Aviation is a global industry. This year it will safely meet the transport needs of 4.6 billion travelers. It will power the global economy by transporting 66 million tonnes of cargo, the value of which accounts for a third of global trade.
The industry’s footprint extends to every corner of the earth. Never before have we been so connected to each other. And as the density of global connectivity grows each year, the world becomes more prosperous.
I call aviation the Business of Freedom. At the IATA AGM here in Doha in 2014 we celebrated the centenary of the first commercial flight. Aviation has changed the world for the better by pushing back the horizons of distance and fueling globalization. As an industry we can be proud.
We could not, however, operate at the current level of safety, with the same level of efficiency or at the scale that we do without commonly understood and implemented rules of the game. Regulation is vitally important to aviation.
Thank you to CAPA and Qatar Airways for partnering to facilitate the important discussions that will take place here today and tomorrow.
Many have the impression that trade associations “fight” regulation. As the Director General of IATA, it is true that much of my time is focused on advocacy, but with the aim of achieving the regulatory structure needed for aviation’s success.
On the one hand, that means working with governments directly and through the International Civil Aviation Organization (ICAO) to produce regulation that enables aviation to fulfill its mission as the Business of Freedom. On the other hand, it means rallying the airlines to agree global standards that support the global system.
To complete the metaphor, global standards and regulation work hand-in-hand to make flying safe, efficient and sustainable. And by sustainable, I mean both in terms of the environment and the industry’s finances.
Smarter Regulation and the Environment
Those of you familiar with IATA will know the term Smarter Regulation. It is a concept that we have been promoting for several years. Smarter Regulation results from dialogue between the industry and governments focused on solving real problems. That discussion should be guided by global standards and informed by a rigorous cost-benefit analysis. In doing so, it avoids unintended and counter-productive consequences.
At its best, Smarter Regulation is proactive. That’s how we achieved CORSIA—the Carbon Offsetting and Reduction Scheme for International Aviation. This is a game-changing global agreement on climate change that will enable aviation to achieve carbon-neutral growth from 2020.
From the start of this year, all airlines are monitoring their emissions from international flights which they will then report to their governments. This process will form a baseline. And the license to grow for airlines will be offsets that they purchase to support carbon-reduction programs in other parts of the economy.
Of course, CORSIA alone is not enough. We are working with governments and across the industry to reduce emissions with
- new technology,
- increased deployment of sustainable aviation fuels
- improved infrastructure, and
- More efficient operations.
CORSIA will play a vital role in filling the gap until these efforts can reach maturity.
From a regulatory perspective what is truly unique is that the industry asked for this regulation. We lobbied hard for it because we accepted our climate change responsibility. We even worked alongside governments to lend our operational expertise to ensure the implementation measures are efficient and effective.
CORSIA will be mandatory from 2027. Already governments accounting for about 80% of aviation are signed up for the preceding voluntary period. And we are actively encouraging more governments to join.
In tandem, we are closely monitoring to ensure that the implementation is fully aligned with the agreed ICAO specifications. That’s because we know from experience that global standards work best when they are universally and uniformly applied.
As you can see, Smarter Regulation is more common sense than it is rocket science. There are, however, challenges. Three of the major issues that we face are:
- Governments breaking from global standards
- Governments not consulting with the industry, and
- Governments not moving fast enough to keep pace with industry developments
Let me illustrate these in order, beginning with issues of universal implementation.
The first example that comes to mind is the Worldwide Slot Guidelines (WSG). This is a well-established global system for allocating airport slots. The problem is that more people want to fly than airports have the capacity to accommodate. The solution is to build more capacity. But that is not happening fast enough. So, we have a globally-agreed system to allocate slots at capacity constrained airports.
Today the WSG is being used at about 200 airports accounting for 43% of global traffic.
Some governments have tried to tinker with the system. And we have fiercely resisted. Why? Because allocating a slot at Tokyo, for example, means nothing if there isn’t a corresponding slot available at the destination at the required time. The system will only work if the parties at both ends of a route are using the same rules. Tinkering by any participant messes it up for everybody!
Like any system, it can always be improved. That’s why we are working with Airports Council International (ACI) on optimization proposals.
Something that has come to light in the process is that there is no standard methodology for airports to declare their capacity. And it is becoming clear that under-declaration by airports is an artificial limit on capacity and a handicap on the system that must be remedied.
We reject categorically, however, proposals for slot auctioning. An important principle of Smarter Regulation is that it creates value as measured by cost-benefit analysis. Auctioning does not create more capacity. It would, however, add costs to the industry. And, it will be detrimental to competition as new capacity would only be available to those airlines with the deepest pockets.
By all means, let’s make the WSG work better. But let’s not compromise the value that is inherent in a reliable, transparent, neutral and global system—a system that has enabled the growth of a fiercely competitive industry. I hope that this afternoon’s discussion on slots will yield some good ideas.
