Good morning to everybody in Geneva and good day to all those joining the call around the world. For a change, today we have some good news. We are cutting our loss forecast in half from the previously predicted US$5.6 billion to US$2.8 billion. It is still a loss so it is too early for a party. But now, we can clearly see from the numbers that the industry situation is improving. What are the numbers that are driving this new optimism? First, let’s look globally and then discuss the regional picture.

The most important improvement is demand. 2010 started strongly with passenger demand up 6.4% and cargo up 28.3%. Even with these big gains, demand is still 2-3% below pre-crisis levels. So the impact of the crisis will be 2-3 years of lost growth. But we are definitely moving in the right direction. In fact, the improvement is much better than expected. We are raising our forecast for 2010 traffic growth to 5.6% for passenger and 12.0% for cargo.

Load Factors
The airlines have been much better at matching capacity to demand in this crisis. For example, for the full-year 2009 passenger traffic was down 2.5% and capacity contracted by 2.1%. With improved year-end demand, load factors have risen to record levels. January is usually a slow month but we saw a load factor of 75.9%.

The tighter supply and demand conditions have given airlines some pricing power. Yields fell by 14% last year for both cargo and passenger. Our previous forecast did not see yields improving but we now anticipate a 2.0% increase in passenger yields and a 3.1% increase in cargo.

Premium traffic is a bit more complicated. We see the numbers rising along with improved economic conditions so it’s a cyclical improvement. But yields are still down by 20% and we are concerned that this could be a structural shift particularly for domestic US and intra-Europe.

All of this translates to an improved revenue environment. We expect industry revenues to be US$522 billion in 2010. So we will be half-way to recovery -- US$43 billion better than 2009 but still US$42 billion below the 2008 peak. This shows that we have also lost 2-3 years of growth in revenues.

While I am optimistic, I must also be realistic. Considerable risks remain and we must be cautious.

The first is fuel. We have raised our forecast to reflect oil at US$79 per barrel. That is US$17 a barrel higher than in 2009. This means that fuel will rise from 24% of operating costs to 26%. The risk is that the pace of the broader economic recovery pushes fuel higher more quickly than the industry can cover its costs with higher yields.

Managing capacity will be a challenge in 2010 as well. Wide-body utilization is still 7-8% down. So there is unused capacity already in the system and 1,400 aircraft are to be delivered this year as well.

Labor and Partners
This will be a Spartan recovery and cost control is critical. The caution that comes with this more optimistic outlook must be understood by labor and our industry partners. The figures are moving in the right direction but they are still red. This is definitely not the time for increases in salaries or prices. And it is certainly not the time for strikes. Recovery will depend on everybody sharing the burden.

Regional Outlook
One unique trend of this improvement is that the industry is moving at two speeds. Where economic recovery is robust such as Latin America and particularly Asia, we are seeing profitable demand growth. Everywhere else will see reduced losses from 2009.

Asia-Pacific carriers are expected to post a combined profit of US$900 million. That is a dramatic shift from the US$2.7 billion loss last year. The recovery of business in Asia has been so strong that we actually have a shortage of capacity for freighter shipments from the region. Unfortunately, it is a one-way problem.

Latin American carriers will see a profit of US$800 million unchanged from the US$800 million that the region made last year.

Middle East carriers continue to show strong traffic growth. We forecast 15.2% demand growth this year. But low yields on hub traffic stand in the way of profitability and the region will lose US$400 million this year.

North America and Europe will show the greatest losses: US$1.8 billion and US$2.2 billion respectively. Jobless recoveries and continuing economic concerns will limit traffic growth and, the short-haul premium traffic is still suffering. In December, within-Europe it was down almost 10% and within-North America it was down over 13%. As I mentioned earlier, this could be a structural change that the industry will have to adjust to.

African carriers will cut their losses in half to US$100 million. The issue here is fierce competition for market share from carriers from outside the region.

That is a very quick round-up of how we see this two-speed recovery and the risks that it faces. The industry also faces some big non-financial issues in 2010. Let me highlight two.

The two-speed nature of the recovery highlights the need to eliminate the restrictions on ownership and market access of the bilateral system. We made progress with the multilateral statement of policy principles signed by Chile, Malaysia, Panama, Singapore, Switzerland, the United States, the United Arab Emirates and the European Commission. Most recently, Kuwait also endorsed the principles. We will be watching closely the US and EU Open Sky talks with the hope that they address ownership.

Copenhagen did not give us the clarity of a binding global agreement. You know our targets: stabilizing emissions with carbon-neutral growth from 2020 and cutting emissions in half by 2050 compared to 2005. The challenge for this year is to add detail to the plan for how we will get there. Biofuels continue to be our biggest hope with certification due next year. And we will be working through ICAO to get governments to agree and support our targets and to develop a system to achieve them that accommodates developed and developing nations. The ICAO Assembly is in September-October, just in time for COP-16.