I am pleased to have had the opportunity to serve as Chair of the IATA Board of Governors and work with Alexandre and his team during the most challenging period in our industry’s history.
Alexandre noted in his speech his intention to step down as IATA’s Director General and CEO at the end of March 2021. In my interactions with him as Board Chair I have come to understand more deeply the challenges of the role and appreciate the dedication and skill that he brought to it. We will deal with the important matter of succession later in this meeting.
In the meantime, I note with regret that this is the first time since 1945 that the members of IATA are unable to come together in the same room at our Annual General Meeting. We are all disappointed that we are not able to enjoy each other’s company and the hospitality of KLM in one of the most beautiful cities in the world. We also regret not being able to together celebrate both IATA’s 75th and KLM’s 100th anniversaries, both being incredible accomplishments in the history of our industry.
Alexandre has already outlined the broad impact of the COVID-19 virus, but it is useful to consider it in the context of past industry crises:
After the 9.11 terror attacks in 2001, net profit margins were negative 4%. In 2020net margins are negative 36%.
During the Global Financial Crisis the largest year-on-year drop observed was 13%. Traffic again recovered relatively quickly, with 2009 being only 1% below 2008. The industry saw a strong rebound in 2010 when traffic was already 7% higher than in 2008.
By comparison, global traffic is expected to be down two thirds this year and we do not see recovery to 2019 levels until the middle of the decade.
Financial losses for 2001 are estimated at USD13 billion. Losses this year are estimated at USD118 billion and we expect losses of USD38 billion in 2021.
This crisis has taken our industry back in time. Passengers numbers for 2020 take us back 20 years. And with passenger load factors at 65% we are even operating like 30 years ago.
No airline could have been prepared for this pandemic and its devastating impact on their operations and business. But, while we may be down, we are a very resilient industry that has a long history of adapting to even the most challenging circumstances.
We are extremely grateful for the support that governments have provided our industry and members in 2020. USD173 billion so far. That said, I also recognize that this is not going to be enough given the continuing challenges that the industry faces going into 2021.
I also note with concern that this support has varied greatly across the globe. Many carriers have been able to maintain operations and staff levels better than others because of their access to government funds. Airlines compete fiercely on multiple fronts – government assistance should not be one of them.
We always opposed state money in our industry since it distorts fair competition. However, in this exceptional crisis there is no other way to save the global industry;
While airlines strive to stay afloat, we also must acknowledge that this is a sad time for all of our extended family who won’t be able to survive this crisis.
First, it may seem like a long time ago but we as an industry entered 2020 with the expectation for transporting almost five billion passengers across the globe. IATA now projects less than two billion for 2020. We regret that travel restrictions have prevented our industry from connecting the world and people within and across it.
I also want to express my sympathy for those airline professionals who have left our industry because of unavoidable downsizing. These fine women and men have devoted some or all of their careers to serving what Alexandre calls the Business of Freedom. Yet through no fault of their own, they are unable to practice their craft. And that leaves all of us both heartbroken and determined to restart the industry and welcome them back to our airline family wherever possible.
As Board Chair, I am pleased to have the opportunity to report on some of the key areas that your Association has been working on since the 2019 AGM in Seoul.
It will surprise no one that the Board spent the majority of its session yesterday exploring how we can accelerate the recovery of the industry and return aviation to its historic role in powering the modern, globalized economy that has lifted more than a billion people from poverty since 1990.
No one underestimates the challenges. Today some 221 countries around the world have implemented restrictions on the ability of people to transit their borders. Those measures include border closures and quarantines -- that have the same effect. This points up the specific problem our members face: while the virus is global, there is no globally agreed way fight against its spread across borders. Airlines are forced to operate in this environment of multiple and disparate measures, which change on an almost daily basis.
In order to address this challenge, the Board has directed IATA to continue to work with ICAO and its member states to ensure that the ICAO CART guidance is translated into sound, aligned government policies that will allow for the safe opening of international borders.
The Board also endorsed IATA’s call for the development and deployment of rapid, accurate, affordable, easy-to-operate, scalable and systematic COVID-19 testing. This should apply to all international passengers as an alternative to quarantine measures that effectively ban international travel.
We are all heartened by the recent news of effective vaccines and hope that it is evidence of light at the end of this horrible COVID tunnel. The Board directed IATA to continue to work with international organizations, member airlines and pharmaceutical companies to ensure that our industry has the tools it needs to transport these vaccines across the globe once they are available.
And it is worth mentioning that only our industry can make it happen to supply the urgently needed vaccines swiftly to the whole world via airfreight.
