IATA’s Director General and CEO Alexandre de Juniac gave a keynote address to the Singapore Airshow Aviation Leadership Summit (SAALS). The theme of the Summit is ‘Reimagining Aviation’s Future’.
The Singapore Airshow Aviation Leadership Summit is co-organized by IATA, Singapore’s Ministry of Transport, the Civil Aviation Authority of Singapore, and Experia Events.
The International Air Transport Association (IATA)at the event is calling for urgent attention to address infrastructure challenges in order to secure the industry’s future.
Transcript of Mr. De Juniacs address:
It is a great pleasure to be here for the Singapore Airshow. The show is a great reminder of the amazing technology that empowers the aviation industry to connect the world. And this Aviation Leadership Summit provides a unique opportunity to look at the challenges and opportunities facing airlines—the businesses that operate that technology.
The theme of this summit is Reimagining Aviation’s Future. And it is significant that we are looking to the future together—the industry and governments. Whatever the future holds for aviation, I am confident that its success in delivering the connectivity that powers modern economies will always rely on a strong partnership of industry and governments working effectively together.
I don’t have a crystal a ball or special insight on what tomorrow will bring for aviation. But, first and foremost, I am absolutely confident that aviation will continue to bring great value to our world. As an industry we are just over 100 years old. And in that short time aviation has become a vital component of the global economy and society.
This year over 4 billion travelers are expected to board planes. Those same planes will carry about a third of the value of goods traded internationally. The livelihoods of some 60 million people are directly linked to aviation and aviation related tourism. And nearly everyone on the planet is touched in some way by the global community that aviation has enabled and by the opportunities to grow wealth and prosperity that aviation continues to create. I call aviation the business of freedom. It makes our world a better place. And we—industry and governments—have a responsibility to ensure that the benefits of aviation continue to enrich our world.
To do that, there are five fundamentals that we must protect.
- First, aviation must be safe. We had a stellar year in 2017. But there are always ways to improve—particularly as our data analysis capabilities grow. I would like to imagine a future for aviation with no accidents.
- Second, aviation needs borders that are open to people and trade. We must be a strong voice in the face of those with protectionist agendas. The ASEAN single aviation market is an important development that runs counter to the protectionist narrative. It will spread the benefits of connectivity deeper across the region. And the benefits will increase if governments progress with regulatory convergence so that operations across the region are efficient and seamless. And I would like to imagine a future for aviation where airlines are as free as possible to meet the demands for connectivity.
- Third, aviation thrives on global standards. A common set of rules underpins the aviation industry’s success—in everything from safety to ticketing. And I would like to imagine a future where these global standards continue to be strengthened by the cooperation of airlines and governments through institutions such as ICAO and IATA.
- Fourth, aviation must be sustainable. The historic agreement on a Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is one of four pillars in a common strategy by industry and governments to ensure that aviation meets this responsibility. And we continue to advance with new technologies, improved operations and more efficient infrastructure. Our commitment to cut emissions to half of 2005 levels by 2050 is ambitious. And I would like to imagine a future where our net carbon impact is zero.
- And lastly, aviation must be profitable. Airlines are doing better than at any time in their history. We are in the ninth year of profitability since 2010. And, more importantly, this will be the fourth consecutive year in which airline earnings will exceed their cost of capital—in other words a normal profit. The expected $38.4 billion profit in 2018 translates to $8.90 per passenger. That is a huge improvement on past performance. And airlines have clearly made themselves more financially robust through massive transformations. But it is still a very thin buffer against shocks. And I would like to imagine a future where airlines generating normal profits is the norm, not a rarity!
In addition to these five fundamentals, I believe that there is one great certainty. The world’s thirst for connectivity will continue to grow. And Asia-Pacific is center-stage for that growth. By 2036 we expect 7.8 billion people to travel worldwide. Nearly half—som 3.5 billion trips—will be to, from or within the Asia-Pacific region. And 1.5 billion trips will touch on China. As early as 2022 China will be the largest single aviation market. India is another emerging power-house—even if it will take longer to mature.
So there is no better place than Singapore—at the crossroads of Indian and Chinese influence—to discuss the future of our industry.
Today’s agenda does a good job of looking at some of the fundamental questions that are before us. What new aircraft technologies are on the horizon? What business models will succeed? What is the potential for unmanned aircraft? And the big question is how to regulate the industry and unlock the value it can create. Let me share some high level thoughts on each.
Next Generation of Aircraft Technologies
From my perspective, the sweet spot for new technology is where sustainability, efficiency, cost and safety meet. Our friends at Airbus and Boeing see the need for between 35,000 and 41,000 new aircraft purchases over the next 20 years. That equals estimated spending of about $6 trillion. Airlines will certainly be expecting value for that money.
For me, I see the two biggest areas of potential as being progress towards an electrically powered aircraft and for aircraft to become progressively smarter. I won’t predict that we will see pilotless passenger aircraft any time soon. But we all know that the technology exists—it is already a reality in military operations. And we also need to think about the human resources that we will need as technology evolves.
