Good morning. It is a pleasure to be in New York City. We’re especially gratified to be hosting Aviation Day USA with the Wings Club for a second time. Thanks are also owed to our generous sponsors, who make events like this possible.
Aviation and New York City are inextricably linked. Not too far from where we are today, Charles Lindbergh took off on his epic flight across the Atlantic Ocean, 91 years ago.
Today, aviation puts New York at the crossroads of the world. In 2017, more than 100 million travelers to and from the metropolitan region were served by some 1.2 million flights from New York’s three main airports. That’s about 3,300 per day.
Many of those travelers will have a view of the Statue of Liberty as they approach the city. It is a great symbol of this country. And I have spoken often about the links between liberty and our industry.
Aviation is the Business of Freedom.
- Aviation frees us from the constraints of geography, distance and time. In doing so, it enables us to lead better lives, and makes the world a better place.
- Aviation empowers us to explore the world, to do business globally, and to enrich our lives.
- Aviation connectivity gets goods to markets, and vital aid to those in need. By value, a third of the goods traded internationally travel by air.
- And the aviation industry supports some 6.2 million jobs in the USA and 63 million worldwide.
To ensure that aviation—the business of freedom—continues to grow the benefits it generates, we must be guided by five core principles:
- First,we must be safe, and we must always strive to be even safer.
- Second,aviation thrives on partnership and cooperation, supported by global standards.
- Third, governments must avoid creating barriers to market innovation.
- Fourth,aviation must be supported by infrastructure that is efficient and affordable.
- Lastly, aviation must be sustainable, both environmentally and economically.
Let’s take a closer look at these principles, beginning with safety.
Today, IATA released the industry’s 2017 safety performance analysis. Some 4.1 billion passengers flew safely on 42 million flights. As has previously been reported, no lives were lost in passenger jet aircraft accidents last year. This is the second time in three years that we have reached this level of safety. And it is an amazing achievement.
There were, however, six fatal accidents involving turboprop and cargo aircraft. And this month there have been fatal accidents in Russia and Iran. Every fatality is a tragedy. And each one rededicates the industry to becoming even safer.
Traditionally, we have relied on accident investigation to guide safety improvements. As the number of accidents declines, the key to getting to zero rests in better understanding what happens in the more than 100,000 flights operating safely every day. That’s what we’re doing with our Global Aviation Data Management (GADM) initiative.
To support this approach, we recently signed an agreement with the Civil Aviation Authority of Singapore to create a Safety Predictive Analytics Research Center (SPARC). We will feed operational flight and safety information collected through GADM into SPARC to analyze potential aviation safety hazards and assess related risks. The goal is to remove the conditions that can lead to accidents.
Aviation is a team effort. We rely on global standards that enable aviation’s many players to work together.
That is best illustrated with safety, where a collaborative approach among stakeholders is crucial. Every safe flight is the result of close cooperation among many actors—airlines, regulators, airports, air navigation service providers, manufacturers, security agencies, ground handlers and more. Underlying this cooperation are global standards—some agreed by governments through the International Civil Aviation Organization (ICAO) and some due to the cooperation of airlines through IATA.
Last year, we saw what can happen when a working together approach is not followed. The US and the UK governments unilaterally banned the carriage of large Portable Electronic Devices (PEDs) in aircraft cabins on flights from several airports in the Middle East and Africa. This was done without prior warning or consultation with industry or other states.
We trust that these measures were guided by reliable intelligence requiring urgent action. But the siloed approach added cost and complexity for airlines and airports.
Our passengers were not only frustrated; their confidence in the system took a knock with that inconsistent approach. How could they think otherwise when PEDs were allowed on some flights but not on others—even from the same airports?
In the wake of these actions, we opened a dialogue with the US Transportation Security Administration (TSA). The focus was on achieving their security goals, while minimizing the impact on operations and passengers. Ultimately, the PEDs ban was lifted, but airlines struggled mightily to achieve alternative measures acceptable to the TSA in a short timeframe.
What did we learn from this? First and foremost, we were reminded that we share the common goal of security with governments. And it was clear that we are more successful when we work together.
New York City was at the center of another—and more recent—example of the importance of working together.
On the fourth of January, the US East Coast experienced extreme snow with the so-called “Bomb Cyclone.” New York’s Kennedy Airport was hit with more than 140 diversions and over 1,000 cancellations. And the next two days saw operational chaos as all involved tried to cope simultaneously with service recovery and regular operations.
I think all stakeholders would agree that our collective response did not meet the expectations of the traveling public. So we are working together to dissect what happened so that we can do better in future extreme weather events.
I won’t pre-judge the results of these efforts. But one thing is already clear. We did not have enough processes in place to ensure that all parties had timely access to the same information on which effective and coordinated decisions could have been made.
And it is imperative that we work with the Port Authority of New York and New Jersey, the terminal operators, the ground service providers and others to create a more integrated approach.
The business of freedom also requires governments to remove barriers to innovation.
