His Excellency Mr. Nguyen Ngoc Dong, Vice Minister of Transport
His Excellency Mr. Ho Anh Tuan, Vice Minister of Culture, Sport and Tourism of Vietnam
Mr. Lai Xuan Thanh , Director General of Civil Aviation Authority of Vietnam
Mr. Pham Ngoc Minh, President and CEO, Vietnam Airlines
It is a pleasure to be in Hanoi for the Aviation Day we are co-hosting with Vietnam Airlines. I am excited to see so many participants at this event, representing a broad spectrum of stakeholders involved in Vietnam’s aviation industry – governments, airlines, airports, agents, international organizations and many more. We are all gathered because we are passionate about Vietnam’s aviation industry, and want it to do well.
IATA represents some 240 airlines around the world. Our members account for 84% of global traffic. IATA’s vision is 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. We do this by setting global standards, such as those that improve safety as well as industry processes and efficiencies, such as the e-ticket. We also bring a global perspective to issues affecting our industry, such as security and climate change.
While IATA has a 69-year history, our involvement in Vietnam aviation is still in its early years. Vietnam Airlines became an IATA member eight years ago. We opened our office in Vietnam in 2009, led by Country Manager Do Nhu Phung. We launched the Billing and Settlement Plan and Cargo Accounts Settlement Service in 2009 and 2010 respectively, providing travel agents and cargo agents with a more convenient way to do business with airlines. Through the IATA Training and Development Institute, we have been supporting the training needs of the Vietnam aviation industry.
It is through partnership with Vietnam Airlines that we are organizing this Aviation Day in Hanoi. Over the last 20 years, we have witnessed the remarkable development of Vietnam Airlines, with its rapidly growing network and investment in a modern fleet of aircraft. As a member of SkyTeam, Vietnam Airlines is making its mark globally. Vietnam Airlines is also playing an important leadership role in our industry. I have the privilege of having Mr Minh as a member of the IATA Board of Governors, where he helps to shape the future of the global airline industry.
We have a full agenda today to discuss how aviation can enable economic growth and connect Vietnam to the world. Before I share my views on the opportunities for Vietnam aviation, I would like to give a brief overview of the state of the industry.
100 Years of Commercial Aviation
This year we are celebrating the 100th anniversary of scheduled commercial aviation. On 1 January 1914, the airline industry was born with one aircraft, flying one passenger, on one route. This single flight has since grown into an industry that will safely transport 3.3 billion passengers and 52 million tonnes of cargo this year.
Today, aviation supports jobs for 58 million people worldwide. And airlines deliver goods worth some $6.8 trillion, a third of the goods traded internationally by value. The global connectivity built-up over the last century is a critical component of modern economies the world over.
Vietnam is more prosperous because of aviation. Including tourism, aviation contributes $6 billion to Vietnam’s GDP and supports over 230,000 jobs. It broadens minds with access to global educational and cultural opportunities, and connects families over long distances. Aviation connectivity is also providing local firms with access to global markets, and is an important driver of foreign direct investment in Vietnam.
The airline industry is celebrating the first century of commercial aviation in the black. This year, airlines are expected to earn a net profit of $18 billion. That might sound impressive, but on revenues of $746 billion, this is equivalent to a net profit margin of 2.4%, or $5.42 per passenger carried. Looking at Asia-Pacific, the region’s airlines are expected to earn $3.2 billion. This is a profit of $2.98 per passenger and a net margin of 1.6%, both of which are below the industry average. We are in a tough and very competitive business.
Safety is one area, however, where nobody competes. It is our common top priority. But the safety of our industry has been in the spotlight in recent weeks. July was an especially sad month for all of us involved with aviation.
Despite the recent tragedies, flying is safe. Every day, approximately 100,000 flights take to the sky and land without incident. Nonetheless, accidents do happen. Every life lost recommits us to improve on our safety performance.
The IATA Operational Safety Audit (IOSA), with its 900+ standards, is at the core of our efforts to improve safety. There are over 400 airlines on the IOSA registry, including Vietnam Airlines. We are making IOSA an even more effective standard with Enhanced-IOSA, changing the audit from a snapshot of an airline’s safety management into a system for constant monitoring. Enhanced-IOSA becomes a requirement for all IATA airlines from 2015.
