It is a special privilege to be able to speak with you today, and I am grateful for the invitation.
There can be no overstating the importance to aviation of aviation lawyers. I know that because hardly a week goes by in which Jeff Shane fails to remind me.
And it does have the virtue of being true. Despite the progress we have made in opening markets and liberalizing the framework within which our industry operates, aviation remains one of the world's most highly regulated industries. And we need people like you to help guide the industry through the regulatory maze!
All joking aside, regulation has played a critical role in fostering the growth of the commercial aviation industry from its humble beginnings. A century ago an entrepreneur, a pilot and a single passenger performed the first commercial flight from St. Petersburg to Tampa, Florida. The industry grew quickly. This year we will connect 3.3 billion passengers and 52 million tonnes of cargo over 50,000 routes with 100,000 flights a day.
Today, aviation is the life blood of the global economy. The industry supports over 58 million jobs and $2.4 trillion in annual economic activity. It creates jobs for Kenyan farmers who sell fresh flowers in world markets. It facilitates global supply chains so that workers in many nations can collaborate to build computers, cars and even airplanes. Aviation delivers many of the real world goods that are traded in the virtual shops of internet commerce. As a catalyst for economic and social development, aviation and the businesses that we support have spread prosperity and lifted countless people from poverty.
The intangibles create even greater value. Flying brings people together—families, friends and business colleagues. It helps minds to meet and exchange ideas. It gives people the freedom to be almost anywhere in just 24 hours. And it has turned our wonderfully big planet into a wonderfully small world of enormous and wonderful opportunities.
The industry has benefited enormously from the public's confidence that their safety and security are essentially assured by the oversight provided by the government authorities who write the rules and monitor our performance.
Regulation has helped this growth. Commercial aviation’s 100th anniversary coincides with the 70th anniversary of the Chicago Convention. It was drafted by, and with, the help of lawyers who shared a vision of a safe and secure global industry firmly founded on global standards and cooperation among nations.
This year will also be remembered for two tragedies. It is a bitter irony that aviation’s 100th anniversary—an industry whose success rests on a safety record for which we can be justifiably proud—is also one of the saddest years we have experienced in a long time.
The loss of Malaysia Airlines Flight 370 in March and the shooting down of Malaysia Airlines Flight 17 in July have touched us all. That both incidents involved the same airline defies comprehension. Somehow it makes these events all the more devastating to those of us who love this industry. Our thoughts, prayers, and deepest condolences go to the families of those lost in these incidents, including both passengers and crew members, and of course to our colleagues at Malaysia Airlines.
The most important thing we can do to honor the victims is to ensure that these events are never repeated. And this is exactly what we, with our partners across the industry, the International Civil Aviation Organization (ICAO), and governments, have set out to do.
The challenges are very different. Let me commence with MH370. That a large commercial airliner could simply disappear was a shock that has gripped the world for the last six months. Until we find the plane, the cause of this disappearance will remain a mystery. The vital effort to find MH370 continues in earnest across a vast swathe of ocean—the largest search operation in history.
That effort must continue. But we cannot wait for its success before taking action.
We have multiple layers and capabilities for tracking aircraft already—from position reporting by the pilot to sophisticated satellite-based systems. But we must recognize that the global fleet includes some aircraft with the most advanced technologies available on board as well as aircraft that are not so well-equipped. And they must interact with air navigation service providers that also have a range of capabilities from ultra-sophisticated in high density airspace to more basic operations in line with market needs. So there is not one “best way” to track aircraft. But it’s a challenge that we are addressing.
In very close cooperation with ICAO, IATA is leading the Aircraft Tracking Task Force (ATTF) which is composed of key stakeholders across our industry. The good news is that there are many existing products and services that have the potential to improve our collective global tracking capabilities. The mission of the task force is to recommend near term options for airlines to implement voluntarily.
I would like to ensure that expectations are appropriate as to what will be produced. This will not be a final document or a silver bullet solution. On 30 September the draft recommendations will be presented to ICAO for consideration in their processes. In parallel, our members will be examining the proposals in preparation for consideration by our Operations Committee and eventually by our Board of Governors in December. So over the next months there will be expert consideration and examination of the ATTFs work.
The speed with which this is being pursued reflects our determination. The ATTF is working with a great spirit of cooperation and is focused on a common purpose that has defined aviation’s history—to safeguard our passengers and crew from harm by making flying ever safer.
The case of MH 17 saw the shooting down of a civilian aircraft traveling in unrestricted airspace. Civilian aircraft are instruments of peace. In no circumstances should they be the targets of weapons of war. The tragic downing of MH 17 on 17 July was an attack on the whole air transport industry. The world’s airlines are angry—and I suspect that the same is true for each of the 3.3 billion people who will board aircraft this year.
