Translation of the speech in Spanish (pdf).
Buenos dias, bom dia, good morning.
It is a great pleasure to address you in person, on what is my first trip to Latin America since taking on my role at IATA in April this year.
The last 18 months have made us realize just how important—indeed how precious—the ability to meet face-to-face is. And in doing so, we also have gained a renewed understanding of the role of aviation in our world. Our industry makes face-to-face possible. As efficient as technology like Zoom or Teams is – and I’ll be honest I hate them – it’s just no match for what we are doing now. And this would not happen without aviation.
I thank ALTA for their invitation. I committed to this many months ago because I wanted to get to know the industry in this region better and because I know how important regional associations are to the success of our industry. IATA brings together the industry to discuss and agree a global way forward for airlines. But we are most successful when we work through our regional offices with associations like ALTA to drive change. And I know that you work very well with our Americas Team under the leadership of Peter Cerda. Working together we will get aviation back on its feet!
It is no secret that COVID-19 has devastated the aviation industry. In 2020, airlines globally lost $138 billion. Losses will reduce to $52 billion this year. And we expect a further reduction to a $12 billion loss in 2022. Add that up, and the toll that COVID-19 will take on industry finances tops $201 billion.
For the airlines based in this region we are estimating a cumulative loss of $5.6 billion for this year, with an improvement to $3.7 billion in losses for next year.
This crisis goes beyond any we have ever experienced before.
We are, however, past the worst point. And we can see a path towards normality.
The cargo business is already operating at 8% above pre-crisis levels. Air cargo has been a lifeline for many—delivering vaccines, PPE, medical equipment and even e-commerce. In doing so, it has also been the revenue star for many airlines in our industry.
Where governments have not restricted travel, the passenger business recovery has been swift. Domestic markets are expected to reach nearly 75% of pre-crisis levels by the end of this year, but unfortunately international travel—where we see travel restrictions continue —is only expected to reach 22%. Next year we expect domestic markets to be nearly where they were in 2019. But international travel will lag at just 44%.
We are moving in the right direction, if not as fast as we would like to go. And the overall mood in the industry is one of cautious optimism. But the task ahead is formidable.
COVID-19 and Re-connecting the World
The situation in this region is unique. It was hit last by the pandemic. It has some of the longest and strictest travel restrictions and border closures but at the same time, the good news is that international connectivity is recovering faster in Latin America and the Caribbean than anywhere else in the world.
However, the openness of markets to international travel varies greatly across the region. Mexico, for example, essentially never closed its borders. Colombia, along with many Central American and Caribbean states, gradually re-opened with certain controls. And Chile, irrespective of having high vaccination levels, retains demand-killing quarantine measures even for vaccinated travelers.
How can we be more than 18 months into this pandemic and still have such disparate approaches? Particularly when data tell us that severely restricting travel at this point in the pandemic makes little sense? Testing data from the UK for the period from February to September, shows for example, that test positivity of inbound travelers was 1% compared to 7% in the general population.
Of course, as airlines, we want to return to normalcy as soon as possible. But it is in the interest of everyone to regain the freedom to travel. And it is especially in the interest of governments to have a revived aviation industry energize an economic recovery.
Our vision for re-establishing air connectivity broadly aligned with the conclusions of the ICAO High Level Conference on COVID-19 which just wrapped-up last week. That is good news. But, of course, the words of a declaration need to be actioned. Reminding governments of their commitments will be a major focus in this region and around the world.
Ensuring that the freedom to fly is fully restored is only one part of the equation. We must do better. That is especially true in this region, where we cannot return to the pre-COVID-19 operating environment.
We have seen that everybody suffers when aviation stops. COVID-19 has dispelled the myth that flying only benefits the rich. And it has never been clearer that aviation is far too important to be treated as a cash cow for governments to milk. More specifically, airlines cannot tolerate partners in the value chain profiting literally at our expense.
