IATA urges help in growing Latin American aviation
Nov. 17, 2011, Rio de Janeiro, Brazil - The International Air Transport Association (IATA) called for close cooperation and innovation among aviation stakeholders to meet the challenges and opportunities in the Latin America-Caribbean (LatAm) region.
“Aviation in LatAm is a bright spot in the aviation world—the only region generating aggregate profits for three consecutive years. September figures show the region’s international passenger traffic growing faster the global average. And the four top growth markets for premium traffic over the first nine months of the year are either connected to, or within, the region. But challenges remain that must be addressed with the cooperation of all industry stakeholders and advocates,” said Tony Tyler, IATA’s Director General and CEO in an address to the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Forum in Rio de Janeiro.
Tyler attributed the region’s strong performance to structural change over the last decade. “It is absolutely clear that the hard work of the last decade has transformed the region’s air transport industry for the better. Overall, Latin American aviation has become safer and more profitable. It has also been a cradle of innovation on cross border ownership structures. And the merger of TAM and LAN will create an aviation powerhouse of global scale,” said Tyler.
Tyler urged LatAm participation in further innovation to address the global challenges of safety, security, environment and infrastructure:
Safety: Safety is a continuing challenge in LatAm. Although there were no LatAm hull losses in 2009; the region’s hull loss rate in 2010 was three times the global average. Over the first ten months of 2011, the hull loss rate has reached four times the global average. To further safety in the region, IATA signed a partnership agreement to create the ALTA-IATA Trend Sharing Program. “This agreement, the first of its kind between IATA and a regional association, reflects our shared commitment on safety. All ALTA members will join the Global Safety Information Centre—adding an important regional dimension and depth to our data collection. Furthermore, we will be in a better position to track, analyze and reduce safety risks in the region,” said Tyler.
Security: LatAm is providing strong regional support for IATA’s Checkpoint of the Future concept. Ten of twelve states having signed statements of principles in support of the project are from the LatAm region. “Airlines and governments have spent at least a cumulative total of $100 billion over the past 10 years on security. Unfortunately, for many travelers, security has become the biggest point of dissatisfaction. Too often it is slow, unpredictable and overly intrusive. IATA’s vision is for a Checkpoint of the Future that introduces a risk-based approach and uses technology solutions to allow a passenger to get from curb to gate without stopping to unpack or remove clothes,” said Tyler.
Environment: Tyler urged cooperation to encourage governments to lay the fiscal and legal frameworks to support the successful commercialization of sustainable biofuels for aviation. “Sustainable aviation biofuels are critical to achieving our climate change targets to cap net emissions from 2020, and cut them in half by 2050 compared to 2005. They are tested, approved and being used to power some commercial flights. The challenge is commercialization—to increase the supply and reduce the cost. To do so, and create jobs in the green economy, we need a united voice asking governments for policies that will support the development of a successful biofuels industry,” said Tyler.
“Unfortunately, the attention of governments is being distracted by Europe’s unilateral plan to include international aviation in its emissions trading scheme (ETS) from 2012. Although we support market based measures—including emissions trading—they must be globally coordinated among governments through the International Civil Aviation Organization (ICAO). Regional schemes like the ETS will distort markets and open the door to a patchwork approach of conflicting, competing or layered measures including taxation,” said Tyler. Tyler noted that the governments are now voicing their concerns on the challenge to national sovereignty presented by the extra-territorial aspects of the European scheme.
Infrastructure: Infrastructure development is a bottleneck to the efficient growth of aviation in Latin America. “Looking around LatAm, it is clear that investment in runways and airport facilities has not kept pace with the region’s impressive traffic growth. A number of Latin American governments are turning to privatization programs for their airport infrastructure, but privatization is not a panacea. Careful thought is needed to understand the potential benefits and to avoid a repeat of the mistakes of the unsuccessful privatizations of a decade ago,” said Tyler.
Tyler focused on two specific Brazilian issues: airport concessions and fuel pricing policy.
Brazil is exploring airport concessions at key airports including Sao Paulo. “The economic center of Brazil needs world-class connectivity. That should be a core part of the government’s economic strategy. But Brazil’s airport concessions program raises serious issues for airlines. These include the potential for a conflict of interest, with the government having dual roles as a major shareholder in the airport concessionaire and the economic regulator. Additionally, airlines do not have a place in the rate-setting and development processes, nor is there a mechanism for ongoing and regular discussions between the aviation community and the airport owner,” said Tyler.
Tyler urged the Brazilian government to review its pricing parity formula for fuel. “Tying the price to the Houston market and including theoretical charges for import duties and transport is a $400 million annual competitive disadvantage to Brazil’s airlines and its economy. It should not be that way in a country that can supply 80% of its fuel needs domestically,” said Tyler.
To support economic arguments for aviation policy changes, IATA announced the completion of a study on the benefits of aviation. The study, completed by Oxford Economics, concludes that aviation contributes 32 billion Reais to the Brazilian economy—1% of GDP. This supports nearly 700,000 high quality jobs. Including tourism brings the jobs figure to 900,000. “Aviation should be on the government’s radar screen as an industry worth nurturing as a strategic asset,” said Tyler.
“Taking a long-term view of Latin American aviation, one can only be optimistic. The economic potential of this vast and varied geography can only be realized with a successful aviation industry,” said Tyler.