Airlines need clear and accurate information on which to base operational decisions on where and when it is safe to fly. In the case of MH 17 airlines were told that flights above 32,000 feet that traverse Ukraine would not be in harm’s way. We now know how wrong that guidance was.
Security agencies were watching developments in the Eastern Ukraine. Of all the questions that can be asked, the most important is why were airlines and aeronautical authorities left in the dark?
It is essential that airlines and civil aviation authorities receive clear guidance regarding threats to their passengers, crew and aircraft. Such information must be accessible in an authoritative, accurate, consistent, and unequivocal way. This is the responsibility of states. And there can be no excuses.
While investigators work to understand all the circumstances of this terrible tragedy, we cannot avoid the early conclusion that the loss of MH17 was, in the largest sense, the product of a rare and unforeseen institutional breakdown.
On 29 July, following a critical meeting between ICAO, IATA, Airports Council International and the Civil Air Navigation Services Organization two broad fields of work were launched. First, a task force was convened to find ways to improve dramatically the accuracy, consistency and reliability of threat information delivered to civil aviation authorities and airlines.
The need for this was re-emphasized shortly after the MH 17 tragedy when governments gave conflicting and unclear advice to airlines flying to Tel Aviv. That many airlines turned to IATA for advice demonstrated the dearth of information available. Of course, as a trade association, we have no access to the sensitive national security information needed to support decisions in such circumstances.
That is why we have made it a top priority to support ICAO as a member of the Task Force on Risks to Civil Aviation Arising in Conflict Zones—the TF-RCZ. We are adding our expertise into this complex—and political—issue by helping ICAO and governments understand airline requirements. A small group of operational and security experts from some of our member airlines are working to identify exactly the kind of information needed, when it is needed and how best it can be provided to us.
Here, too, time is of the essence and the TF-RCZ has already met twice and is working with a strong resolve to have a first report to the ICAO in the coming weeks.
The second body of work that industry has asked of ICAO is to seek improvements in the international legal framework that governs the design, manufacture, and trading of weapons with anti-aircraft capability..
There is precedent for such action. After KAL 007 was shot down in 1983 by Soviet aircraft Article 3 bis was added to the Chicago Convention. It said quite simply that states should not shoot down civilian airliners. Even though the investigation on MH 17 is ongoing, we now know clearly that weapons with the capability to do harm to civilian aircraft at cruising altitudes are in the hands of non-state entities. We therefore need a further expansion of state obligations.
It is now essential for states that design, manufacture, or deploy such weapons be under the obligation to ensure that they can reliably distinguish between civil and military aircraft so as to, in turn, ensure the safety of innocent travelers.
The solution may be in the Chicago Convention—or other relevant treaties. We know, of course, that such amendments take time. It took 15 years for Article 3 bis to become effective. So the immediate and practical focus of attention is the work of the TF-RCZ.
Now allow me to veer back to the subject matter of this conference and say a few words about regulation. Regulation does not grab the headlines in the same way as the challenges that I have just described. But it is a topic about which IATA has some very strong and heartfelt convictions which I would like to share with you.
Developments in US regulation impact the global industry—both because so much international flying involves the US and because the US is among a handful of countries whose approach has a large influence on how regulation is developed elsewhere.
With that in mind, I would like to congratulate the Forum on the publication of Aviation Regulation in the United States. Jeff Shane wrote the Introduction and tells me that it will be an incredibly valuable resource. And thank you for inviting two other IATA lawyers, Michael Gill and Auguste Hocking, to contribute a chapter on IATA itself. It’s one of the most informative accounts of the organization’s pivotal role in the industry that you’ll find anywhere.
Without question, the greatest success story with respect to aviation regulation is safety. That 100,000 flights will operate safely today is of course attributable to the focused efforts of everyone in the industry. But it is also testimony to the quality of governmental oversight that guides their work. The industry not only respects regulation, it depends on it.
Aviation regulation goes well beyond safety and security, however. It ensures healthy competition; it governs the financial fitness of airlines; it prescribes rules for the ownership and registration of aircraft; it even protects passengers from unfair treatment. In all of these areas, the work of the government is, no doubt, motivated by the best of intentions. Alas, we do not always get the best of results.
For that reason, I would like to spend my last few minutes discussing concerns over the approach that the US is taking in its efforts to protect the rights of air travelers.
In response to hearing about one of the countless perceived inequities over which government has no control, President Jimmy Carter famously said, “life is unfair.” Apparently nobody told President Carter that, using its authority under 49 USC section 41712, the US Department of Transportation (DOT) can prohibit most of what is unfair in life.
