consistently two to three times worse than the global average but so far this year you have a perfect record. Congratulations. But that is not a license to relax. Five Latin American governments -- Brazil, Chile, Panama, Costa Rica and Mexico -- have incorporated IOSA into national legislation. Over three years ago LACLAC made IOSA a regional commitment.

Our message to governments is that it is time for more to come on board and deliver on their commitment.


The last area is environment. How we deal with climate change will shape our industry’s future. Industry’s responsible approach to reducing emissions is racing ahead of governments who cannot see beyond politics. Our four-pillar strategy has saved nearly 79 million tonnes of CO2. Carbon emissions this year will fall by 7% -- 5% from the recession and 2% from our strategy.

At our June AGM, our Board agreed three tough targets: to improve fuel efficiency by an average of 1.5% per year through 2020, to stabilize our emissions with carbon-neutral growth from 2020, and to cut our emission in half by 2050 compared to 2005. To achieve these targets we need a global sectoral approach in the Kyoto II framework. National solutions for power plants or factories will not work for a global aviation industry. A global sectoral approach means that aviation’s emissions are accounted for as a global sector, not by state. Aviation needs to be fully accountable for its emissions but with no double-taxing or double counting.

We worked with ACI, CANSO, ICCAIA, who represent airports, ANSPs and manufacturers to make this a joint industry position for the ICAO High Level Meeting last week. Our message to governments at Copenhagen is clear. Aviation has a strong commitment and impressive track record. Governments must sort out their politics so that we can deliver results effectively as a global sector.


In conclusion our common goal with governments must be to make aviation safer, greener and profitable. I hope that these thoughts are helpful and I wish you a productive meeting. Thank you.