Next, I’d like to look at the importance of consultation—another important principle of Smarter Regulation. I would like to do this in the context of the development of passenger rights regulations. For nearly 15 years the industry has raised its concerns over the European Passenger Rights Regulation—the infamous EU 261.
It is a confusing, poorly-worded regulation that is adding cost to the European industry. Plus, it is not doing its best at protecting consumers. Even the European Commission sees the shortcomings of this regulation and has proposed important reforms. But these have been held hostage for years as a result of the implications of the Gibraltar dispute between the UK and Spain.
It is absurd that a dispute dating from the early 1700’s—over two centuries before the first airline took flight—is holding up reform of an airline regulation. But that is the reality. The point that has to be made is simple. Ample consultation must take place before a regulation becomes law because fixing mistakes can take a very long time.
Let me be clear. Airlines support protecting the rights of their passengers. In fact, a resolution of our 2013 AGM outlined principles to do just that. We want a common-sense approach that includes good communication, respectful treatment and proportional compensation when needed.
The IATA resolution was taken into consideration when governments agreed the ICAO principles on passenger rights. Even though governments signed-up to these principles, many persist in going it on their own. And too often they do so in a knee-jerk response to an incident.
Canada is the latest example. In response to a 2017 incident that everyone agrees was deplorable, the Canadian government decided to establish a passenger bill of rights. The government canvassed broadly for ideas, which was good. But what followed was a disappointment.
- With the draft regulation published on 22 December—just before the year-end holiday—the desire for rigorous consultations is not apparent.
- The draft regulation is more focused on penalizing airlines than protecting passengers.
- Those penalties have forgotten the principle of proportionality. Compensation for delays can be several times average fares.
- And the cost/benefit relationship is questionable. Airlines are already highly incentivized to run on-time operations. Penalties will add costs. But that is not a solution for improving the passenger experience.
Regulation Must Keep Pace with Industry Developments
While we disagree with punitive regulation, there are cases where stronger regulation is needed to keep pace with developing industry trends. Airport privatization is a case in point.
Cash-strapped governments are increasingly looking to the private sector to help in the development of airport capacity. We believe that critical infrastructure capacity like airports must be developed in line with user needs. And airline needs from airports are rather simple:
- We need adequate capacity
- The facility must meet airline technical and commercial requirements
- And it must be affordable
We don’t really care who owns the airport so long as it delivers against these goals. Achieving these will also serve the local community well by supporting growth in traffic and stimulating the economy.
But our experience with privatized airports has been disappointing. So much so, that airlines unanimously agreed a resolution at our last AGM calling on governments to do better.
Our members urged governments to be cautious while:
- Focusing on the long-term economic and social benefits of an effective airport as part of the country’s critical infrastructure
- Learning from positive experiences with corporatization, new financing models, and alternative ways of tapping private sector participation
- Making informed decisions on ownership and operating models to protect consumer interests, and
- Locking-in the benefits of competitive airport infrastructure with firm regulation.
Slots, passenger rights and airport privatization help illustrate why a Smarter Regulation approach based on global standards is critical to fostering aviation’s future growth. That addresses half of the reason why we are here today. What about aeropolitics?
Where we have seen liberalization in markets, there has been growth. In general, airlines are for liberalization of markets. There is full support, for example, for the Single African Air Transport Market initiative. But there is no broad industry consensus on what are fair pre-conditions for broad liberalization. The commercial considerations for airlines are critical. And governments have the tough job of adjudicating what constitutes fair.
But I will reflect back on my opening comments about aviation as the Business of Freedom. This is coming under pressure today by a number of political agendas. Some of these are very specific and related to this region:
- Iran’s ability to maintain internationally accepted safety standards or support links to its diaspora and the rest of the world are enormously challenged by US sanctions.
- And, the lack of peaceful relations among states in the region has resulted in operational restrictions and inefficiencies.
- The blockade of Qatar is one example. Aviation is keeping the country connected to the world—but under extremely difficult conditions.
Looking outside the region, in Europe, the outcome of the Brexit talks could compromise the ability of aviation to meet growing demands for connectivity. Irrespective of the political relationship between the UK and Europe we see growing demand by individuals and business for connectivity between the two. Brexit cannot be allowed to undermine that demand.
More generally, some political circles are rejecting globalizations benefits. They favor a protectionist future that can only lead to a far less connected and less prosperous world—both economically and culturally.
We need to work towards a more inclusive globalization. But it is a fact that globalization has already lifted a billion people from poverty. That could not have happened without aviation. And we are well-aware that our industry has a critical contribution to most of the 17 UN Sustainable Development Goals.
IATA is a trade association. Our primary aim is to help our member airlines to deliver connectivity safely, efficiently, and sustainably. This is enormously important and positive for the future of our world.
IATA has no political agenda and takes no sides in political disputes. But we know that aviation can only deliver its benefits with borders that are open to people and to trade. And so, in these challenging times, we must all rigorously defend the Business of Freedom.