Iata annual review 2012annual review-2012


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Iata annual review 2012annual review-2012

  1. 1. Tony TylerDirector General & CEOInternational Air Transport AssociationAnnual Report 201268th Annual General MeetingBeijing, June 2012
  2. 2. ContentsIATA Membership 2Board of Governors 4Director General’s message 6The state of the industry 10Feature: What is the benefit of global connectivity?Safety 18Feature: How safe can we be?Security 22Feature: Do I need to take my shoes off?Taxation & regulatory policy 26Feature: What is right for the passenger?Environment 30Feature: Can aviation biofuels work?Simplifying the Business 36Feature: What’s on offer?Cost efficiency 42Feature: Why does economic regulation matter?Industry settlement systems 48Aviation solutions 52Note: Unless specified otherwise, all dollar ($)figures refer to US dollars (US$). This review uses only 100% recycled paper (Cyclus Print) and vegetable inks. #
  3. 3. IATA Membershipas of 1 May 2012ABSA Cargo Airline Air Nostrum Blue Panorama DonaviaAdria Airways Air One Blue1 DragonairAegean Airlines Air Pacific bmi Dubrovnik AirlineAer Lingus Air Seychelles British Airways EgyptairAero República Air Tahiti Brussels Airlines EL ALAeroflot Air Tahiti Nui Bulgaria air EmiratesAerolineas Argentinas Air Transat C.A.L. Cargo Airlines Estonian AirAeromexico Air Vanuatu Cargojet Airways Ethiopian AirlinesAerosvit Airlines Air Zimbabwe Cargolux Etihad AirwaysAfriqiyah Airways Aircalin Caribbean Airlines Euroatlantic AirwaysAigle Azur Airlink Carpatair European Air TransportAir Algérie Alaska Airlines Cathay Pacific EurowingsAir Astana Alitalia China Airlines EVA AirAir Austral All Nippon Airways China Cargo Airlines FedEx ExpressAir Baltic AlMasria Universal Airlines China Eastern FinnairAir Berlin ALS China Southern Airlines flybeAir Canada American Airlines Cimber Sterling Freebird AirlinesAir China Arik Air Cirrus Airlines GarudaAir Corsica Arkia Israeli Airlines CityJet Georgian AirwaysAir Europa Armavia Comair Gulf AirAir France Asiana Airlines Condor Hahn AirAir India Atlas Air Condor Berlin Hainan AirlinesAir Koryo Atlasjet Airlines Continental Airlines Hawaiian AirlinesAir Macau Austrian Continental Micronesia Hong Kong AirlinesAir Madagascar Avianca Copa Airlines Hong Kong Express AirwaysAir Malawi Azerbaijan Airlines Corsair IberiaAir Malta B&H Airlines Croatia Airlines IcelandairAir Mauritius Bahrain Air Cubana InselAirAir Moldova Bangkok Airways Cyprus Airways InterairAir Namibia Belavia—Belarusian Airlines Czech Airlines Iran AirAir New Zealand Belle Air Delta Air Lines Iran Aseman AirlinesAir Nigeria Biman DHL Air IsrairAir Niugini Binter Canarias DHL International E.C. Japan Airlines 2
  4. 4. Jat Airways MEA—Middle East Airlines SKY Airlines UPS AirlinesJazeera Airways Meridiana fly Skyways US AirwaysJet Airways MIAT—Mongolian Airlines South African Express UTairJet Lite Montenegro Airlines SriLankan Airlines Vietnam AirlinesJetBlue Nippon Cargo Airlines Sudan Airways Virgin AtlanticJordan Aviation Nouvelair SunExpress Virgin Australia InternationalJSC Nordavia—RA Olympic Air Surinam Airways AirlinesKenya Airways Oman Air SWISS Vladivostok AirKingfisher Airlines Onur Air Syrianair VolarisKish Air PAL—Philippine Airlines TAAG—Angola Airlines Volga-Dnepr AirlinesKLM Pegasus Airlines TACA VRG Linhas AéreasKorean Air PGA—Portugália Airlines TACA Peru White AirwaysKuwait Airways PIA—Pakistan International TACV Cabo Verde Airlines WideroeLACSA Airlines TAM—Transportes Aéreos Xiamen AirlinesLAM—Linhas Aéreas de PLUNA del Mercosur Yemenia Moçambique Precision Air TAM Linhas AéreasLAN Airlines Qantas TAME—Linea Aérea delLAN Argentina Qatar Airways EcuadorLAN Cargo Rossiya Airlines TAP Portugal Associate MembersLAN Perú Royal Air Maroc TAROMLAN Ecuador Royal Brunei Thai Airways International AustralLauda Air Royal Jordanian THY—Turkish Airlines Lufthansa CityLineLibyan Airlines SAA—South African Airways Tianjin Airlines SafairLOT Polish Airlines SAS TNT Airways SATA Air AçoresLufthansa Saudi Arabian Airlines Transaero Virgin Australia AirlinesLufthansa Cargo Shandong Airlines TransAsia AirwaysLuxair Shanghai Airlines TUIflyMahan Air Shenzhen Airlines Tunis AirMalaysia Airlines SIA—Singapore Airlines Ukraine International AirlinesMalév SIA Cargo United AirlinesMalmö Aviation Siberia AirlinesMartinair Cargo Sichuan AirlinesMas Air Silkair 3
