Good morning. Thank you to Driss Benhima, CEO of Royal Air Maroc and President of AFRAA; and Elijah Chingosho, Secretary General of AFRAA for the kind invitation to join you today. It is good to be back in beautiful Marrakech for the second time this month. And I extend my appreciation to AFRAA and Royal Air Maroc and all of the delegates at this assembly for a very warm welcome.
Aviation is a team effort. That is why I am making it a priority to meet as many key stakeholders and partners—especially the regional associations—early in my IATA career. Strong partnerships across the industry are necessary to deliver the best value to our members. I look forward to working with AFRAA to support African aviation and our many common members.
I don’t need to tell you that aviation is a tough business. Our 2011 forecast is for a 1.2% margin which would be a $6.9 billion profit. If we are right, the aggregate bottom line for the industry since 2001 will be a loss of $30 billion on revenues of nearly $5 trillion. It is difficult to make a living in an industry that is all turnover and no leftover.
But aviation is an industry with a very important role. Globally it supports 33 million jobs and $3.5 trillion in economic activity. The connectivity that aviation makes possible turned our planet into a global community. With two or three kilometers of runway, even the most remote outpost has access to the world.
This is particularly important in Africa with vast distances and poor land infrastructure. In many cases there is simply no alternative to air travel. And every plane that takes off carries with it almost infinite possibilities—uniting families, facilitating exploration and linking business. And it is our duty to ensure that every flight is as safe, secure, and environmentally efficient as possible.
Aviation generates wealth both material and of the human spirit. My passion for aviation will guide me in my duties as IATA’s Director General and CEO—focusing on helping IATA’s members do business more successfully.
State of the Industry
Aviation faces enormous challenges. And Africa certainly has its share. African carriers made a $100 million profit last year. We expect them to break even this year, but fall into losses of $100 million in 2012.
The political unrest in North Africa has dampened demand for African carriers. Over the first nine months of the year, passenger traffic grew by only 0.7%. But comparing just the month of September shows growth of 2.3%. It’s less than half the global average, but an improvement on the performance earlier in the year.
The deepening economic uncertainty in Europe has yet to take a bite out of global passenger demand. September traffic was up 5.6%.
All eyes are on air cargo, where we usually get an early warning of what is to come. In September cargo contracted by 2.7% compared to the previous year. And volumes carried by African carriers over the first nine months of the year were down by 3.1%.
Despite the gloomy economic outlook, we don’t foresee much relief on fuel prices. Our forecast average for crude oil in 2012 is $100 per barrel. The industry fuel bill will top $200 billion, consuming 32% of operating costs.
You don’t need me to tell you how difficult it is to run an airline. So, I will focus my remarks on strategic priorities to reinforce the competitiveness of African aviation—and of course based on a solid foundation of global standards.
Safety
The top priority is always safety. And I have to say that I am concerned.
Between 2005 and 2008 the Western Built Jet hull loss rate in Africa improved—from nearly 10 hull losses per million flights down to 2. That was still 2.5 times worse than the global average. But it was a significant step forward.
In 2009, the rate jumped back to 9.94 and in 2010 it was 7.41. For the first 10 months of this year, with two hull losses, the rate is 4.33 hull losses per million flights. That does not compare well to a global average of 0.37. Sure, the trend is back in the right direction. And there have been no hull losses this year with IATA carriers. But aviation must be safe for all airlines and in all regions. And that means we have much work to do in Africa.
When the hull loss rate for African aviation neared 10 in 2005, there was urgency among the region’s stakeholders to improve. That coincided with IATA’s decision to make the IATA Operational Safety Audit (IOSA) a condition for membership. We also committed $3 million to the Partnership for Safety program that focused on helping African carriers achieve this tough but necessary global standard.
The Nigerian example shows what can be achieved. In 2005 it had the worst safety record on the continent with four of the eight hull losses in that year. Contributing factors to these accidents included gaps in safety oversight, ground infrastructure and pilot proficiency. Dr. Harold Demuren was called in to turn the situation around in the post of Director General of Civil Aviation (DGCA).
Dr. Demuren brought innovation and proved that world-class safety is possible in Africa. There was one further hull loss in 2006. And there have been no hull losses in Nigeria since 2007. Dr. Demuren completes his tenure as Nigeria’s DGCA next February and he is owed a great debt of gratitude by IATA and all of our members for his tireless work.
His work should be an inspiration. Making IOSA a requirement for all carriers operating long-haul from Nigeria was one of the innovative measures that Dr Demuren introduced. And Iencourage other African governments to join Nigeria, Egypt and Madagascar in making IOSA a requirement.
It is hard to say what reversed the improvement trend in 2009, but data tells us that runway excursions remain the biggest safety challenge for Africa, followed by loss of control accidents. Data is an important tool. For African carriers participating in IATA’s Implementation Program for Safety Operations in Africa—which makes available flight data analysis—we have seen a 50% reduction in safety events.