Ultimately, our goal is to predict the potential for accidents, and prevent them from happening. IATA has created the Global Aviation Data Management (GADM) project, which is the world’s largest resource of operational information. It contains data collected from partners, including the International Civil Aviation Organization (ICAO), the US Federal Aviation Administration, and the European Aviation Safety Agency. Each new data point contributed to GADM and every improvement in our analytical capabilities moves us closer to this reality of preventing accidents.
As the aviation industry in Vietnam grows, there is a need to ensure that it does so safely. I encourage the Vietnam government to recognize IOSA as part of its safety oversight program, and encourage all aviation stakeholders in Vietnam to participate in the GADM.
I will repeat that flying is safe. But two tragedies this year—MH370 and MH17—have exposed some gaps in the system. Neither should be repeated. To that end, industry and government already are moving.
Firstly IATA established the Aircraft Tracking Task Force or ATTF, which includes representatives from the Internal Civil Aviation Organization (ICAO) as well as aviation experts from around to world, to develop recommendations to improve global flight tracking. A draft of the recommendations will be given to ICAO next month.
Secondly, airlines need to be provided with better information with which to make risk assessments of the various threats they face. IATA is participating in another task force, this one led by ICAO, to address this information gap. In the longer term, there is a need for an international framework that imposes on states a duty to manage the design, manufacture and deployment of anti-aircraft weapons. This is similar to the frameworks that exist for chemical, nuclear and biological weapons, plastic explosives, and global arms trading in general.
I will repeat, however, that flying remains safe. We are addressing a few gaps. And—in line with the great aviation tradition of cooperation on safety—the industry and governments have come together in a partnership effort to make flying even safer.
Another issue that we are working in partnership on is the Ebola outbreak in Western Africa. The World Health Organization (WHO) is the global expert on public health. But there are implications for aviation. That is why WHO is engaging with IATA and ICAO, and other key international partners in a task force to ensure effective coordination of efforts in areas affecting civil aviation.
Ebola is a terrible disease. But it is very different from SARS, which had such a devastating impact on aviation in this region. WHO has advised that the risk of transmission of Ebola during air travel or even when visiting an affected country is low. Transmission requires direct contact with blood, secretions, organs and other bodily fluids of infected living or dead persons or animals, all of which are unlikely exposures for the average traveler. Furthermore, the transmission of Ebola occurs when patients are displaying symptoms of the disease, which are severe. It is highly unlikely that someone suffering from Ebola symptoms would feel well enough to travel. So travelers should be reassured.
WHO does not recommend any ban on international travel or trade. It has requested affected countries to conduct exit screening of all persons at international airports, seaports and major land crossings. For non-affected countries, WHO has called for the strengthening of the capacity to detect and contain new cases while avoiding measures that will create unnecessary interference with international travel or trade.
Over the years, the air transport industry has dealt with several outbreaks of communicable diseases. Guidance materials have been developed by WHO, ICAO and IATA. IATA has specific guidance materials on communicable diseases available for maintenance crew, cabin crew, cleaning crew, and passenger agents.
The air transport industry is prepared. IATA will continue to monitor developments closely in coordination with WHO and ICAO. As I mentioned, WHO is the global expert. We will continue to follow its advice and encourage governments to do so as well.
Aviation in Vietnam
Having looked at the issues affecting aviation globally, I would like to shift my focus to aviation in Vietnam.
Vietnam is a dynamic and rapidly growing aviation market. Between 2008 and 2013, passenger traffic has almost doubled. In our industry traffic forecast for 2013 to 2017, Vietnam is expected to be the seventh fastest growing market for international passengers at a rate of 6.9%, and the fastest growing for international freight at 6.6%. And with the ASEAN liberalization of the air transport sector from 2015, the demand for travel will continue to grow.
Aviation is a force for good in our world. And its successful development will pay big dividends to the Vietnamese economy. But it must be handled correctly.
It’s a strategic asset. I will discuss three areas where I see particular potential in Vietnam: infrastructure, passenger experience and cargo.
The availability of infrastructure is critical to support the growth of the aviation industry. Vietnam ranks 82nd in the Infrastructure Index of the World Economic Forum’s Global Competitiveness Report. Among the 10 ASEAN states, Vietnam is ranked sixth. It is encouraging to see that the Vietnamese government has made it a priority to improve.