  5. 5. The Board of Governors Peter Hartman Chairman IATA Board of Governors 2011-2012 4
  6. 6. Khalid Abdullah Almolhem Naresh Goyal Titus NaikuniSAUDI ARABIAN AIRLINES JET AIRWAYS KENYA AIRWAYSRichard Anderson Peter Hartman Masaru OnishiDELTA AIR LINES KLM JAPAN AIRLINESDavid Barger James Hogan Calin RovinescuJETBLUE ETIHAD AIRWAYS AIR CANADADavid Bronczek Harry Hohmeister Emirsyah SatarFEDEX EXPRESS SWISS GARUDAYang Ho Cho Thomas Horton Vitaly G. SavelievKOREAN AIR AMERICAN AIRLINES AEROFLOTAndrés Conesa Alan Joyce Jean-Cyril SpinettaAEROMEXICO QANTAS AIR FRANCE - KLM (representing AIR FRANCE)Enrique Cueto Hossam KamalLAN AIRLINES EGYPTAIR Antonio Vázquez IBERIAGerman Efromovich Temel KotilAVIANCA TURKISH AIRLINES Willie Walsh International Airlines GroupChristoph Franz Liu Shaoyong (representing BRITISHLUFTHANSA CHINA EASTERN AIRLINES AIRWAYS)Rob Fyfe Samer MajaliAIR NEW ZEALAND GULF AIRGoh Choon Phong Siza MzimelaSINGAPORE AIRLINES SOUTH AFRICAN AIRWAYS 5
  7. 7. The air transport industry is fragile. Airlines made a profit of $7.9 billion in 2011. That is half of the $15.8 billion profit realized in 2010. And on 2011 revenues of $598 billion, that translated to a net profit margin of just 1.3%. The current year promises to be more challenging. April was the 15th month with oil prices above $100 per barrel (Brent). Fuel now accounts for over 30% of average operat- ing costs. A decade ago, it was 13%. A further price spike could easily push the industry into losses. Airlines are similarly vulnerable to economic cycles. Historically, the airline industry has pro- duced a collective loss when GDP growth falls below 2%. In April 2012, the Economist Intelligence Unit was predicting growth of 2.2%. Political insta- bility continues in the Eurozone as it grapples with the sover- eign debt crisis. The United Kingdom and Spain have already gone back into reces- sion. If others follow, the ripple effects would most certainly be felt in all global markets.6
  8. 8. The Director General’s messageIn the face of such strong head- 2011 was the safest year for providers, and manufacturers political gains of high taxes,winds, keeping revenues ahead civil aviation. There was one reiterated their commitment to misguided regulations, andof costs is a major challenge. hull loss for every 2.7 million improve fuel efficiency 1.5% growth restrictions.We still expect airlines to make flights with Western-built jets— annually to 2020, to achievea collective profit in 2012. But a 61% improvement on the carbon-neutral growth from Job creation is a priority of allit will be razor thin. Conserving performance a decade ago. The 2020, and to cut net emissions governments. Aviation can help.cash, carefully matching capac- IATA Operational Safety Audit in half by 2050 compared with Already our industry supportsity with demand, and managing (IOSA) is making a difference. 2005 levels. the livelihoods of 56.6 mil-costs will remain the focus for Airlines on the IOSA regis- lion people and $2.2 trillion inmost airline managements. try—some 375—outperformed Governments are important economic activity. And govern- the accident rate for non-IOSA partners in meeting these ments must understand thatBehind the scenes, IATA has operators by 52%. targets. They must implement with an enabling policy environ-redoubled its efforts to man- policy measures that de-risk ment we could do much more.age the industry’s settlement Together with the International investment in sustainable biofu- When aviation gets stronger, soprocesses reliably. Fully $367 Civil Aviation Organization els, unlocking their potential to does the economy.billion passed through IATA’s (ICAO), the US Department reduce aviation’s carbon foot-financial systems