IATA Director General reveals his vision on aviation in Latin America and the Caribbean

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IATA Director General reveals his vision on aviation in Latin America and the Caribbean
Willie Walsh, IATA
Source: Twitter @AnatoNacional
October 27, 2021

Willie Walsh has participated in the ALTA Leaders Forum, the 3-day event that closed its doors yesterday in Bogotá. His speech left several important points about the present and future of the sector

Willie Walsh has traveled especially to Bogotá, Colombia to be part of the ALTA Leaders Forum, a 3-day event organized by the Latin American and Caribbean Air Transport Association. There the official made a speech that we share below:

The last 18 months have made us realize how important, indeed, how precious is the ability to meet face to face. And in doing so, we have also gained a renewed understanding of the role of aviation in our world. Our industry makes face-to-face possible. As efficient as technology like Zoom or Teams is, and I'll be honest, I hate them, it's just no match for what we're doing right now. And this would not happen without aviation.

I thank ALTA for its invitation. I made a commitment to this many months ago because I wanted to get to know the industry in this region better and because I know how important regional associations are to the success of our industry. IATA brings the industry together to discuss and agree on a global way forward for airlines. But we are most successful when we work through our regional offices with partnerships like ALTA to drive change. And I know you work very well with our Americas team under the leadership of Peter Cerda. Working together we will make aviation recover!

It's no secret that COVID-19 has devastated the aviation industry. In 2020, airlines lost $ 138 billion globally. Losses will drop to $ 52 billion this year. And we expect a further reduction to a loss of $ 12 billion in 2022. Add that up and the cost that COVID-19 will take on industry finances exceeds $ 201 billion.

For airlines based in this region, we are estimating a cumulative loss of $ 5.6 billion for this year, with an improvement to $ 3.7 billion in losses for next year.

This crisis is beyond any we have experienced before.

However, we have had the worst time. And we can see a path to normality.

The cargo business is already operating 8% above pre-crisis levels. Air cargo has been a lifesaver for many, delivering vaccines, PPE, medical equipment, and even e-commerce. In doing so, it has also been the revenue star for many airlines in our industry.

Where governments have not restricted travel, the recovery of passenger business has been rapid. Domestic markets are expected to reach almost 75% of pre-crisis levels by the end of this year, but unfortunately international travel, where we see travel restrictions continue, is only expected to reach 22%. Next year we expect domestic markets to be almost where they were in 2019. But international travel will be delayed by just 44%.

We are moving in the right direction, if not as fast as we would like to go. And the general mood in the industry is one of cautious optimism. But the task ahead is formidable.

The situation in this region is unique. He was the last to be affected by the pandemic. It has some of the longest and strictest travel restrictions and border closures, but at the same time, the good news is that international connectivity is recovering faster in Latin America and the Caribbean than anywhere else in the world.  

However, the opening of markets to international travel varies greatly in the region. Mexico, for example, essentially never closed its borders. Colombia, along with many Central American and Caribbean states, gradually reopened with certain controls. And Chile, regardless of having high levels of vaccination, maintains quarantine measures that eliminate the demand even for vaccinated travelers.

How can we be more than 18 months in this pandemic and continue to have such disparate approaches? Particularly when the data tells us that severely restricting travel at this point in the pandemic makes little sense? UK test data for the period February to September shows, for example, that inbound travelers' test positivity was 1% compared to 7% in the general population.

Of course, as airlines, we want to get back to normal as soon as possible. But everyone is interested in regaining the freedom to travel. And governments are especially interested in a revived aviation industry spurring an economic recovery.

Our vision of restoring air connectivity is broadly aligned with the conclusions of the ICAO High-Level Conference on COVID-19 that concluded last week. That's good news. But, of course, the words of a statement must act. Reminding governments of their commitments will be an important focus in this region and around the world.

Ensuring that the freedom to fly is fully restored is only part of the equation. We must do better. That's especially true in this region, where we can't go back to the pre-COVID-19 operating environment.

