IATA AGM OPEN BORDERS

Gl­real avi­atirn is in thh Sinn rf hhalth, eut it fachs air Sr­c­n­hts, linh wafhr-thin mar­gins, high fuhl crst anG traGh wars, says Alexan­dre de Ju­niac, DG anG C(O IATA

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THE pos­i­tive im­pact of glob­al­i­sa­tion is un­de­ni­able. Since 1990, 1.1 bil­lion peo­ple have been lifted from poverty. The world is grow­ing richer and trade, em­pow­ered by con­nec­tiv­ity, is a leading force in de­vel­op­ment. But the forces of pro­tec­tion­ism are gath­er­ing strength. Sanc­tions, tar­iffs, and geopo­lit­i­cal con­flicts are the main­stay of daily news. The spec­tre of a trade war looms. De­bates on mi­gra­tion and im­mi­gra­tion rage. And trust among na­tions is show­ing its fragility. Facts show that avi­a­tion has cre­ated im­mense value by bring­ing peo­ple, prod­ucts and busi­ness to­gether. The 4 bil­lion pas­sen­gers who boarded planes in 2017 demon­strate the hu­man de­sire to ex­plore, con­nect, learn and col­lab­o­rate across great dis­tances. And the 60 mil­lion tonnes of cargo de­liv­ered by air ac­counted for a third of the value of goods traded glob­ally. Ev­ery day, goods, peo­ple, in­vest­ment and ideas are con­nected by avi­a­tion. That di­rectly sup­ports 63 mil­lion jobs and im­proves the qual­ity of life for all. Avi­a­tion has a pur­pose. It spreads pros­per­ity and en­riches the hu­man spirit. That truth lays the foun­da­tion for a very im­por­tant mes­sage. Ev­ery­one is bet­ter off when borders are open to peo­ple and to trade. And, our hard work as an in­dus­try has primed avi­a­tion to be an even stronger cat­a­lyst for an even more in­clu­sive glob­al­i­sa­tion. Avi­a­tion’s fi­nan­cial foun­da­tion is stronger than ever. Air­lines will make $33.8 bil­lion this year. Pas­sen­ger de­mand is ex­pected to grow seven per­cent and cargo by four per­cent. Air­lines are cre­at­ing jobs, pay­ing-down debt and re­ward­ing in­vestors. Our nine-year run of prof­itabil­ity be­gan in 2010. Re­turn on in­vested cap­i­tal will ex­ceed the cost of cap­i­tal for four years in a row. At long last, nor­mal prof­its are be­com­ing nor­mal. This is hard won through ma­jor changes—to the struc­ture and its op­er­a­tions.

But suc­cess is not evenly spread. Al­most half the in­dus­try’s prof­its are gen­er­ated in North Amer­ica, while bet­ter fi­nan­cial re­turns re­main elu­sive for many. The goal is for the en­tire in­dus­try to op­er­ate in solid fi­nan­cial health. Low-cost long-haul is pro­vid­ing great value to con­sumers. Pro­tec­tion­ism could de­rail suc­cess­ful in­ter­na­tional joint-ven­tures. Jet fuel costs are ex­pected to be up 25% on 2017. But, $7.76 is our only buf­fer against fu­ture shocks. That’s the av­er­age profit per pas­sen­ger that air­lines will make this year—a thin 4.1% net mar­gin. Avi­a­tion’s new-found fi­nan­cial health is re­ward­ing con­sumers. With money to in­vest in new air­craft, the global net­work has grown to over 58,000 routes. Air­lines

