Director General’s Report on the Air Transport Industry AGM 2021

he COVID-19 pandemic that essentially brought global aviation to a halt in April 2020 is now virtually endemic.

This AGM is an early symbol of how we can work, meet, connect, live and travel with COVID-19 in our world.

Aviation’s resilience, which has been a hallmark of our industry, is now on display.

Demand for cargo is tracking at nearly 8% above pre-crisis levels.
Some domestic markets are nearly back to pre-COVID-19 levels, telling us that people want to travel
And while August traffic was still far below 2019 levels, recent announcements relaxing border restrictions should give international markets a critical boost

We are also seeing improvements in finances. We expect 2021 losses to be nearly $52 billion—cut dramatically from the $138 billion lost in 2020. Losses will further reduce in 2022—to about $12 billion. In total, the COVID-19 crisis will cost aviation $201 billion in losses before we return to profitability in 2023.

We are past the deepest point of the crisis. While serious issues remain, the path to recovery is coming into view.

And we must walk that path with our partners across the value chain and with governments. Some 4% of global GDP, 88 million jobs and the freedom of billions of people to fly rests on the efforts of many partners. Our resilience will be tested as we work together:

To keep aviation safe and secure
To manage the risks of COVID-19, and
To make aviation sustainable

Safety and Security

Only last month we marked two decades since the terrible events of 9/11, another time when our resilience was severely tested.

Aviation is a symbol of freedom. And we witnessed horror as four civilian aircraft were converted to weapons to attack New York and Washington, DC. We pay deepest respect to all those who lost their lives on that darkest of days and remember the courageous actions of so many.

We should also recall the determined effort of airlines, our industry partners, and governments to respond and restart. As always, safety and security were the top priorities. And industry processes, infrastructure and even aircraft were adapted to deal with a transformed threat of terrorism.

In hindsight, we know that it took too long to recognize that working together and sharing vital information are the foundations of a strong defense against terrorism. There is no doubt that we are far more secure today than in 2001. But we could be much more efficient if we eliminated measures that have been surpassed by technology. We cannot allow this same mistake to be repeated with COVID.

And when it comes to safety, we must always be vigilant.

The recent deplorable Belarus incident reminded us that two wrongs can never make a right. We must stand together and insist that all authorities respect their bilateral commitments and keep safety regulation free from political agendas or influence.
And the ongoing experience of returning the 737 Max to service reminds us that we have further work to do. We must get back to a safety regulatory system that relies on mutual recognition and reciprocity. When regulators disagree we need them to rely on expert technical modelling to align approaches and resolve those differences with a laser focus only on safety.

COVID-19

Today the immediate challenge is COVID 19, or more correctly the reaction of governments to the risk presented by the virus.

The good news is that people want to fly. And they are confident.

Under the leadership of ICAO and with strong support from the industry, we have a clear set of measures to keep travelers safe while flying. The solid rebound in domestic markets tells us that people are not afraid to fly. And nearly 90% of those who have flown recently reported that they felt safe.

How our partners in government are managing border restrictions, however, must dramatically improve.

Travel restrictions bought governments time to respond in the early days of the pandemic. Nearly two years later, that rationale no longer exists. COVID-19 is present in all parts of the world. And there is little evidence to support ongoing blanket border restrictions and the economic havoc they create.

Testing results for UK arrivals demonstrate that travelers are not adding risk to the local population.

Of the 4.2 million arrivals between February and the end of August this year, only 57,200 tested positive.
These 4.2 million people had to take more than 6.4 million expensive PCR tests. The positivity rate was less than 1%.
During the same period more than 32 million PCR tests were taken in the general population and 2.2 million of them were positive. That’s a positivity rate of almost 7%. Five times the number of tests but 37 times the number of positives.

This is why we can say with confidence that flying is not the risk.

Fortunately, risk-based measures are starting to take hold in markets that had some severe restrictions.

The EU took an early decision to open to vaccinated travelers.
Canada followed.
The US and UK have announced similar measures.
Singapore has vaccinated traveler corridors.
Even Australia—which had the most severe restrictions on the freedom of its people—will begin re-opening its borders based on vaccination from next month.