The statute gives DOT a mandate to prevent “unfair or deceptive” practices. That’s a perfectly reasonable and well-focused provision. In fact, you will be aware that the US Federal Trade Commission (FTC) Act protects the customers of all businesses on the basis of almost identical statutory language.
But DOT’s implementation of the language has exceeded by a wide measure anything we have seen at the FTC. Indeed, DOT has begun to micro-manage the industry’s relationships with its customers in ways that run directly against the grain of the Airline Deregulation Act. That historic legislation spearheaded a positive transformation of aviation—in the US and globally. At its core is the instruction to government to place “maximum reliance” on competitive market forces. DOT’s passenger protection activities over the past few years, however well intentioned, are hard to square with that admonition.
I will give you three examples.
The first is DOT’s rule requiring airlines to advertise prices inclusive of all taxes.
Where I grew up, that is the norm for any product. If the price tag on a pencil showed a Pound; that is what you would pay at the cash register. But in North America, everybody is accustomed to the fact that taxes are almost always added at the point of sale.
In other words, DOT says it is “unfair” or “deceptive” for an airline to do what virtually every other provider of goods and services in the US and Canada does: advertise the amount of money it wishes to be paid for its services without adding in the taxes.
Why should airlines operate to a unique set of rules? If just about every other taxable purchase in the US is advertised with the before-tax price, how can it possibly be “unfair” or “deceptive” as those words are used in the statute when it comes to an airline ticket?
It’s encouraging that the House of Representatives voted to repeal DOT’s rule. It’s rare that Congress votes to repeal a regulation purportedly issued in the interest of consumers. That speaks volumes about the extent to which DOT is exceeding what Congress intended in giving it the authority to prevent unfair and deceptive practices. We all hope that the Senate will see it the same way.
The second example is the just-proposed Consumer Rule III.
Among its provisions is one that would require each airline to allow any travel agent that sells its tickets to display the airline’s core ancillary services and fees as well. We take no issue with an airline negotiating an agreement along those lines. And many are doing so. But I don’t know of any other industry that is forced to market its products through channels it has not chosen to use for those products.
The rule even obliges airlines to display ancillary information on their own websites. This begs the question of what problem DOT is trying to solve. Nobody has suggested that consumers are unable to purchase ancillary services or to see how much they cost. If passengers can readily ascertain the information that is the subject of the proposed rule, where is the unfairness or deception that triggers DOT’s regulatory authority?
Even if DOT had the legal authority to impose this requirement, the proposed rule is, at best, a “yesterday solution” to an issue that industry is already well on its way to solving.
To start, airlines are progressively signing bilateral agreements with global distribution system providers for the distribution of ancillaries. At last count more than 50 such agreements have already been concluded. So there is a marketplace solution. But even more significantly, the industry is working together to develop a New Distribution Capability (NDC) that sets us all on a course to far greater transparency and granularity in the marketing of air transportation than DOT (or anybody for that matter) could even imagine today. And it’s important to note that even some early detractors of NDC—GDSs and travel agents as represented by Open Allies for Airfare Transparency—have come on board.
Ironically, DOT granted final approval to the IATA resolution launching the NDC program, lauding the richer information that will be its most important benefit, on the very same day it issued its Consumer Rule III proposal. What’s wrong with this picture?
The final example is my all-time favorite illustration of regulatory overreach and concerns the onboard use of mobile phones.
The Federal Aviation Administration and the Federal Communications Commission are considering removing a prohibition on their use which was based concerns about safety and interference with ground networks.
Now DOT says that if this happens, it will propose banning them under its consumer protection authority as an unfair practice. Why? DOT says in explaining its concern that some passengers might find the excessive use of mobile phones during flight “annoying.” Well, I suppose that’s true. But should that trigger a regulatory response from government?
Let the airlines work out what their customers want and provide it! Those that get it right will prosper. And those that get it wrong will have a huge incentive to change course. That’s the power of the market place.
I hope that these comments help you in your considerations. Airlines are not opposed to regulation. Indeed, it plays a critical role in guiding us in our most fundamental challenges on safety and security. But it is frustrating when governments miss the important principles of what we call Smart Regulation and propose “solutions” to issues best handled by the market.
The US—the country that pioneered deregulation—should understand that better than any other. And we will be depending heavily on you—our lawyers—to help lead the charge in defending the interests of both consumers and the industry against misguided regulations. And the world is counting on you to nip the trend of regulatory over-reach in the bud, before it becomes an even more popular export commodity.
Many thanks for allowing me to share these thoughts with you today.