The government has announced an ambitious aviation masterplan of having 26 airports by 2020. This is positive. Expansion programs are underway at Noi Bai International Airport in Hanoi and Ho Chi Minh International Airport. These expansion works will provide the needed capacity to support the aviation growth. And when the new Long Thanh Airport is ready, it will give a much needed boost to Ho Chi Minh City.
The government has also announced plans to open some airports to foreign investment and management, as well as to privatize the Airports Corporation of Vietnam.
I would like to offer some words of caution. Airport privatization has not always worked. We have seen plenty of examples of beautiful infrastructure developments coming with ugly unintended consequences. The most common is when we experience unjustified increases in charges as the private operator tries to squeeze out profit. Some high profile examples are the Indian airports, which saw charges increase over 300%! In Latin America, we saw a further consequence where operators raised charges but failed to meet investment expectations.
Airports have tremendous market power. With a few exceptions, they are essentially monopolies. And that is why I say due caution is needed when they are turned over to private interests.
To balance the market power of privatized airports, we urge Vietnam to establish an effective independent economic regulator in line with well-established international norms. That should bring about fair charging schemes that are aligned with ICAO’s policies on charges of non-discrimination, cost-relatedness, transparency and consultation with users. Lower charges will improve the viability of routes and allow Vietnam to reap the benefits from enhanced connectivity and increased traffic.
Improving the Passenger Experience
Vietnam should also look at using IT to improve the efficiency and passenger experience at airports. IATA has a Fast Travel program which responds to passenger demand for a more seamless travel experience and more control through six time-saving, self-service initiatives. They are
- Self check-in and/or automatic check-in
- Self tagging of baggage
- Document check
- Flight re-booking
- Bag recovery
Passengers have told us that they want to be able to do more things themselves. In IATA’s 2013 Global Passenger Survey, two-thirds of passengers said they prefer to check-in online or automatically by receiving a text message or email. Only11% prefer to receive their boarding passes from an agent at an airport check-in counter. And we have set ambitious goals to meet these expectations. This year, our target is to implement Fast Travel projects covering 27% of eligible passengers. By 2020, we want 80% of passengers to be offered a complete self-service suite based on industry standards.
As Vietnam develops its airport infrastructure, it has the opportunity to build them around the self-service expectations of travelers. Just look at Doha’s Hamad International Airport. It opened a few months ago with five of the six Fast Travel initiatives for self-service. I encourage Vietnam to make it a priority to implement Fast Travel to enhance the passenger experience as well.
Given the importance of tourism to Vietnam’s economy, I would also urge a review of the current visa requirements. Vietnam’s process is inconvenient to travellers.
Every tourist that decides to have a holiday in a neighboring country because of Vietnam’s visa process is a lost economic opportunity. It is money that never comes into the country.
Easing visa requirement can boost tourism. Japan saw an increase in inbound travel when it relaxed visa requirements for China and Korea. This is the same experience elsewhere.
Technololgy also has a role to play in air cargo, which is a critical contributor to Vietnam’s economy. About 25% of Vietnam’s trade by value, or $29 billion, is shipped by air. Companies such as Intel, LG Electronics, Nokia, and Samsung have established facilities in Vietnam. It has been reported that by 2015, more than 40% of Samsung’s smartphones will be produced in Vietnam. It is more critical than ever that air cargo processes be as efficient as possible.
E-freight will help to improve the efficiency of air cargo. It will replace paper processes with electronic documentation and will drive both efficiency and quality improvements. An important step to implementing e-freight is the e-air waybill (e-AWB). Vietnam Airlines is benefitting from the efficiencies of e-AWB and has implemented it for domestic freight. However, it is not able to do so for international freight as Vietnam has yet to ratify the Montreal Convention 99 (MC99). MC99 provides the legal framework for the use of electronic document of carriage, paving the way for freight forwarders and airlines to use the e-AWB. Given the importance of air cargo, I urge Vietnam to urgently ratify MC99 so that greater efficiencies can be achieved in Vietnam’s air cargo sector.
The aviation industry has come a long way since the very first flight from St. Petersburg to Tampa, Florida 100 years ago. In one century, we have turned our planet into one small world. In doing so, we have created a big future for us all, including the aviation industry in Vietnam. The IATA team stands ready to work with our partners in Vietnam as we embark on the second century of commercial aviation.