Based on runway excursion data my colleague Gaoussou Konate, Director for Safety Operations and Infrastructure in Africa, challenged African airlines present at this forum to integrate the Runway Excursion Risk Reduction Toolkit into simulator training and daily operations. Have we risen to the challenge?
Earlier this year we completed a revised toolkit in cooperation with the International Civil Aviation Organization (ICAO). For it to improve safety, it needs to be used—by airlines, air navigation service providers (ANSPs) and airports.
Implementing the toolkit is at the top of an agenda for safety innovations that also includes:
- Developing a data driven safety culture
- Implementing Safety Management Systems
- Developing infrastructure to support Performance Based Navigation
- And engaging ICAO, the African Civil Aviation Commission (AFCAC), the European Aviation Safety Agency (EASA) and African states in a partnership to develop effective State Safety Program Implementation
It is time again to muster the political will that we found in 2005 to improve safety. I have high expectations for the African Safety Summit, co-hosted by IATA and ICAO in the second quarter of next year. As well as addressing issues like runway excursions, SMS and safety data, it has two ambitious goals for 2015: to reduce Africa’s accident rate to the global average and to remove African carriers from the European list of banned airlines.
And let me re-emphasize IATA does not believe that banning carriers improves safety. Working with airlines to implement global standards and best practices—as we do with IOSA—delivers results. None-the-less, the list of banned airlines is a political reality that is not going to disappear. And improving safety is incumbent on all in this industry. So we need to work together.
Solving safety issues is a constant challenge, but it is not an impossible task. Along with the example of Nigeria, I personally have seen first-hand the amazing turn-around in China. Twenty or so years ago it faced many of the infrastructure and training issues that you have in Africa. But the determination of all stakeholders to use global standards as the basis to achieving world-class safety levels paid off. During my time at IATA, I plan to pay special attention to improving African safety. And I look forward to working with all of you to deliver results.
Security
Another area that I am paying special attention to is security—where innovation is also needed.
Over the last months I have spent considerable time promoting IATA’s Checkpoint of the Future concept for a risk-based approach to airport security. Along with using passenger data already collected for governments to differentiate screening processes, the vision is for technology to enable passengers to walk through the security checkpoint without stopping, unpacking or removing clothing. We are receiving enthusiastic support from the US—the key driver of global aviation security. And over a dozen states and INTERPOL have signed a statement of principles in support of the concept. Notably, Nigeria was the first and we are in advanced discussions with several African countries. I look forward to working with AFRAA and our African members to promote this across the continent.
Passenger security is only half the story. Since the Yemen printer cartridge incident last year, cargo security has been high on the regulatory agenda.
We are very concerned at the European Commission’s pending regulation to create a secret “redlist” of countries whose air cargo security infrastructure has been deemed inadequate. These countries would be subject to significant additional processes and procedures in order to be permitted to maintain air cargo links with EU members.
As is the case with the EU’s list of banned carriers, we believe that this is not the right approach because it does not address the underlying issues in cargo security. Instead of delivering more effective security screening, it will create two classes of countries: the “haves” and the “have-nots”. Among the have-nots are likely to be those states most in need of our support, and for which air cargo offers a path towards economic prosperity.
There is a better path. It is IATA’s Secure Freight program which is a blueprint for a multi-layered approach to securing the air cargo value chain. This is an innovative way to help countries take advantage of years of industry know-how and best practices so that they don’t have to start with a blank sheet of paper. Cooperation among all parts of the supply chain is also a must. And I know that we can count on AFRAA for their support.
Environment
Environment also needs cooperation and a global approach. From next week Africa will play host to COP-17 in Durban. Aviation will be present through IATA and the Air Transport Action Group (ATAG)—engaging with delegates and communicating our strong track record and proactive approach.
As you know, aviation committed, as a united industry value chain, to improve fuel efficiency by 1.5% annually to 2020, cap net emissions from 2020 and cut net emissions in half by 2050 compared to 2005 levels. To help guide this process, South African Airways sits on the IATA Environment Committee—its first member from this continent. And Kenya Airways is the first African carrier to use the IATA Industry Standard Carbon Offset program and we hope that Egyptair will soon be the second.
I was at the IATA Fuel Forum last week where much attention focused on sustainable biofuels. With the potential to reduce aviation’s carbon footprint by up to 80% when calculated over the lifecycle of the fuel, sustainable biofuels are a potentially game changing innovation. They are tested, approved and being used on some commercial flights.
The challenge is commercialization—to increase the supply and reduce the cost. To do so, and create jobs in the green economy, we need a united voice asking governments to create the fiscal and legal frameworks to support the development of a successful biofuels industry. There is huge potential for Africa to develop local biofuels industries that could spread economic opportunity even in the most remote corner of the continent. And we should be lobbying governments strongly to help make that a reality.
Unfortunately, the attention of governments is being distracted by Europe’s unilateral plan to include international aviation in its emissions trading scheme (ETS) from 2012. The industry has long opposed this because regional schemes distort markets and open the door to a patchwork approach of conflicting, competing or layered measures including taxation.
