6 JULY 2009
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Welcome to the July AERBT discourse by a senior member of the travel industry. Our guest writer for this month is Director General and CEO of IATA (International Air Transport Association) Giovanni Bisignani. An energetic and popular figure within the airline industry he was previously involved with several Italian industrial companies including Alitalia where his was president for a spell.
"Numbers can tell powerful stories. USD10.4bn is the amount the world’s airlines lost in 2008, a year when the ground shifted and our industry was shaken. Skyrocketing oil prices dominated the first half of 2008 and global recession was the story of the second half.
We now see massive shifts in 2009. The industry fuel bill will fall by USD59bn, if oil averages USD56 per barrel for the year. But rising oil prices anticipating recovery are a great risk. On top of this, an even bigger negative number is on the horizon: USD80bn. That is the total revenue that will disappear with falling demand, collapsing yields, broken consumer confidence, and pandemic fears. The landscape is harsh and we expect airlines will lose USD9bn this year.
The air transport industry is in survival mode. Whether this crisis is long or short, the world is changing. Even if we try to look beyond the crisis we must recognize that it will not be business as usual. The assumptions of our past are no longer valid. After September 11, revenues fell by 7%. Almost immediately, we returned to growth that was fuelled by strong economies. This time we face a 15% drop with a global recession. It is a different world and our future depends on drastic resizing and reshaping by governments, partners and airlines to be even safer, greener and profitable.
Tightening belts is obvious. Airlines have made a head start. IATA’s Simplifying the Business programme delivered USD4bn in savings in 2008. Now we are targeting a further USD10bn annual savings by improving baggage, travel processes and shipping.
But resizing and reshaping is not just a problem for airlines. Our partners live on our revenues. They must follow the same approach. For labour, we cannot reshape without flexibility. This is not the time for salary increases. To protect jobs we must modernize work practices and we must all do more with less. Airlines expect the same from all suppliers and manufacturers.
The biggest job in change must be in our relationship with governments. It starts with climate change. Even in a recession, environment is at the top of our agenda. No other industry is as ambitious and no other industry is as united. Our four-pillar strategy focuses all industry players on addressing climate change together. And no other industry has achieved so much in recent years. For example, in 2009 emissions will fall 7% with the recession and 2% as a direct result of our strategy.
Biofuels have the potential to reduce our carbon footprint by up to 80%. IATA set a target of 10% alternative fuels by 2017. Nobody thought it possible but four airlines have tested biofuels, making certification a reality by 2011. But where are governments? Of the trillions of dollars in stimulus funds there is nothing on aviation biofuels. Governments are too slow to invest, they are too fast to tax.
We must look to the future. Both the aviation industry and governments want to improve environmental performance. It is an opportunity to work together. Our industry has made significant commitments with concrete targets. The first is to improve fuel efficiency by 1.5% each year until 2020. We recognize that improved fuel efficiency is not enough. Our emissions must stop growing. Last month our Board took a landmark decision. By 2020, the airline industry will achieve carbon neutral growth. Demand will continue to increase but any expansion of our carbon footprint will be compensated.
Airlines are the first global industry to make such a bold commitment, but we cannot do it alone. ICAO must define binding carbon emissions standards for manufacturers. Fuel companies must supply eco-friendly fuels and governments must give us access to credits in global carbon markets. To manage this global sectoral approach, we must account for emissions at a global level, not by state. IATA will work with ICAO to ensure compliance. Airlines should get carbon credits for every cent they pay whether in taxes, charges or emissions trading scheme payments. We should pay only once, not several times.
Reshaping the approach to climate change is only the start. Our relationship with governments must move from punitive micro-regulation to joint problem solving. For example, we need better coordination on security. We must spend our money more wisely focusing on the threats. One-stop security must be the future and the time has come for harmonization and mutual recognition of standards.
Governments want to protect jobs and stimulate the economy but we need basic commercial freedoms to run our businesses. The airline industry does not want bailouts. All we want is access to global capital, but old rules stand in the way of a healthier industry. If we cannot pay the bills, saving the flag on the tail will not save jobs. A prolonged recession could lead to a cash crisis. This would put at risk 32 million jobs and the lifeblood of the global economy.
What is the opportunity for our future? Progressive liberalization. It would be a cheap and effective stimulus. The logical next step is for the US and Europe to expand Open Skies to Open Aviation. Access to markets and capital is critical to all of our businesses.
Air transport is a responsible industry in good times and in crisis. Today’s situation is unprecedented, the most difficult ever. Governments and partners must understand that we are struggling to survive with a new and harsh reality. We are, however, resilient and capable of great change. Together with governments and partners, we must turn challenges into opportunities to be safer, greener and profitable".
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