In an effort to bring public focus to all of these developments, the Board recommends that the AGM adopts two policy resolutions.
The first calls on governments to accelerate the reopening of borders and the restart of international travel.
The second reaffirms the fragile state of airline finances. And it urges governments to prioritize regulatory relief for the industry as well as aviation’s commitment to reconnect the world safely and sustainably.
The Board recognizes the vital role that our trade association has played since the onset of this crisis. IATA celebrated its 75th birthday this year; and I hope I speak for everyone when I say that the Association has never been more important, more necessary, than today.
I’d like to highlight three areas where IATA’s activities were absolutely crucial to sustaining the industry since the COVID-19 crisis began:
- The first was maintaining the viability and integrity of our industry financial settlement systems --upon which the global air travel network depends -- under unimagined stresses for which the systems were not designed.
- The second was in tirelessly advocating for government support of the industry, directly and through the media for-financial assistance, two rounds of global slot use relief, and the extension of the validity of crew licenses and certificates that could not be renewed due to travel restrictions.
- The third was in representing the industry during the ICAO CART process to ensure that industry knowledge and expertise was included in the Take-Off guidance and in the subsequent Phase 2 documents released this month.
The Board congratulates Alexandre and his team for these achievements and for many others during this crisis. However, Alexandre and I recognize that these accomplishments would not have been possible without the strong and tireless support of our Board members and the airline employees who have devoted their time and expertise to the nine IATA Advisory Councils and their subcommittees that support our Association. That they were able to do so at a time when survival was the order of the day is greatly appreciated.
Notwithstanding the accomplishments, the Board made it clear that we have very high expectations for our Association in the coming year, particularly in two key areas: advocacy and standards.
Let’s begin with advocacy. The need for IATA-led advocacy with governments around the world has never been greater. First is the critical requirement for continued financial support. IATA also needs to provide governments with the operational expertise to put policies in place that manage the risk of importing new cases while enabling aviation to provide the global connectivity that contributes USD3.5 trillion dollars in economic benefits.
The second key area is around standards. Today, governments, airlines, airports and a wide variety of private companies are exploring different ways to ensure the safety of the traveling public in a pandemic world. IATA, for its part, is working with its members and public health authorities to gather the lessons learned from various trials that give hope that we can begin to build traffic back to the pre-COVID level.
We, as an industry, need to lead the way in developing global standards for testing and health passports. The first pilot projects with tested flights are delivering promising results. The Board supported IATA’s development of the IATA Travel Pass which was launched yesterday. It is a digital solution to support the safe, secure and verified flow of testing and vaccine information among governments, airlines, laboratories and passengers. We believe that this offers the potential to give passengers the confidence to fly again and governments the confidence to re-open borders without quarantine measures.
Turning to the environment, the Board recognizes that regardless of COVID-19, the environmental sustainability of the industry will continue to be on top of our agenda. Anti-aviation sentiment is alive and well in a number of jurisdictions. Further, the Board considers that the industry’s environmental impact will remain a key policy and regulatory challenge as aviation transitions from survival to recovery.
For this reason, the Board recommends that the AGM reaffirms its commitment to address the industry’s environmental challenges. This reaffirmation is included as part of the policy resolution I mentioned before, relating to aviation’s commitment to reconnect the world safely and sustainably. If adopted, it will underscore and support IATA’s advocacy and communication efforts with governments, travelers and other stakeholders.
Turning finally to the business of IATA, the Board reviewed the report of its Audit Committee and approved both the financial statements of IATA for 2019 and the Association’s budget for 2021. I am pleased to report that, despite the current economic crisis, the Association continues to enjoy a sound financial position with a debt-free balance sheet and effective internal controls and processes.
The Board also recognized the difficult decision made by Alexandre and his team to restructure IATA in the face of the new realities facing our industry. While IATA will be a smaller organization than before the crisis, the Board and I have no doubt that your Association is up to the task ahead of it.
This concludes my report on the actions taken by your Board yesterday. I am pleased to be succeeded as chairman by Robin Hayes, who I know will do a great job.
While the situation is truly challenging, I would not want to close with at least a bit of optimism. In a recently published forecast, IATA predicted that a vaccine would be available by June 2021. News over the past several days suggests that this prediction may come to pass, which would be a major step towards our recovery.
However, as Alexandre has noted, aviation—and indeed the world--cannot wait for a vaccine to be universally available before we reopen borders to travel. We must continue to tirelessly advocate for testing as the interim, but critical step to begin the journey back to normality.
Thank you for your attention.