But let me also be clear in stating that the industry supports market based measures—including emissions trading—as a key pillar of our environment strategy. But such measures must be globally coordinated through ICAO.
States are now expressing very clearly their opposition to Europe’s ETS. They see the extra-territorial imposition of taxes as a threat to sovereignty. The US is debating legislation preventing its carriers from participating. And recently the ICAO Council agreed to a Declaration, sponsored by 26 states, urging Europe to abandon its plans and support a global solution through ICAO. As 2012 draws near, we can expect growing pressure on Europe to accept credit for raising the profile of the issue…but also to change course to support a global solution.
African carriers may expect to be sheltered from the EU ETS and other market based mechanisms through the de minimis rule adopted by ICAO in 2010. This is by no means certain. So I urge all AFRAA members to stay engaged on the issue. It is important that that you continue to communicate to your governments the importance of a global solution though ICAO.
Another issue which may arise around the COP-17 discussions is that of a carbon tax on aviation. Such taxes will hurt the industry….and many economies—especially those that rely heavily on trade and tourism. Just look at the competitive disadvantage that the UK’s Air Passenger Duty puts on long-haul tourist destinations. The challenges of adaptation must be addressed and funded, but a carbon tax on air travel is not the way. And I hope that with AFRAA we can remind African governments of this.
Infrastructure
We must also keep an open dialogue with governments on infrastructure. There is no question that Africa needs infrastructure investment. And it needs to be funded. But like all innovations in aviation, infrastructure development is most successful when it is a team effort built on global standards.
Since 2008 we have seen a worrying trend of infrastructure development fees being imposed with little prior notification and often with no consultation and in the absence of transparency. For example Mali, Senegal and the Democratic Republic of Congo are among twelve states to have introduced such fees since 2008. And the combined annual cost to airlines is over $100 million—more than the African industry made in 2010.
We need to remind governments that pre-financing of infrastructure is against ICAO principles. It is the same principle as road tolls. You don’t collect them until the road is built.
But the issue is not limited to pre-financing. On 12 September the Kenya Civil Aviation Authority announced that it would revise its air navigation charges upwards effective the first of November. They applied a formula that was agreed upon in 2008. But the implementation was without consultation which we are now requesting before anything is finalized.
I was here in Marrakech a few weeks ago addressing the Airports Council International. I stressed that airlines and infrastructure providers share a common future. There will always be tension in the relationship because the infrastructure revenues are airline costs. The important thing is to ensure that it results in decisions that strengthen both.
Airlines should be involved in any capital expenditure planning for airports or ANSPs. For better or worse, airlines are the customer in the relationship. If projects meet our needs and cost benefit analysis, we will be enthusiastic supporters. That can only be achieved through engagement and transparent consultations. And to pay for infrastructure we are focusing on long-term charges agreements which include service level agreements. And, we are working on the development of innovative concepts for risk-sharing which will lead to better charges structures in the long-term.
And of course in all of this, I repeat that we must safeguard and be guided by ICAO principles of non-discrimination, consultation, transparency, cost-relatedness and without pre-financing.
Benefits of Aviation
Whether we are talking about safety, security or environment, or if we are looking to improve the infrastructure on which we operate, governments are more than idle stakeholders in our business. The decisions that they make about the industry have a tremendous impact on our business…right down to the bottom line.
But, how much do governments know about our business and the impact that a successful aviation industry can have on national economies and sustainable development? To help support industry arguments for better policy with quantified data on the benefits of aviation, IATA commissioned Oxford Economics to complete a series of 54 national studies—including South Africa, Nigeria, Kenya, Egypt and Morocco. AFRAA, the Airlines Association of Southern Africa (AASA), local airlines, Board of Airlines Representatives (BARs) and others have been partners and supporters of this project.
The findings of our recently released study on South Africa are impressive. Aviation contributes 2.1% of South African GDP and employs over 220,000 South Africans. It also pays some six billion Rand in taxes. And the overall economic benefit of the 21 million people and 240,000 tonnes of cargo that travel to, from and within South Africa exceeds ZAR 100 million.
Understanding the economic importance of aviation lends tremendous weight to our arguments on issues such as regulation of monopoly suppliers. As you know, that is a discussion that we are having in South Africa following enormous price hikes allowed under the current system.
Aviation is a catalyst for sustainable development. Every government in the continent should know that…and make that knowledge a key pillar in their economic strategy. As these studies are produced, they are a tool for anybody to use…strengthening our voice as an industry.
Conclusion
There is lot of work still to be done to bolster competitiveness and support African aviation to reach its potential. IATA is at your service---across the continent and for all airlines…..
- Keeping your money safe in our settlement systems
- And supporting innovation to make our industry safer, more secure, environmentally responsible, competitive and well-supported with efficient infrastructure.
We cannot do it alone. I look forward to working with AFRAA and our members individually to make this continent—indeed the world—a better place by harnessing the power of a successful aviation industry.