Date: 2 June 2019
Director General's Report on the Air Transport Industry, AGM 2019, Seoul
The Two hundred thousand (1). That is the number of people who will arrive safely by air at their destination before I complete this report.
Some will be reuniting with friends and family. Others will be on journeys of discovery, rejuvenation or learning. Still more will be on business—exploring markets or closing deals. A few will be starting a new life in a new land. And some will be travelling to solve political crises, share ideas or deliver help to those in need.
Flying generates infinite possibilities that enrich our society. Because of the hard work of the leaders in this room—and the 2.7 million airline employees (2) who stand behind them—the world of 2019 is more connected than ever.
Flying is freedom!
And we can be proud that it is our business. Flying contributes to 15 of the 17 UN Sustainable Development Goals (3). And two recent events underscored how valued aviation is:
- In January, the longest government shutdown in US history ended when it appeared that air traffic controllers were not going to report for work (4), and
- In March the UK and the European Union agreed that international air services would continue uninterrupted, irrespective of what kind of Brexit finally unfolds (5).
Unfortunately, creeping protectionist or isolationist political agendas are on the rise. And they threaten to compromise the value our industry creates. For aviation to be a catalyst of prosperity, borders must be open to people and to trade.
Aviation enables globalization. Since 1990, on average, globalization has lifted 130,000 (6) people a day from poverty. The more people connect through flying, the greater the benefits to all the people of this world.
That’s an important message for governments to hear.
Solid financials are also needed for aviation to deliver its best.
As an industry, airlines have been in the black since 2010 (7). And since 2015 (8), returns to shareholders have exceeded their aggregate cost of capital.
The performance is not uniform. Some regions continue to struggle. But our sustained normal financial performance is a major shift from the boom and mostly bust cycles of the past.
2019 will see airlines make a $28 billion profit (9)— that’s $6.12 (10) per passenger. It’s a solid profit under challenging conditions. Passenger demand is robust. But trade wars and protectionist measures are taking their toll on the cargo business. And rising costs for fuel, labor and infrastructure are squeezing margins.
Returns will still exceed the cost of capital, but only just. And the industry’s 3.2% (11) net margin is modest and fragile compared to the margins of 20% (12) or more that Apple and Google regularly enjoy.
Looking to the future, the outlook is optimistic. Demand is forecast to double over the next two decades. With the cost of travel 40% (13) lower than a decade ago, the freedom to fly is reaching more people than ever. Aviation today is far from being an industry for the rich. The developing markets are expected to provide the majority of additional passenger demand. India and China alone are forecast to account for around 45% (14) of all additional passenger trips over the next two decades. Even more than today, the travelers of the future will come from all walks of life and economic means.
Meeting the demands of the future will test our industry’s capabilities.
- We need a solid platform to spread the benefits of aviation with efficient infrastructure and a diverse workforce,
- We need the capability to meet customer expectations with modern global-standard processes,
- And we must earn our license to grow with safety and sustainability.
These issues need action today to be ready for the future.
And, as an industry built on global standards, that action must be coordinated among stakeholders and across geographies.
Let’s start with infrastructure—the physical platform to spread aviation’s benefits. Our requirements for airport and air traffic management are not complicated:
- Sufficient capacity
- Quality and efficiency aligned with airline expectations, and
- Affordable costs
We are far from that today.
European air traffic management shortcomings illustrate the problem. In 2018 aircraft flying in Europe experienced 19.1 million (15) minutes of en-route delays. That’s 36 years of wasted time that unnecessarily added 5.6% to our European carbon footprint. The prime causes are inadequate capacity and staff rostering. These are fixable. And that makes poor performance all the more disappointing.
Unfortunately, this is not an isolated example. Air traffic bottlenecks are found in China, the US, the Gulf and elsewhere.
On the airport side, Mexico City (16) is the poster child for deficiencies. We were midway through the construction of a solution for the city’s infamously congested airport. Then the newly-elected government pulled the plug with no viable alternative.
Critically congested airports are spread the world over. Sao Paolo, New York, London, Amsterdam, Mumbai, Bangkok and Sydney are all examples of airport bottlenecks due to capacity constraints—both real and artificial.
There is some good news. Some governments do understand the importance of infrastructure:
- Istanbul opened a major new hub earlier in the year and Beijing will soon follow.
- Poland (17), Italy (18) and France (19) have published national airspace strategies.
- And the Republic of Korea demonstrates what implementing an ambitious vision for connectivity can achieve. This country moved from poverty to the world’s 11th largest economy in a few decades. Strong transport links supported a successful export-led strategy. Incheon Airport is part of that success—famous for customer centricity, efficiency and affordability.
Other governments should take note. Developing infrastructure—airports or air traffic management—lays an economic cornerstone. Careful planning, broad consultation with users, examination of funding options and a keen focus on affordability are the keys to making it successful. The right decisions today will determine the economic and social benefits that will be realized in the future.