We have seen that everyone suffers when aviation stops. COVID-19 has dispelled the myth that flying only benefits the rich. And it has never been clearer that aviation is too important to be treated as a source of revenue for governments to command. More specifically, airlines cannot tolerate value chain partners literally profiting at our expense.

Since the start of the pandemic, airlines have made drastic cost reductions. Operating costs were reduced by 35% compared to before the crisis. This was supported by an increase in business loans and shareholder contributions as a means of survival. 

Yes, some governments intervened and provided support to the sector. Globally, $ 243 billion was made available to airlines, of which $ 81 billion supported payroll and approximately $ 110 billion was provided in the form of support that must be repaid. Unfortunately, not a single government in this region provided direct financial support to airlines. In most cases, financial relief came in the form of tax deferred or fee reduction or exemption.

We see traffic constantly picking up, showing that recovery is on its way. However, in parallel, we are seeing a growing trend from our "partners" in the aviation value chain to increase taxes and fees. There are already many examples in this region:

Argentina not only implemented additional taxes on the sale of tickets in local currency, but also increased the international departure tax from US $ 51 to US $ 57.
Costa Rica plans to increase the airport security fee at the San José airport by more 70%
The Dominican Republic plans to increase ground handling fees by just over 6% in 2022
El Salvador plans to add an agricultural inspection fee of US $ 1.50 per passenger to airline tickets

They are unacceptable in these times of crisis. And we cannot tolerate others following in their footsteps.

Airlines are also facing poor operational planning as the industry is scaling up operations to meet recovering demand. An example of this is Bogotá's El Dorado International Airport, where ground delay programs have been used almost daily since late May. More than 850,000 travelers have already been affected by delays of 2 to 4 hours. However, the good news is that we had an excellent meeting with President Iván Duque this morning. Bogotá's El Dorado Airport is a fantastic asset for this country, with great potential, and by working together we can improve the current situation.  

The other big topic of the day is sustainability. We all recognize that the freedom to fly will depend on our ability to fly sustainably. With only a few weeks to go until COP26 opens in Glasgow, climate change is high on the agenda around the world.

At the 77th IATA AGM, IATA members made a landmark decision to achieve net zero carbon emissions by 2050. We appreciate the support of IATA members in this room. And we look forward to working with you and ALTA as we tackle this monumental and existential challenge.

We must also put into perspective what this will mean. In 2009 we already committed to reducing net emissions to half of 2005 levels by 2050. That would have left 325 million tons of aviation emissions in 2050, and industry growth forecasts would have expected almost 3 gigatons of emissions. if we didn't do anything. Now we must bring that to zero.

It can be done. It will take a combination of sustainable aviation fuels (SAF), radical airframe designs, state-of-the-art propulsion methods, efficiency gains, carbon capture technology, and offsetting.

This is an airline commitment. And we will promote the need to change. And to be successful, we need to align all of our stakeholders, including governments.

The technology roadmap for sustainable aviation is more complex than that of road transport. But the mechanism for generating changes is the same. Governments must lead with incentives. And the most important area of ​​immediate concern is SAF.

The ALTA resolution calling on governments to support the development of an SAF industry in Latin America and the Caribbean sets the right tone for progress in this region. Specific actions governments can take include:

Fund research and development programs and feasibility studies in the region to identify raw materials that could be used to develop a local SAF industry.
Implement policies to eliminate the risk of investments in SAF production facilities, including legislative certainty to attract investment in new production facilities.
Attract capital to expand SAF's offering through performance-based tax credit or loan guarantee programs.

Importantly, we must also remind governments that SAF mandates for airlines are not the way to go. The challenge with SAF is not on the demand side. Airlines want to buy it. But not enough is available at commercially acceptable prices. You cannot force the purchase of something that does not exist. We need to work with governments to ensure reasonable market prices and strong SAF availability are possible.

I wish to conclude by thanking ALTA and congratulating them for the excellent work they do for their members. It is a great example for regional associations of what to do. I have committed on behalf of IATA to work together to advance our industry goals, including achieving the critical goal of net-zero.


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