Taking this recent momentum forward, our asks for opening borders are simple and align with the WHO:

Vaccines should be available to all as quickly as possible
Vaccinated travelers should not face any barriers
Testing should enable those without access to vaccines to travel without quarantine
Antigen tests are the key to cost-effective and convenient testing regimes, and
Governments should pay for testing, so it does not become an economic barrier to travel

It is also clear that digital health credentials—documentation of vaccination or testing status—will be needed as borders re-open. Experience even at today’s low levels of travel tells us that there will be chaos in airports if we rely on paper processes.

Europe has made a good start. The EU Digital COVID Certificate (EU DCC) is an efficient and reliable standard to record test and vaccination status. If governments are looking for a standard to follow, this is our recommendation.

And if governments are looking to manage travel health credentials using e-gates, the IATA Travel Pass is a solution. Irrespective of government use, an automated solution is essential for airlines. They will need to manage documentation verification using automated check-ins. If not, airport wait times and congestion will skyrocket as travel volumes increase. After extensive testing, it’s great to see the IATA Travel Pass entering regular operations.

There is also lot of work to do to simplify entry requirements. The recovery could be highjacked by complex “made-at-home” rules. For example:

Governments are using at least 24 versions of country risk-assessment lists
Only half of the 20 states with alleviations for vaccinated travelers recognize the complete WHO vaccine list
There are at least 6 definitions for when a vaccine becomes effective, and there is no standard for how long a vaccine is considered good to travel
There are at least ten ways to define testing windows prior to travel
And there is no consensus on the age of children for testing or vaccination exemptions

Even these few examples demonstrate that the situation is a mess. It’s stalling recovery.

Complete harmonization is unlikely. But some simple best practices that travelers can comprehend should be achievable.

On Thursday last week the G7 recognized the problem and committed to doing something about it. That will be progress if their words lead to action.

Another opportunity is the ICAO High Level Conference on COVID-19, if it can produce concrete results:

A pathway to reducing complexity
And a methodology to ensure that COVID-19 measures do not become permanent

Measures must remain in place only for as long as they are needed—and not a day longer. As we do with many safety regulations, defined review periods are needed. Otherwise, as we saw in the aftermath of 9.11, well-intentioned measures could remain in place long after they are necessary or have become technologically or scientifically obsolete.

We will also need the support of our industry partners—particularly airports and air navigation service providers.

With these partners the issue is cost. Everybody has suffered massive COVID losses, but some providers are abusing their position.

From the onset of the pandemic airlines have undertaken drastic cost reductions. Operating costs were reduced by 35% compared to pre-crisis. This was supported by increased commercial borrowing and shareholder contributions as a means of survival.

Where this huge effort was not enough, airlines have had to actively seek government aid as an essential lifeline. But let’s be clear, of the $243 billion that was made available to airlines, $81 billion supported payrolls and approximately $110 billion is in the form of support that needs to be paid back.

The problem is that some airports and ANSPs are seeking a solution to shore-up their finances by recovering “lost revenue” from their airline customers. You heard that correctly. Some of our so-called partners want to increase charges to recover the money that airlines could not spend with them during the crisis.

While not universal, here are some examples of the gouging that is being planned

NavCanada charges will increase 30% over the next five years
Ethiopia’s ANSP is raising charges 35% this year
European ANSPs are asking for a 40% price hike in 2022

On the airport side:

Here in the US we have seen a spate of large increases
Airports Company South Africa wants to raise charges by 38% in 2022
Amsterdam Schiphol airport is asking for 40% over three years
And Heathrow is off the chart with a proposed 90% increase next year

Let me remind you what Heathrow said only a few months ago; “We continue to work closely with airlines on the impact of COVID 19, listening and responding to their needs and priorities for the months and years ahead.” Are you kidding me? Do they honestly expect us to believe that a 90% increase in charges will help airlines?

We all want to put COVID-19 behind us. But placing the financial burden of a crises of apocalyptic proportions on the back of your customers, just because you can, is a commercial strategy that only a monopoly supplier could dream up. Reducing costs—not increasing charges—must be at top of everyone’s agenda.

But total confirmed airport and ANSP charges increases announced in 2021have already reached $2.3 billion. It’s outrageous. And, if unchecked, it will get worse.

That’s why I am ringing the alarm. This must stop!