In the meantime, shortfalls in airport capacity must be managed transparently to ensure that consumers benefit from competition even at the most congested airports. The Worldwide Slot Guidelines (20) have done this for decades. Just look at the evolution of the low-cost sector around the world for proof (21).
Working with Airports Council International (22) and the Worldwide Airport Coordinators Group we have made the system even better. The soon-to-be re-named Worldwide Airport Slot Guidelines are a major modernization of the system with a focus on delivering even more benefit to consumers.
An industry-managed system, administered through independent slot coordinators, is the most responsive to consumer needs. And you will be asked to endorse a resolution (23) reminding governments of this.
Sustainable growth will also create fantastic employment opportunities. Currently some 10.2 million (24) people are employed in the broad aviation sector. And millions more rewarding careers will be created to meet the growing demand for sustainable connectivity. But one important hurdle must be overcome.
Women are not equally advancing into senior management. And that’s a big problem. Diversity is strength. We are missing out on the insight and innovation that gender balance would bring. And we are not taking full advantage of a talent pool that can help us with the skills we need to grow sustainably. Our industry must engage the female half of the world’s population much more effectively.
Progress is being made. Tomorrow we will honor inspirational leadership with the inaugural IATA Diversity and Inclusion Awards (25). And we are working with partners across the industry to document and share best practices that have made a difference.
This work should help us articulate an industry strategy on gender diversity against which we can measure progress.
Aviation is a service industry. Our success depends on meeting customer expectations. They want innovation—digital transformation—at 5G speed. And it’s a real challenge for global standards to keep pace.
Our cargo customers, for example, eagerly await modernization. But, a decade and a half after setting a vision for e-freight, we still struggle to implement an electronic document—the e-air waybill.
The goal is digital transformation. That means using electronic documents in optimized processes to deliver better results. By that measure, we have a lot of ground still to cover.
The passenger business has made more progress. In June 2008 we converted to 100% e-ticketing (26). And today we are on the cusp of a digital transformation with the New Distribution Capability (NDC) (27) and ONE Order (28).
Thanks to your support, these programs will liberate the industry from a century of accumulated legacies. Together, they will usher in a new world of retailing—creating value for customers and airlines. That’s exciting!
What else can we do?
Two resolutions (29) before you today call for passenger experience improvements using technology and data:
- The first demonstrates our commitment to Radio Frequency Identification (RFID) (30) for baggage. RFID has the potential to reduce mishandling—already rare—by a quarter. And when things do go wrong, we will know where the bag is. It’s what passengers expect.
- The other supports One ID (31) — a single biometric token that will reduce the hassles of identifying yourself as you move through the airport. This will boost efficiency from check-in to boarding—to the benefit of passengers, airports and the control authorities. To make this happen we must work with governments to agree global standards, harmonize approaches, sort out privacy issues, integrate with existing infrastructure and agree the implementation process.
A further resolution will improve the experience for passengers with disabilities. Airlines can be proud that the industry has collaborated for decades to make the freedom of air travel accessible to passengers with disabilities.
Today’s resolution (32) reconfirms this commitment. And it asks governments to harmonize regulation so that travelers know what to expect regardless of where they travel and to protect the system from abuse so it is fully available for the passengers who need it.
Earning our License to Grow
Our success in modernizing processes, attracting talent or convincing governments to invest strategically in infrastructure relies on airlines earning their license to grow.
The freedom to fly makes our world a better place. For that, aviation’s reputation is solid. But in recent months, there is increased scrutiny on how we do our business in two fundamental areas: safety management and sustainability. These are our key elements of our license to grow.
Safety is always the top priority. And the numbers tell us categorically that flying is safe.
- In 2018 there was one major accident for every 5.4 million flights (33).
- The 430 IOSA (34) - registered carriers outperformed non-IOSA carriers on safety by a factor of two (35).
- And over the last decade the fatal accident rate has improved by 59% (36).
These facts, however, give no comfort to those who have lost family or friends in aviation tragedies. That’s why we must always strive for a zero-accident future.
The recent Boeing 737 MAX accidents have put our reputation in the spotlight (37). Serious questions arise with two accidents of a new aircraft model in quick succession.
Investigations will ultimately reveal the cause. And a remedy will be found.
The consequences of these tragedies, however, go far beyond the technical. Trust in the certification system has been damaged—among regulators, between regulators and the industry and with the flying public.
Everyone must be confident that processes are sufficiently thorough not to warrant duplicative and redundant examinations jurisdiction by jurisdiction. While Boeing and the US Federal Aviation Administration are at center stage, the close collaboration of counterpart manufacturers and civil aviation authorities around the world is essential. Any rift between regulators is not in anybody’s interest.
This is about more than restoring confidence in how aircraft are certified. When issues arise, coordination among regulators and with industry must improve. People were confused as grounding decisions rolled out in some markets while it was business as usual in others. Put yourselves in the shoes of travelers and I am sure anyone would expect better.
To be clear, I am not advocating for knee-jerk reactions. But governments and industry must find a way to maintain public confidence in safety with fast and coordinated responses.
