Reflecting on the broad theme of this panel reminded me of IATA’s vision statement: To be the force for value creation and innovation driving a safe, secure and profitable air transport industry that sustainably connects and enriches our world. In short, we want to deliver value to make air transport a successful driver of social and economic development. I have no doubt that we all share the same goal.
Three billion people travel annually. About a third of world trade is delivered by air. Aviation supports some 57 million jobs. And aviation connectivity has re-dimensioned our big world into a global community. And it is our responsibility to work together to support its future success. Despite all the good that aviation delivers, it’s a challenging business.
The perennial problem of pathetic profitability illustrates the point. Last year we made $2.50 for every passenger carried (on average). We will do a bit better this year. But closing the gap between the 7-8% returns needed to recover the industry’s cost of capital and where we are today will need some fundamental changes. As industry partners and stakeholders, we need to find ways to help aviation thrive—to grow connectivity, raise service levels and invest in a sustainable future. The team that can make this happen is broadly represented here today—airports, air navigation service providers and our business partners in the tourism and cargo value chains. And of course, our government partners play the critical role of ensuring safe and secure operations on a level playing field.
I see three critical elements for addressing our issues and building success:
- The first is identifying and committing to common goals. We are in this together and there are many areas on which to cooperate.
- The second is global standards. There is no better example than safety—our industry’s top priority—to illustrate what can be achieved with the successful application of global standards. Last year was the safest in aviation history with not a single modern jet hull-loss among IATA’s 240 member airlines.
- And the third element is striking the right balance between what regulation can do best and those areas where market forces should take the lead.
“Passenger rights” provides a good illustration. The common goal is to ensure that passengers arrive safely, on time, and satisfied. And when things go wrong, we want to minimize the inconvenience. Global standards play a role because we want all passengers to have a clear understanding of rights and responsibilities—even when traveling internationally. IATA’s working paper addresses the issue by outlining simple guarantees that could be applied globally. And the balance between regulation and market forces is met by ensuring that airlines have the freedom to respond to passengers in the way that best meets their needs—guided by the disciplining hand of the market.
The same approach could be applied to what is likely to be the most contentious issue at this Assembly—achieving carbon-neutral growth from 2020 (CNG2020). CNG2020 is a common goal for both industry and governments. And there is a common understanding that a package of measures are needed—improvements in technology, more efficient infrastructure and better operations. These alone will not get us to CNG2020. Market-based measures (MBM) will have to fill the gap at least on a temporary basis.
The approach to MBM’s must be global—a global standard if you will. Aviation is a global industry. Managing emissions is a global challenge. Achieving consensus on a global MBM is a politically charged and difficult task. The only way to get there is by keeping focused on achieving the common goal—CNG2020. That means avoiding being sidetracked by regional discussions.
Last year one regional scheme—the extraterritorial application of the EU Emission Trading Scheme (ETS)—took us to brink of a trade war until cooler heads prevailed. The clock is stopped. But that dispute has cast a strong shadow in the run-up to the Assembly discussions and we must not let it become a distraction to achieving what could be a truly historic outcome.
I know first-hand the delicate balance that must be struck. We achieved a consensus among our members to support a global mandatory carbon offsetting scheme to manage aviation’s post-2020 emissions’ growth. We had to take in various positions of airlines, but in the end we found a way forward.
We are the first global industry to come this far on environment. And I hope that this will provide inspiration for the delicate discussions that will happen here over the next two week. Had we focused on the exceptions and difficulties, we would never have achieved agreement. But we kept our eyes on the CNG2020 goal. As a result of building a common understanding of our future, the way towards that future becomes clear.
The three pronged approach of common goals, global standards and the right balance between market forces and regulation can be applied to all twelve working papers that IATA has submitted. Many of them will be discussed during the course of this symposium. So I will end my opening remarks here. I look forward to a robust discussion on how we can collectively contribute value to the aviation industry that will build a stronger foundation for aviation’s future success.