have in­vested to de­velop op­tions that meet ev­ery travel bud­get, ship­ping re­quire­ment, or busi­ness need. Safety We are also mak­ing progress on safety. In 2017 for the sec­ond time in three years, there were no pas­sen­ger fa­tal­i­ties in ac­ci­dents on jet op­er­a­tions. The re­cent Cubana crash, how­ever, was a hu­man tragedy that sharp­ens our de­ter­mi­na­tion to make our safe in­dus­try even safer. That’s why our Global Avi­a­tion Data Man­age­ment pro­gram (GADM) is so im­por­tant. The vi­sion is to use data to mit­i­gate risks be­fore they can be­come ac­ci­dents. Pre­dic­tive anal­y­sis tools we are de­vel­op­ing with the Sin­ga­pore govern­ment will make this pos­si­ble. Se­cu­rity Work­ing ef­fec­tively with reg­u­la­tors is more de­mand­ing when the sub­ject is se­cu­rity. Af­ter some chal­lenges over the last year, our part­ner­ship with govern­ments has deep­ened. It helped the US Trans­porta­tion Se­cu­rity Ad­min­is­tra­tion to re­place its PED ban with mea­sures that have im­proved se­cu­rity glob­ally. En­vi­ron­ment Sus­tain­abil­ity is also cen­tral to our fu­ture. From Jan­uary 1, 2019, all air­lines must re­port fuel con­sump­tion in prepa­ra­tion for the Car­bon Off­set­ting and Re­duc­tion Scheme for In­ter­na­tional Avi­a­tion (CORSIA). This scheme will keep our promise to cap net emis­sions, achiev­ing car­bon neu­tral growth from 2020. But the com­mit­ment to sus­tain­abil­ity must be shared by govern­ments. The 73 govern­ments al­ready signed on to CORSIA cover 88 per­cent of avi­a­tion. We want more to join. It’s not just about sign­ing-up. Un­der the lead­er­ship of ICAO, govern­ments agreed to CORSIA as a uni­ver­sal mea­sure to ad­dress avi­a­tion’s car­bon foot­print. We also want govern­ments to step up on sus­tain­able avi­a­tion fuel (SAF). Chal­lenges On avi­a­tion’s core mis­sion to de­liver safe, se­cure, ac­ces­si­ble and sus­tain­able con­nec­tiv­ity, the state of our in­dus­try is strong and get­ting stronger. And with “nor­mal” lev­els of prof­itabil­ity we are spread­ing avi­a­tion’s ben­e­fits more widely. Look­ing to the fu­ture, I will high­light three key chal­lenges: • Avoid­ing creep­ing re-reg­u­la­tion • Main­tain­ing the in­tegrity of global stan­dards, and • Find­ing suf­fi­cient ca­pac­ity to af­ford­ably ac­com­mo­date growth Re-Reg­u­la­tion We are work­ing in part­ner­ship with govern­ments to en­sure that “smarter reg­u­la­tion” prin­ci­ples are at the core of reg­u­la­tions. This com­mon-sense ap­proach asks them to align with global stan­dards, take into ac­count in­dus­try in­put and an­a­lyse the costs of reg­u­la­tion against the ben­e­fits. Fly­ing is more ac­ces­si­ble. In 1978, when dereg­u­la­tion be­gan, the av­er­age per­son flew once ev­ery 6.6 years. Now the av­er­age is more fre­quent than once ev­ery two years. But a wor­ry­ing coun­ter­point of creep­ing re-reg­u­la­tion can­not be ig­nored. Global Stan­dards As part of pro­mot­ing smarter reg­u­la­tion, we must vig­i­lantly de­fend global stan­dards. The Chicago Con­ven­tion set global op­er­at­ing stan­dards that have fos­tered avi­a­tion’s amaz­ing suc­cess story. We could not safely op­er­ate on the scale of to­day if each coun­try made up its own rules. Global com­mer­cial stan­dards are the back­bone of a dis­tri­bu­tion net­work en­abling pas­sen­gers to buy a ticket at any ac­cred­ited agent, pay in a sin­gle cur­rency, and travel the world with con­fi­dence.

In­fra­struc­ture

While the World­wide Slot Guide­lines are great at man­ag­ing scarce ca­pac­ity, they are not an al­ter­na­tive so­lu­tion for build­ing more air­ports. We are in a ca­pac­ity crisis. We don’t see the re­quired air­port in­fra­struc­ture in­vest­ment to solve it. Govern­ments strug­gle to build quickly. With cash-strapped fi­nances, many are look­ing to the pri­vate sec­tor for so­lu­tions. Our mes­sage: we need air­port ca­pac­ity. But be cau­tious. Ex­pect­ing pri­vati­sa­tion to be the magic so­lu­tion is a wrong as­sump­tion.

Traf­fick­ing

We are the busi­ness of free­dom. There should be no tol­er­ance for those who use our net­works ne­far­i­ously. Our de­ci­sion a few years ago to take a stand on the il­licit traf­fick­ing of wildlife is bear­ing fruit. IATA’s Eyes Open cam­paign is now rais­ing aware­ness on hu­man traf­fick­ing.

The Busi­ness of Free­dom

There are chal­lenges. We will meet them head-on. By build­ing part­ner­ships and un­der­stand­ing needed to ex­pand the ben­e­fits of the amaz­ing in­dus­try.

Board of Gover­nors: IATA

Alexan­dre de Ju­niac

Jeffrey Goh, CEO, Star Al­liance

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