in 2011. The of Transportation, and the print up to 80%. And they must I am passionate about aviation.Billing and Settlement Plan— European Union, we con- agree on a global approach to As the Director General andthe largest among IATA’s finan- tinue to build the Global Safety positive economic measures CEO of IATA I have proudlycial services—settled nearly Information Exchange. This through ICAO. Progress is sung aviation’s praises and$250 billion in volumes with collection and sharing of data being held back by the global advocated policies and partner-99.971% accuracy. We are will enable analysis for targeted backlash against the extra-terri- ships that support its success.determined to do even better. programs to make our safe torial inclusion of aviation in the I thank the IATA Board of industry even safer. EU Emissions Trading Scheme Governors and our membersIATA is strengthening its settle- (ETS). ICAO offers a process and partners for their greatment systems. By migrating Security processes must evolve to reach the global consen- support in helping IATA help thefunctions to regional hubs, we to be risk-based and data sus that all parties—including industry.will operate to a single global driven. Our flagship security Europe—desire.standard on fully integrated IT programs—Checkpoint of the Aviation is indeed fragile. Butsystems. The migration will take Future and Secure Freight—are The ETS impasse highlights by working together, I am confi-place progressively until mid- built around these principles. the urgent need to reaffirm our dent that we can strengthen the2014. In a separate program, Support from governments is agenda with governments on foundations of our safe, secure,we are taking paper out of the growing as they recognize the jobs and growth. Many govern- and sustainable industry.processes for the $49.5 billion value of these initiatives. ments sacrifice the benefits ofIATA Clearing House. aviation-enabled connectivity Aviation remains united in its for the shortsighted budget andAlong with ensuring reliable global approach to managingfinancial services, IATA is its carbon emissions. Airlines,working with its members on airports, air navigation serviceaviation’s most fundamentalchallenges—safety, security, Tony Tylerand sustainability. Director General & CEO 7
  9. 9. THE STATE OF THE INDUSTRYThe story in 2011. Direct services are increasing.In 2011, air transport pas- Worldwide international and In 2011, airlines added 865 di- When looked at in isolation,senger traffic grew 5.9% but domestic revenue passenger rect services, bringing the total the trends in domestic airprofits fell 50% as difficult kilometers flown grew 5.9% number of direct airport-pair travel have a different pattern.economic headwinds buf- to a new high of 5.2 trillion connections to nearly 35,000 Representing just under 40%feted the industry. kilometers in 2011. The growth by the end of 2011, but there of worldwide industry volumes, of the past two years compares was substantial geographical domestic aviation markets are favorably with the 4% to 5% variation in passenger market dominated by the United States trend of the past 20 to 30 performance. Latin American and China. The US market years. Contributing to the surge airlines saw the fastest growth, expanded just 1.3% in 2011. in air travel was a rebound with an expansion of over 11%. But the Chinese market grew from the recession of 2008 African airlines experienced almost 11%. The Indian market, and 2009. Clearly, air travel the weakest performance, which is one-twelfth the size demand remains robust despite with barely positive growth, of the US market, grew even slow economic growth in many partly due to the impact of the faster at 16%. Brazil is another regions. Arab Spring on the north of example of an emerging market the continent. Among airlines with large potential. Growth Nevertheless, despite the in the larger regions, North there was almost 14% in 2011. increased passenger demand, American carriers grew less Japan’s domestic market, con- airlines struggled to make