Thank you Emanuele. And thanks for the great cooperation of Aeroporti di Roma for hosting the IATA environment stand and for hosting this event. I am pleased to be here today to inaugurate the stand.
Environmental responsibility, alongside safety and security, is a core promise for the aviation industry. According to the Nobel Prize-winning Intergovernmental Panel on Climate Change (IPCC), aviation contributes 2% of global manmade CO2 emissions. Aviation is a small part of the big problem of climate change and this stand explains how effectively the industry is addressing this important issue. Before going into details let me first put our efforts in the context of the crisis that the airline industry is facing.
Last year airlines lost US$5 billion. The fuel crisis peaked with oil at US$147 in July. The price of oil dropped as the economic crisis became more severe. Today oil is around US$40 per barrel. It is good news on our fuel bill but our business is disappearing. International passenger traffic was down 4.6% in November. Capacity management is critical but the 1% cut in capacity in November is not keeping pace with the decline in demand. Even more worrying - I would even say shocking - is what is going on in cargo. In November, international freight traffic plunged by 13.5%. As 35% of the value of goods traded internationally travel by air, this is a clear indicator that global trade is declining. And the worst is yet to come.
For airlines 2009 will be another tough year. The year began with airline stock prices 60% down on last year. We expect 2009 global losses to be US$2.5 billion. US carriers will benefit directly from the drop in fuel prices, as they could not hedge in 2008. And they made a major capacity cut in domestic markets when oil spiked in June-July. As a result they will move from the biggest loss, US$3.9 billion last year, to US$300 million in profit this year. European carriers will lose US$1 billion, ten times the loss in 2008. And Asian carriers will post the biggest loss of US$1.1 billion.
We are an industry in crisis. IATA had to suspend 35 airlines from our US$360 billion financial systems because they could not pay their bills. But, even in this crisis, our commitment to environmental responsibility is strong.
IATA’s four-pillar strategy addresses climate change by investing in technology; flying planes effectively; building efficient infrastructure and using positive economic measures. All 179 states attending the last ICAO Assembly endorsed the strategy. It is also a common industry commitment signed by the CEOs of Airbus, Boeing, Bombardier, Embraer, CFM, GE, Pratt & Whitney and Rolls-Royce as well as IATA, ATAG, ACI, CANSO and other associations and companies. Our common target is to achieve a 25% improvement in fuel efficiency by 2020 compared to 2005. IATA is even more ambitious, mapping the way to carbon-neutral growth with a vision for a carbon-emission-free future. No other industry is as united, responsible or ambitious.
The strategy is delivering results. Aviation’s emissions will fall 4.5% in 2009. Part of this is due to the crisis - we expect traffic to fall 2.5% - but the rest is directly related to the strategy. Airlines are investing in fuel-efficient aircraft with improved fuel efficiency of 20-30% per plane. And old ones are being retired. The numbers are impressive: in the first 11 months of last year 1,037 new aircraft were delivered and 881 inefficient old aircraft were parked. IATA’s environment leadership is also contributing to reducing fuel burn. Working with airlines, airports and air navigation service providers, since 2004 we saved 59 million tonnes of CO2, equal to US$12.2 billion in fuel costs. In 2008 alone we identified and saved close to15 million tonnes of CO2, equal to US$5 billion. Let me highlight three critical areas that can help us deliver even better results:
- Alternative fuels;
- Better air navigation;
- And a global solution on positive economic measures.
Among alternative fuel options bio-fuels are the most promising for reducing aviation’s carbon emissions over the entire lifecycle. Bio-fuels have the potential to reduce carbon emissions by up to 60%. Our industry target is to have 10% alternative fuels by 2017. The European Union’s target is 20% bio-fuels by 2020. We need the right bio-fuels. That means fuels that don’t compete with food for land-use or harm bio-diversity, and that meet the current exacting specifications including:
- High energy content;
- Low freezing point;
- Work in our current fleet;
- Can be mixed with existing fuels;
- And have the potential for global availability.