Last month we met with 737 MAX operators (38). Both of these topics—shoring-up trust among regulators and improving coordination—were identified as priorities. They will be among the topics at a follow-up summit that will gather airlines, manufacturers and regulators.
Environment is the other great challenge of our time. It is also a fantastic example of what aviation can achieve when stakeholders combine forces to tackle a common problem.
- The environmental impact of an individual traveler has been cut in half compared to 1990 (39).
- CORSIA (40) — the Carbon Offsetting and Reduction Scheme for International Aviation — will facilitate carbon-neutral growth from 2020.
- And by 2050 (41) we will cut our net emissions to half 2005 levels—irrespective of growth—aligning ourselves with the goal of the Paris agreement.
- This is a great story in progress. How will we reach its very ambitious end?
- Modernizing air traffic management (42) could cut fuel burn if governments make investments to eliminate inefficiencies.
- Electric propulsion has potential. But even the most optimistic don’t see this playing a role outside of some regional flying in the near future.
Our biggest and most practical opportunity is sustainable aviation fuels. They can reduce our carbon footprint by up to 80% (44). A “chicken or egg” situation of high price and limited supply, however, remains. Reaching 2% (45) sustainable fuel system-wide by 2025 would be a tipping point.
Some airlines are moving us towards this with significant forward purchase agreements (46). I urge all of you to consider similar action.
Governments also need to act. They should build supportive policies to invigorate the sustainable fuels industry. But too many are focused on punitive environment taxes instead. This is climate hypocrisy. Putting money into general government coffers does nothing to reduce carbon. And it undermines CORSIA:
- Which delivers real reductions,
- Will generate $40 billion (47) in climate financing by 2035, and
- Was agreed by governments to be the single global market-based measure.
Public concern on environment issues has spiked worldwide with the publication of a UN report (48) on the impacts of not meeting the Paris Agreement goals. That has been reflected most acutely in Northern Europe. Sweden, for example, is the birthplace of “flight shaming” those who travel by air.
Unchallenged, this sentiment will grow and spread. Along with reducing emissions, we must collectively engage and tell our story more effectively. That means articulating a much clearer path towards our 2050 goal.
I want to emphasize that I am not proposing to communicate the climate problem away. We have targets to meet. And we must engage in out-of-the-box thinking to see if there are opportunities to work with governments to do even more.
Today you will be asked to support a resolution (49) reconfirming our commitments on sustainability. And we call on governments to deliver CORSIA along with promoting the use of sustainable aviation fuels, new technology and more efficient operations.
It is our duty to protect the planet from the disastrous impacts of climate change.
Some say that the answer to climate change is to stop or heavily reduce flying. That would have grave consequences for people, jobs, and economies the world over. It would be a step backward to an isolated society that is smaller, poorer and constrained.
I say, let’s work together to make flying sustainable. CO2 is the problem. We can and are doing something meaningful to reduce it. And we must not keep that a secret.
Securing the Future
Flying is freedom. The society we live in is better for it.
To protect that freedom for future generations
- We must commit to make flying unquestionably sustainable.
- We must build the infrastructure capable of accommodating a further democratization of sustainable flying.
- We must ensure that our industry places no barriers in front of anyone seeking to make a career in aviation.
- We must evolve the processes to improve the convenience, accessibility and efficiency of flying.
- And we must do everything possible to keep flying safe and public confidence strong.
These are no small challenges. But we are used to challenges. And when aviation unites in a common cause we have always delivered outstanding solutions.
Since I began these remarks some 200,000 people have arrived safely at their destination by air. And enormous value has been created as a result. That is aviation in action. We are the stewards of a truly amazing industry. And we must confidently work together to secure aviation’s future as the safe, secure, efficient and sustainable business of freedom.
1. Total passenger figures as per
speech from IATA DG December 2018
2. Aviation Benefits site
3. UN sustainable development goals
6. Based on The World Bank Taking on Inequality 2018 edition
7. IATA Economics report (pdf)
8. IATA Economics report (pdf
9. IATA Economics report (pdf
10. IATA Economics report (pdf
11. IATA Economics report (pdf
12. Macrotrends and
13. IATA Economics report
14. IATA press release
16. IATA Press release
17. IATA Press release
18. IATA Press release
19. IATA Press release
20. IATA Press release
23. Resolution release
24. ATAG - Aviation – Benefits Beyond Borders Report 2018
25. IATA press release
26. IATA press release
29. IATA press release
32. IATA press release
33. IATA press release
35. IATA safety fact sheet (pdf)
36. Comparing 2018 with 2009 (10 years), the fatal accident rate (per million sectors) decreased by 59%
(0.24 in 2018 vs 0.59 in 2009). Source: GADM: www.iata.org/gadm
39. IATA World Air Transport Statistics
41. IATA CORSIA fact sheet (pdf)
42. IATA Air Traffic page
43. IATA Technology Roadmap
44. IATA Alternative Fuels fact sheet (pdf)
45. IATA Alternative Fuels fact sheet (pdf)
46. Flight Global
48. UN Climate Change report
49. IATA resolution press release