Infrastructure shareholders, governmental or private, have benefited from stable returns pre-crisis. They must now play their part in the recovery. It is unacceptable behaviour to benefit from your customers during good times and stick it to them in the bad times.

Sustainability

Looking beyond the crisis, we all recognize that the freedom to fly will depend on our ability to fly sustainably.

Today we power our aircraft with kerosene. Carbon is emitted when we burn it. That contributes to climate change.

Like all industries we must reduce and eventually eliminate these emissions. Unlike other industries, however, more than a decade ago we set a target to address this by cutting emissions to half 2005 levels by 2050.

Since then, our achievements prove our determination:

Airlines invested hundreds of billions of dollars in more fuel-efficient aircraft. Fleet fuel efficiency improved by over 20% in a decade.
Sustainable aviation fuel (SAF) use grew from 8 million liters in 2016 to over 100 million liters this year. And,
The world’s only sector-wide offsetting scheme—CORSIA—has stabilized emissions at 2019 levels.

This is good progress towards a target that will be both expensive and technically challenging. But science tells us that the situation is even more urgent than we previously thought. And the world’s response is to focus on achieving net zero emissions. Our current target—which would reduce net emissions to 325 million tonnes in 2050—is simply not ambitious enough.

Over the last months, your Board of Governors worked intensively to define a path to net zero carbon emissions by 2050. It can be achieved. It will take a combination of SAF, radical airframe designs, cutting edge propulsion methods, efficiency gains, carbon capture technology and offsetting.

Today you will be asked to endorse a resolution making net zero carbon emissions by 2050 an industry-wide commitment.

Many in this room—individually or in groups—have already taken this step. For others, this will be an additional challenge at a very difficult time. But for all us, it will be a commitment behind which we must be united and determined to deliver on time. It is the right thing to do. And, together, it is possible.

And “together” includes our partners. The cost and effort of breaking our industry’s dependance on fossil fuels cannot all fall on the backs of airlines alone.

We don’t have electric cars because drivers built them. The energy transition for road transport is happening because governments created a policy framework that supported innovation. The market reacted by developing cost-efficient electrification solutions that appealed to consumers.

The technology roadmap for sustainable aviation is more complex. But the mechanism to deliver change is the same.

We just heard some encouraging news from Secretary Buttigieg. The Biden Administration has taken a whole-of-government approach to incentivize the production of at least 11 billion liters of SAF by 2030. This is an excellent example of the leadership that we need from governments.

Airlines will do their part, but everyone’s action is necessary:

ICAO must lead governments in a global approach that has always been successful at driving change in our industry
Governments must set policies supporting carbon-reducing innovation, SAF production and CORSIA, while avoiding a patchwork of environment taxes
Fuel-producers need to bring large scale, cost-competitive SAF to market.
Airports must make sure we can have SAF in airports at no additional cost compared to jet fuel
Governments and ANSPs must eliminate inefficiencies in air traffic management—all of which are inexcusable even without a sustainability mandate, and
Aircraft and engine manufacturers must produce radically more efficient airframe and propulsion technologies

For aviation, net zero is a bold, audacious commitment. But it is also a necessity. The important decision that we must make today will secure the freedom to fly for future generations.

Conclusion

IATA AGMs are always a unique moment. Look around the room and you see the global leadership of an amazing industry. The connectivity we provide underpins $3.5 trillion of economic activity and 88 million jobs. And in assembling today, after 18 months of lockdowns, restrictions, Zoom and Teams, we will all have renewed appreciation for just how powerful that connectivity is; and how important it is to meet face-to-face.

Aviation inspires us.

In little over a century, flying has established itself as a driving force for positive changes in our world. Aviation’s contributions to the UN Sustainable Development Goals are real. Our children grow up in a world with far fewer boundaries, reduced poverty and much more freedom.

This pandemic reminded us what a world with limited aviation is like. Disconnecting the planet is intolerable for people, businesses, and governments.

Reconnecting the world and transitioning to sustainable energy sources are big challenges. We all feel the responsibility. But if we all pull together—with the support of our partners in government and across the value chain—we will show our resilience yet again. Our industry is rising—from the destruction of COVID-19 and to the challenges of sustainability. We will fly high again!