Like all industries, aviation is being challenged by the digital revolution. Nobody knows what opportunities that will bring or how it will change the industry. But it is clear that constant innovation is critical to survival. Often, however, governments treat aviation as if it was a monopoly utility, with heavy commercial regulations that stifle innovation and creativity.
For example, the success of the so-called ultra-low cost carriers makes it clear there is a huge appetite for an absolutely basic travel experience. Yet in parts of the globe, regulators try to limit airlines’ ability to meet this demand by imposing some service levels—like requiring inclusive or flexible fares.
Unfortunately, this has also occurred in the USA. Under the Obama Administration, the Department of Transportation (DOT) retreated from some of the principles of free and open market competition in favor of a more heavy-handed approach to regulation.
Let me provide you with three instructive examples of what I would call regulatory over-reach:
- First, the full fare advertising regulation singles out airlines as one of very few industries that must include all government-imposed fees and taxes in their posted fare. Why should air travelers be treated any differently than other consumers in a country where tax is almost universally applied on top of the advertised price?
- A second example is DOT’s proposal to regulate cell phone use on planes for voice calls. Absent a safety issue, it is hard to see how DOT had authority to regulate in this area.
- Third, DOT considered whether to require airlines to distribute flight and fare information to any and all metasearch companies, with no restrictions on how the information was presented to consumers.
We appreciate DOT’s willingness under the Trump Administration to review regulations to ensure that their costs to industry and air travelers do not exceed their benefits. I would like to particularly thank Deputy Secretary Jeffrey Rosen for leading this important initiative.
The business of freedom also depends on having the right infrastructure to meet future demand.
IATA forecasts that 7.8 billion passengers will travel globally in 2036. That is nearly double the 4.1 billion who flew in 2017. Our requirements to meet that demand are ambitious, but they’re not rocket science.
We need sufficient capacity in terms of runways, terminals and airspace. Quality must be aligned with our technical and commercial needs. And it all must be affordable.
I believe, however, that we are headed for an infrastructure crisis–and that includes in the US– where we expect passenger numbers to rise 57% over the next 20 years to 1.1 billion.
First, infrastructure is not being built fast enough to meet growing demand. In the US, for example, the last all new major airport, Denver International, opened nearly a quarter of a century ago.
And there are worrying trends which are increasing infrastructure costs. One of these is airport privatization. Candidly, we have yet to see an airport privatization that has, in the long-term, delivered on the promised benefits of greater efficiency for airlines and a better experience for our customers. To date there has been no regulatory formula that effectively balances the interest of private owners to earn a profit with the public interest to have the airport serve as an engine of economic growth.
The result is that our members are very frustrated with the state of privatized airports. By all means invite private sector expertise to bring commercial discipline and a customer service focus to airport management. But our view is that the ownership is best left in public hands.
We also have concerns about the ability to handle the thousands of new flights that will be required to meet demand in the coming decades. US air traffic controllers do an excellent job. But the US air traffic management system is falling behind in the introduction of new and more efficient technology. That is why IATA supports the long-delayed transformation and modernization of America’s air traffic management system by placing it in an independent not-for-profit structure outside of government.
One of the most troubling developments impacting infrastructure modernization is the misallocation of government fees and charges collected from air travelers. About 21% of the average domestic ticket cost is taxes and charges. And instead of funding much needed aviation investments, too much of this money is being spent elsewhere.
The latest House budget proposal continues this misguided trend. If passed, we will see increased charges for security and customs services. But much of that will be diverted to general spending. It’s bad enough being taxed like a sin. It is unbearable to have those taxes spent elsewhere.
Finally, aviation must be environmentally and economically sustainable
Aviation was the first industry to globally agree on a plan to address our carbon emissions. We are making progress toward our goals of carbon-neutral growth from 2020 and a 50% reduction in our carbon footprint by 2050.
The historic agreement reached at ICAO in 2016 on a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is one of four pillars in our common strategy to ensure that aviation meets this responsibility.
ICAO will formally adopt the technical requirements for CORSIA in the coming months, and we are working with our members and the rest of the airline community to ensure that they are ready to start reporting from 2019. We also continue to encourage more governments to join CORSIA from the voluntary period. Already, over 80% of the anticipated 2020-2035 growth will be covered. We’d like it to be more. And we continue to advance with new technologies, improved operations and more efficient infrastructure that ultimately will get us to our 2050 goal.
The other part of sustainability is economic. Airlines are doing better than at any time in their history. This will be the fourth consecutive year in which earnings will exceed the cost of capital—in other words a normal profit. The expected $38.4 billion profit in 2018 translates to $8.90 per passenger globally. North American airlines are doing even better with a forecast profit of $16.67 per passenger. Airlines clearly have made themselves more financially robust through massive transformations. But it is still a very thin buffer against shocks.
Conclusion
I will end my remarks with one more thought. All of us are fortunate to participate in an industry that contributes so much value to how we live. Aviation is woven into the fabric of modern life and is the irreplaceable highway in the sky for those striving to bring the benefits of modernity to their own part of the world. Yet we must never take aviation’s continued well-being for granted. I believe the principles I have outlined should enable aviation to be the Business of Freedom for decades to come. Thank you.