We call these second and third generation bio-fuels and they are already being tested. In the last month trial flights by Air New Zealand and Continental Airlines proved that bio-fuels are viable and proved that this is possible. In a few weeks time Japan Airlines will conduct a similar experimental flight. These test flights are important steps forward. We will gather information on bio-fuels that will help to develop global standards for specification and certification. It is only with these standards that investments can be made to ramp-up production on a global scale. We must move fast.
Oil companies’ margins to refine jet fuel rose from 21% in 2003 to 30% in 2008. They made windfall profits in the tens of billions of dollars. More needs to be invested in research and production. Similarly, governments have a role. I urged President-Elect Obama to include bio-fuel development in his plans for alternative energy sources. More specifically, we are working with governments and regulators to agree certification rules and move the process forward. Speed is critical. The current timeline is by 2013 but we are challenging them to push certifiers to deliver even faster, by 2010 or 2011.
Greater Efficiency in Air Navigation
Flying effectively is a winning solution for everyone: lower cost; better on-time performance and fewer emissions. A recent “perfect” test flight - called ASPIRE - from Auckland to San Francisco showed fuel and CO2 saving of 3.5% simply by making the most of existing air traffic management capabilities. Every Continuous Descent Approach (CDA) saves between 150 to 600kg of CO2. Each Clean Airspeed Departure (CAD) saves between 600 to 5,000 kg of CO2. But we can only take advantage of these efficiencies at less than 50 of Europe’s airports. Hopefully, Rome will come on board with these measures soon.
To expand this quickly, last year IATA signed a joint work programme with CANSO and EUROCONTROL. The goal is annual savings of EUR390 million and 1.5 million tonnes of CO2. We have an even more ambitious project: a Single European Sky. Clearing up the mess of 35 different air traffic control providers could save US$5 billion and 16 million tonnes of CO2. After decades of talks, lots of hot air and little action, major progress seems possible. Last summer, Commission Vice President Tajani achieved Commission approval for the second package. By 2012 we are asking Europe to establish 9 functional airspace blocks and put in place a network manager so that they operate efficiently together. Europe must also agree to efficiency targets, for example, reducing the 21 million minutes of delays that we currently have. The technical solutions are well known. Now we need the political will to turn Europe’s biggest environmental embarrassment into a success story
Positive Economic Measures
The timing of 2012 is no accident. That is when aviation is due to join the European Union Emissions Trading Scheme (ETS) at a cost of billions of Euros to the industry. Europe’s unilateral approach is wrong. It is not effective. Environment is a global problem. We are a global industry. Regional schemes will not be effective. And it is illegal. It is against the Chicago Convention and already countries from the US to Japan and China have indicated that they will challenge this. Europe will lose like it did in 2000 with the hush kit case. Even putting this aside, the proposal is hypocritical. If Europe is going to charge us for emissions in 2012 then it must provide the air navigation infrastructure to allow us to fly efficiently. A Single European Sky is a must.
Europe must show leadership. Having raised awareness on aviation and environmental issues, Europe should contribute to a global solution through the International Civil Aviation Organisation (ICAO), a UN body. In fact, the Kyoto Protocol asked ICAO to deal with aviation’s international climate change emissions. In June 2008, the G8 declaration in Japan signed by Prime Minister Berlusconi, Prime Minister Brown, President Sarkozy and Chancellor Merkel supported ICAO’s role. Even as the EU finalised its unilateral ETS proposal, a global solution is still possible. ICAO’s Group on International Aviation and Climate Change (GIACC) is making quick political progress. Governments, including European ones represented by Switzerland, France and Germany, must ensure that GIACC’s action plan, to be issued in September, will be challenging and effective.
Time to Focus
To recap, this stand is a strong reminder that airlines take their environmental responsibility seriously and are delivering results. We need governments to come on board with alternative fuels, better air navigation and a global approach to positive economic measures.
Thank you very much and I am happy to take your questions.