It is good to be here in Russia. The growth and resilience of Russian aviation is amazing.
2010 was the best year for modern Russian Aviation, with Russian carriers transporting over 57 million passengers. That is 26% more than in 2009, and 10% more than 2008. And this is leading to profits for several Russian carriers.
But let’s not forget that this is a difficult business, in Russia and around the globe. The industry earned a record $18 billion in 2010, on $554 billion in revenue. That is a pathetic 3.2% margin, and earlier this month, at our Annual General Meeting in Singapore, we cut our 2011 profit forecast in half to $4 billion. That’s an even more pathetic 0.7% margin.
This year has had an unprecedented series of crises: political unrest in the Middle East; the Japanese tsunami and earthquake; volcanic eruptions in Iceland, Chile and Eritrea; and a 30% jump in oil prices since the beginning of this year.
Despite all this, today we are celebrating two big events for IATA and for aviation in Russia. First, it is IATA’s 15th year of operations since we established our presence here in 1996 with two staff and two Russian member airlines - Aeroflot and Transaero. Today we are nine staff, proudly representing IATA’s 238 members - including nine based in the Russian Federation.
This growth is directly related to our second celebration, which is the opening of our new office, with facilities to support our expanded operations. During IATA’s 15 years in Russia, we have been honored to contribute to the growth and strengthening of aviation in Russia. When I was here in 2009 to celebrate the 100th anniversary of the Russian Ministry of Transport, I signed a Memorandum of Understanding with the Ministry to formalize IATA’s many contributions. IATA’s global standards, including the Simplifying the Business initiative, are helping improve competitiveness with e-ticketing, e-freight, self service check-in and so on. Our Billing and Settlement Plan (BSP) operation with our partner, VTB Bank, and the strong support of Aeroflot and Minister Levitin, has grown to a $2.5 billion operation, covering 107 airlines and 525 agents.
We have cooperated closely with air traffic management authorities to improve efficiency by opening some 400 new international air routes since 2004, and we look forward to Russia adopting the global standard for Reduced Vertical Separation Minima (RVSM) from November this year. This will be a major step forward, and a platform for even more improvements.
The top priority is always safety. Russia’s hull loss rate for Western-built aircraft shows no hull losses in 2009 and 2010. The record was broken this year, with one tragic accident that claimed five lives. IATA’s Operational Safety Audit (IOSA)has helped with this tremendous improvement. From just a few years ago, when Russia had one of the highest hull loss rates in the world, today the thirteen biggest Russian airlines are on the registry, including of course all nine IATA members. None of these carriers has had a fatal accident in the last three years.
But safety remains an issue, with three accidents this year with Russian-built aircraft, and nine last year. We have standards within IOSA for modern Russian aircraft, which comply with the International Civil Aviation Organization (ICAO) standards, and we encourage FATA—the Federal Air Transport Authority - to move quickly to deal with aircraft still in service that do not comply with ICAO’s standards.
I have also come to Moscow with a strong appeal for Russia to adopt global standards for airport and air navigation charges. For various historical reasons
Russia charges foreign carriers more to use airports and air navigation services than it does Russian carriers. Now it’s time to stop this practice and focus on cost efficiency, with effective economic regulation, and equal charges for all carriers.
This can be achieved through more open consultation between airlines, and both FATA and the State Air Traffic Management Corporation. The more that they understand airlines’ needs, the better we will be able to plan for top-class cost efficient services.
EU Emissions Trading Scheme (ETS)
I also came here with a strong message for Russia to become more vocal in defending global standards with its neighbors in Europe. We believe that Europe’s intention to bring international aviation into its emissions trading scheme is illegal. It contravenes the Kyoto protocol, which gives ICAO the responsibility to manage aviation’s international emissions, and the Chicago Convention, which prohibits taxation of international aviation. It is also extra-territorial, making Europe the sheriff for emissions around the world, and taxing airlines for emissions outside its political territory. This would be unacceptable for any other form of tax.
We appreciated Russia’s strong support for a global framework at the ICAO Assembly, and I encourage it to join the growing chorus of countries—including China and the United States - to make its support of a global solution through ICAO, and opposition to Europe’s unilateral moves, even more vocal.
Europe needs to understand that by imposing its ETS on sovereign states like Russia, it could lead to consequences not just for European airlines, but for the European economy as a whole.
Aviation plays a key role in Russia. With such a vast geography, the connectivity that aviation makes possible is critical to Russia’s economic success. IATA’s mission in Russia is to help the aviation sector deliver even more value to Russia.
The potential is huge. The 57 million passengers carried by all Russian carriers last year are less than half the 120 million carried by Aeroflot in Soviet times. I am convinced that the future is bright and full of potential, but Russia must use global standards to further improve safety, to defend its interests against unilateral European actions, and to ensure cost-efficient operations with airport and air navigation charges, that are compliant with ICAO principles.
These were my main messages to the Minister this morning.
Finally, I am joined on this visit by my successor Tony Tyler. From 1 July I will become Director General Emeritus and continue with aviation-related boards
and important work teaching the next generation of aviation leaders. I know that Tony will lead IATA with a great interest in Russia, and will continue to support its aviation development with all of IATA’s expertise, global perspective and standards.
* Note: This speech was delivered before the RusAir Tupolev-134 crash at Petrozavodsk, on 20 June at 23:40.