From the onset of the pandemic airlines have undertaken drastic cost reductions. Operating costs were reduced by 35% compared to pre-crisis. This was supported by increased commercial borrowing and shareholder contributions as a means of survival.
Yes, some governments stepped in and provided support for the sector. Globally $243 billion was made available to airlines, of which $81 billion supported payrolls and approximately $110 billion was provided in the form of support that needs to be paid back. Sadly, in this region not a single government provided direct financial support to airlines. In most cases financial relief came in the form of deferred taxation or reduction or waiving of fees.
We are seeing traffic steadily rebounding which shows that recovery is on its way. However, in parallel we are seeing an increasing trend by our “partners” in the aviation value chain to increase taxes and fees. Already there are plenty of examples in this region:
- Argentina has not only implemented extra taxes on ticket sales in local currency, but also increased the international departure tax from US$51 to US$57
- Costa Rica is planning to increase the airport security fee at San Jose airport by more than 70%
- The Dominican Republic is planning to increase ground handling fees by just over 6% in 2022
- El Salvador is planning to add a US$1.50 per passenger agricultural inspection fee to airline tickets
These are unacceptable in this time of crisis. And we cannot tolerate others following in their footsteps.
Airlines are also facing poor operational planning as the industry is ramping up operations to meet rebounding demand. One case in point is Bogota’s El Dorado International Airport where ground delay programs have been used nearly on a daily basis since the end of May. More than 850,000 travelers have already been impacted with 2–4-hour delays. The good news, however, is that we had an excellent meeting with President Ivan Duque this morning. Bogota’s El Dorado Airport is a fantastic asset for this country, with huge potential, and working together we can improve the current situation.
The other major issue of the day is sustainability. We all recognize that the freedom to fly will depend on our ability to fly sustainably. With only weeks to go until COP26 opens in Glasgow, climate change is top of the agenda across the world.
At the 77th IATA AGM, IATA’s membership took a historic decision to achieve net-zero carbon emissions by 2050. We appreciate the support of the IATA members in this room. And we look forward to working with you and ALTA as we tackle this monumental and existential challenge.
We also need to put into perspective what this will mean. In 2009 we already committed to cut net emissions to half 2005 levels by 2050. That would have left 325 million tons of aviation emissions in 2050, and forecasts for industry growth would have expected nearly 3 gigatons of emissions if we did nothing. Now we must get that to zero.
It can be achieved. It will take a combination of Sustainable Aviation Fuels (SAF), radical airframe designs, cutting-edge propulsion methods, efficiency gains, carbon capture technology and offsetting.
This is an airline commitment. And we will drive the need to change. And to be successful, we need alignment across our stakeholders, including governments.
The technology roadmap for sustainable aviation is more complex than for road transport. But the mechanism to deliver change is the same. Governments must lead with incentives. And the most important area for immediate concern is SAF.
The ALTA resolution calling upon governments to support the development of a SAF industry in Latin America and the Caribbean sets the right tone for progress in this region. Specific actions which governments can take include:
- Financing research and development programs and feasibility studies in the region to identify feedstocks that could potentially be used to develop a local SAF industry
- Implementing policies to de-risk investments into SAF production plants, including legislative certainty to attract investment in new production facilities
- Attracting capital to expand SAF supply through loan guarantee programs or performance-based tax credits.
Importantly, we must also remind governments that SAF mandates for airlines are not the way forward. The challenge with SAF is not on the demand side. Airlines want to buy it. But there is not enough of it available at commercially acceptable prices. You cannot mandate the purchase of something that does not exist. We need to work with governments to ensure that reasonable market prices and strong SAF availability is made possible.
I wish to conclude by thanking ALTA and congratulating them on the excellent work that they do for their members. It’s a great example for regional associations of what to do. I have committed on behalf on IATA that we will work together to further our industry goals, including achieving the critical target of net-zero.
I wish you all very well and look forward to seeing you during the rest of the conference.
Thank you, gracias, obrigado