than 3%, reflecting the maturity versely, shrank 15% because of significant profits. Although of their domestic markets and the tsunami and earthquake in revenues rose 9.4% to $598 the lack of significant capac- early 2011. billion, profits fell by almost half ity growth. Growth for the compared with 2010, to $7.9 Asia-Pacific airlines was over billion. This was largely due to 5%, but down on the previ- a sharp increase in the cost of ous year’s performance, due fuel; the average price of a bar- mostly to the impact on travel rel of oil rose from $79 in 2010 of the tsunami and earthquake to $111 last year. in Japan. European airlines saw the strongest growth, at 9%, Looking at 2012, rising oil among airlines in the three larg- prices and continued economic est regions. weakness, especially in Europe, appear to be the greatest threat to airline profitability. Domestic passenger market in millions (source: IATA) Total passenger and air freight traffic, seasonally adjusted (source: IATA) China USA 10
  10. 10. An average jet keroseneNet posttax earnings were Revenues expanded to nearly price of $127.50 in 2011 set ahalved to $7.9 billion in 2011. $600 billion. new record.Airline earnings before interest Next to Africa, the weakest- Airline industry revenues ex- The average price of a barreland tax (EBIT) declined from performing region was Europe, panded 9.4% in 2011 to $598 of jet kerosene rose 40%, tothe highs of 2010 to $16.2 where EBIT margins barely billion, driven in equal part by a $127.50, in 2011. This took av-billion (2.7% of revenues). exceeded 1% on average. But rise in volumes and an improve- erage fuel prices above the pre-Although this decline was not again there is much variation, ment in yield. Passenger and vious annual record of $126.70as severe as the 2008 experi- with the large quoted airlines cargo revenues rose above per barrel, set in 2008.ence, at the net posttax level in Europe delivering a similar prerecession levels, but thethe impact was more marked. performance to those in the industry has lost around two In 2008, jet fuel prices spikedAfter debt interest, tax, and United States. years of revenue growth since to over $180 a barrel beforefinancial transactions, industry early 2008. falling sharply, whereas in 2011profits were more than halved US airlines saw their profits the peak was $143, 20% lowerfrom 2010 to a total of $7.9 reduced in 2011, but they In 2010, the network airlines than in 2008. By the end of thebillion, or 1.3% of revenues. continue to generate EBIT had a strong boost relative to year, prices were still high. TheProfits were squeezed by a margins close to 3% despite other airlines in the industry contrasting extreme volatility ofcombination of slower revenue little market growth as a result from the robust growth of long- fuel prices in 2008 caused bil-growth and further large fuel of limited additional capacity. haul premium revenues and lions of dollars of fuel hedgingcost increases. Profitability in the US domestic cargo. During 2011, there was losses. A major problem for air- market has been particularly further growth in the premium line fuel hedging in 2011 wasThe regional experience contin- robust as a result. segment, but there was no the distortion in the price of theued to be diverse. Asia-Pacific longer the marked gain versus West Texas Intermediate crudeairlines delivered the largest Elsewhere, the Latin American other segments. Cargo revenue oil benchmark. Nonetheless,absolute net profits and the airlines continued to show rea- growth slowed sharply in 2011. new industry-wide hedginghighest EBIT margins for the sonable profit, albeit at margins practices and the stability of thesecond consecutive year. But that were lower than in 2010. crack spread with the Brent oilwithin this region there was The Middle Eastern airlines saw benchmark meant that the fuelmuch variation, with signifi- only a minor reduction in profit- hedging experience of airlinescant losses in Indian domestic ability in 2011, as structural in 2011 was much better thanmarkets and substantial