We all fly. Japan is one of the most important air transport markets in the world. That’s as you would expect for a nation of islands that is also one of the world’s most important economies. But very often we take flying for granted. We have forgotten how amazing it is to wake-up in Tokyo, spend a few hours on plane at 40,000 feet, land and go to sleep on the other side of the world. For almost all of human history that was impossible.
This is a special year for commercial aviation. You probably all know that the Wright Brothers were the first to achieve powered flight in 1903. But a decade later, on 1 January 1914, commercial aviation began with a 23-minute journey across Tampa Bay, Florida. It was a momentous event that changed our world immeasurably for the better. It all began as a partnership of three visionaries:
- Percival Fansler, an entrepreneur who saw commercial opportunity in the technology of flight
- Thomas Benoist, who built the aircraft, and
- Tony Jannus, who safely piloted the plane to its destination.
They could see the value in transporting people quickly over geographic obstacles. The journey across Tampa Bay would have taken a lot longer on land or water.
That value was seen by Abram Pheil. He became the real hero of the day when he purchased the first ticket. And he paid a handsome price to be the first: $400. In today’s money, that is the equivalent of $9,500.
Flying has changed a lot since then. It has become much safer, more comfortable, and very affordable.
People caught the flying bug. The airline industry quickly grew from a single aircraft, one route and a lone passenger. This year we will connect 3.3 billion passengers and 52 million tonnes of cargo over 50,000 routes. Since commercial aviation began 65 billion passengers have traveled by air.
At a personal level, flying delivers great value. It brings people together—families, friends and business colleagues. It helps minds to meet and exchange ideas in forums like this. 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 exciting opportunities.
Commercial aviation is a force for good in our world and the lifeblood of the world economy. Globally it supports 58 million jobs and $2.4 trillion in economic activity. In Japan that means 774,000 jobs and about 1.0% of GDP (including the impact of aviation-related tourism).
The world has been watching the Japanese economy with intense interest. After the bubble burst, the challenge has been to grow. That is certainly a priority for Prime Minister Abe. The 2020 Olympics and the government’s plan to double the number of international tourist arrivals to 20 million by that date are part of that growth plan. That growth will not happen by chance. There are challenges - particularly costs and capacity.
Airport charges are disproportionately expensive in Japan. Seoul’s Incheon Airport, for example, competes with Haneda, Narita and Kansai for hub traffic for this region. But even more important is the competitive disadvantage that expensive infrastructure places on the Japanese economy. Narita has become much more reasonable in recent years—in part because Haneda represents a convenient alternative. But Haneda itself ranks among the most expensive airports in the world and, quite frankly, is using its convenient location as a cash cow. Certainly the JCAB’s reduced-rate landing fee scheme for early morning or late night operations is helping. But there needs to be more effort on reducing charges overall so that the most economically important slots are made available in the most cost-efficient way.
In Osaka I also have concerns about cost in light of government plans to privatize the airport. IATA takes no issue with privatization. But the government must establish a strong regulatory framework to ensure that the passenger’s interest is protected. Profit is the motivation of any private company. But when it is both a monopoly and a critical component of the economy, the government must set some firm ground rules in regulation.
Japan’s infrastructure itself is struggling to keep pace with demand where consumers need it—Tokyo. There is some spare capacity at Narita. The fourth runway at Haneda and its opening to international traffic with an expanded terminal was no less than a Big Bang for Japanese aviation. But it will likely not be long before both these airports reach capacity again—especially Haneda.
I am very pleased to hear that there are plans to optimize the airspace around Haneda by allowing aircraft to overfly the Tokyo Metropolitan area—even if for only a few hours a day. As I understand it, noise was the original reason for the restriction. Modern aircraft are 70% quieter than those of the early jet age, so it makes sense to re-think the flight paths. The government estimates that this will add 10 slots to Haneda’s hourly capacity. The difference between 80 and 90 slots per hour is an enormous economic opportunity.
Before I open the table for discussion, I wanted to address two topics for your consideration:
- The flying experience, and
Our most recent research shows that the number of passengers will more than double in the next two decades—from 3.3 billion this year to 7.3 billion in 2034. Processing that many passengers efficiently will be a major challenge. To prepare for that, we are promoting Fast Travel which is a suite of self-service functions designed to get travelers through the airport with fewer hassles. With fast travel a passenger can check-in at home and print their bag tag, so they arrive at the airport ready to fly. Document scanning, boarding, re-booking and baggage tracking are also part of the Fast Travel suite.
Some of the features of Fast Travel are already familiar for domestic travel in Japan. Our goal is to drive those same efficiencies for international journeys. In fact we are working closely on this with NAA.
An IATA project called New Distribution Capability will allow airlines to sell a broader range of products through travel agents. This will most certainly unleash wide-ranging innovation that should allow travelers to customize their journeys more easily. What could that mean? It might mean that you can order a bottle of Champagne if you are travelling for a special occasion, that a limousine pick-up is arranged as part of your trip, that you will have access to special entertainment options or that you can book special seating arrangements, an upgraded meal or value added services on board the aircraft….maybe a massage or other esthetic treatments. Nobody knows where innovation will lead. But we can be sure that it will add interesting options to the experience.
We are also looking at ways to link the various parts of travel together. So, in the rare event that your flight is delayed or early, your car rental company or hotel will be able to make appropriate arrangements. The trick will be in developing systems to share information more efficiently among the various companies involved in your travel experience. That’s where data standards like NDC come in. And to keep travelers themselves updated on any changes and ensure that they have critical information when it is necessary, we are encouraging airports to have Wi-Fi easily available everywhere.
And finally, we want to take the hassle out of security. In fact, we have teamed up with Airports Council International in an initiative that we are calling Smart Security. A key element is taking a risk-based approach with known traveler programs helping authorities differentiate security measures based on information voluntarily contributed by passengers. There is also a technology component with the aim of reducing time at checkpoints with equipment that can scan without having passengers remove clothing or unpack their bags.
The good news is that the future of travel is full of innovation focused on meeting passenger needs.
Of course there can be nothing guaranteed about the future of aviation if the industry is not sustainable. The whole aviation industry has committed to some very ambitious goals. From 2020 we will cap our emissions and our growth will be carbon-neutral. And by 2050 the aspiration is to cut our net emissions back to half the levels that we emitted in 2005.
We also have a plan.
A key driver will be technology. Modern aircraft entering into airline fleets today bring with them fuel efficiency gains of 20-30% over their predecessors. Billions of dollars are being spent on this each year.
Another example of the role of technology is the development of sustainable biofuels. Over 1,500 commercial flights have been fueled by sustainable biofuels. The challenge is that biofuels are in short supply and expensive. It’s a chicken-and-egg situation. The high cost is being driven by the small quantities being demanded. And demand is low because of the high cost. We are calling on governments to incentivize the use of sustainable biofuels as they have done for other alternative power supplies such as solar. The good news is that distribution will be relatively easy. If we can get biofuels to just 190 airports, we will cover about 80% of potential demand.
The second and third pillars of the strategy are better operations and infrastructure—the goal is to be able to fly aircraft as efficiently as possible.
And the last pillar involves paying for carbon emissions. We are asking governments for a global mandatory carbon offset scheme. Airlines recognize that we will have to pay for at least some of our emissions until the other pillars of our strategy fully mature. This important work is being done through the International Civil Aviation Organization. We hope to have the framework agreed in 2016 and to be able to implement from 2020—just in time for our carbon neutral growth commitment.
With that I will end my formal remarks. I hope that I have stimulated some thoughts and look forward to engaging with your questions.