The airline business itself is also evolving—very fast. It was not that many years ago that people were discussing if the low cost model could work in Asia. Air Asia is the pioneer in Southeast Asia. And it essentially began in 2001. Today, the low cost sector accounts for 54% of the Southeast Asia market. The next frontier is low-cost long-haul. To be very frank, it is doing much better than I would have thought. There is indeed a part of the market for whom price is the biggest driver. Catering to that on long-haul operations may well prove as successful as it has been for short-haul.
The so-called legacy carriers are also changing. There is very little in the business that has not changed since 2001. Changing technology and new processes have improved the passenger experience and cut huge costs out of the business. Think of your own travel. Does anybody even remember the last time they traveled with a paper ticket? Could you imagine a trip without referring to your favorite airline app or the ability to select your seat in advance? These are the tip of the digital revolution that continues to transform the legacy business. And I am proud to say that IATA’s global standards are playing a major facilitating role.
So what’s next? The biggest change agent is data. Airlines know their customers much more today than they did a decade ago. IATA’s New Distribution Capability will help airlines to innovate, create greater choice and personalized offers. Consumers can be absolutely sure that airlines will compete even more vigorously to earn their loyalty—some with absolute low fares, others with premium products and many in-between. And we will all be very interested in understanding how our panel discussion sees future developments.
Unmanned Aircraft Opportunities
Even less predictable is the future of unmanned aircraft. Outside of their potential use for traditional passenger or cargo operations, there is no doubt that drones are flying disrupters. I am sure that we would all think it is very “cool” to have your next take-out meal delivered by a drone. Will they replace taxis, security companies or ambulances in urban settings? What are the privacy implications? How will we control the airspace? And how can we keep them at a safe distance from commercial aircraft? These are among the weighty questions for our panel to explore.
Regulating to Unlock Aviation’s Value
Before we get into these very interesting future discussions, our day will begin with a look at some fundamental questions of regulation. This expert panel will give great insight on how regulation will evolve to manage the exciting potential developments in aviation’s future.
Whatever the challenge, I hope the panel will take into consideration what we call Smarter Regulation. The first principle of smarter regulation is industry-government dialogue focused on solving real problems. As our summit is designed to bring regulators and the industry into dialogue, we are already off to a good start. And as we look to the future, ensuring that regulation aligns with global standards, passes rigorous cost-benefit scrutiny, and achieves maximum impact with minimum compliance burden are all solid principles to guide us.
Before we move on to the panel discussions, there is one more point that I feel is key to our industry’s future. That is having the infrastructure to grow. All the great plane deals that will be done at this air show will mean nothing if we don’t have the capability to manage the traffic in the air and the airports at each end of the journey. Infrastructure is vital to our industry’s future.
With respect to infrastructure, airline requirements are not that complicated. We need sufficient capacity to accommodate demand. Quality must be aligned with our technical and commercial needs. And the cost of the infrastructure must be affordable.
I believe, however, that we are headed for a crisis. First, infrastructure in general is not being built fast enough to meet growing demand. And there are worrying trends which are increasing costs. One of these is airport privatization. We are yet to see an airport privatization that has, in the long-term, delivered on the promised benefits. That is because we have not found the correct regulatory framework. It must carefully balance the interests of the investors to turn a profit with the public interest for the airport to be a catalyst for economic growth.
Our members are very frustrated with the current 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.
Like all parts of the world, Asia-Pacific has its bottlenecks. We would like to see the Asia-Pacific Seamless Air Traffic Management Plan make much faster progress—to avoid the disaster that we are living with Europe’s fragmented sky. And some capital cities in the region—Jakarta, Bangkok and Manila among them—are in desperate need of capacity improvements.
Fortunately Asia-Pacific also has some great examples to follow. Look at Seoul’s Incheon airport. It provides great service to airlines and passengers. And it recently expanded runway and terminal capacity to meet growing demand. Importantly, that has been done without raising charges. In fact, Incheon recently extended a discount on airport charges that was introduced two years ago. The result? Aviation plays a key role in linking the Korean economy to economic opportunities globally.
Singapore is another good example of a world class facility that is contributing greatly to this country’s prosperity. The government is showing great foresight with its expansion plans for Changi Airport, including T5. It is an enormous undertaking—the equivalent of building a whole new airport alongside the existing one. I have no doubt that this will seal the leadership of Singapore on aviation for years to come. But there are challenges. The plans for T5 must be sufficiently robust to ensure the high standards of airline operations and passenger convenience that the users of Changi expect. And we need to get the funding model right to avoid burdening the industry with extra costs. The prize to keep in sight is the airport’s contribution to the overall economy. If we get it right, it is an investment with a track record of paying big dividends.
With that, I will bring my remarks to a close. As co-host of this event with the Singapore Ministry of Transport, the Civil Aviation Authority of Singapore and Experia Events, I thank you all for your participation today. The partnership between government and industry is probably the most critical factor influencing aviation’s future. I look forward to a great day of discussions that will make aviation—the business of freedom—an even greater catalyst of prosperity and social development.