profit in improvements at some airlines it was in 2008.Chinese domestic markets. partly offset the rise in fuel costs. Fuel prices were driven higher in 2011 by crude oil costs. The crack spread between jet fuel and crude remained at 15%. The upward pressure on oil prices came from a com- bination of continuing strong demand from emerging econo- Total net profits in $ billion Brent oil price $/barrel mies and a supply squeeze by (source: IATA) (source: Platts) producers, shown in the decline of oil inventories. More recently, concern about supply disrup- tion caused by the situation in Iran has put further upward pressure on energy prices. The airline industry’s fuel bill rose to $177 billion in 2011, some 30% of costs. 11
  11. 11. Airline load factors exceeded Goods worth over $5 trillion 78%, close to historic highs,Strong business travel kept were transported by air in and the fleet continued to ex-premium seat growth ahead 2011, but air cargo volumes pand, with 1,268 new aircraftof economy seat growth. slipped slightly. delivered.A sign of buoyant air travel After an exceptionally strong Worldwide passenger capacity factors rise even further, to amarkets in 2011 was the rebound in 2010, air freight accelerated in 2011, growing new high of 79.6%. This wasgrowth in the sale of first- and metric ton kilometers flown fell 6.6% as measured by available an important factor leading tobusiness-class seats, which 0.4% worldwide in 2011. The passenger kilometers in inter- stronger airline profitability inexpanded 5.5% on international air freight market is no big- national and domestic markets. the US and Chinese domesticmarkets compared with the ger than it was four years ago. That exceeds the expansion of markets in 2011.growth in economy seat sales Since air freight volumes have 4% in 2010.of 5.1%. This, however, was not on average grown from 5% to The delivery of new aircraftapparent in all markets. Within 6% a year over the past 20 to There was a substantial differ- picked up in 2011, with 1,268Europe, where distances are 30 years, growth in the past ence between domestic and in- new aircraft delivered torelatively short, there has been four years has been exception- ternational markets. In domestic airlines. Taking into accounta structural shift away from ally weak. Even so, with the es- markets, slightly less capacity aircraft retirements, which typi-premium seats, resulting in timated value of world trade at was added than growth in the cally involve around 400 to 500the faster growth of economy more than $16 trillion in 2011 market: 4.0% versus 4.1%. The aircraft, hull losses becausetravel. On the important airlines were still responsible opposite prevailed in interna- of accidents, and movementstransatlantic and transpacific for carrying more than $5 trillion tional markets, where the pace in and out of storage, the in-markets, though, premium travel worth of the world economy’s of capacity expansion was in service fleet of the commercialcontinued to grow substantially internationally traded goods. excess of the expansion of airline industry expanded 763faster than economy travel. demand: 8.1% versus 6.9%. aircraft to 24,605 aircraft byThis reflected the continua- But the excess of capacity year-end 2011.tion of business travel growth growth was not too large, andin most regions and the lull in so load factors remained closeleisure travel in many developed to historic highs in 2011, witheconomies because of weak a worldwide average of 78.3%.consumer confidence. Domestic markets saw load International passengers by seat class Passenger and cargo load factors (source: IATA) (source: IATA) 12
  12. 12. Airline cash flows of 8% to Return on capital of 3.5% was 11% of revenue approached less than half what investorsYields improved 4% in 2011. mid-cycle levels. expect. Prospects for 2012.Passenger yields worldwide The profile of airline cash flows Financial sustainability means The threat of a catastrophicrose 4% in 2011, following an was very different during 2011 generating profit and paying default within the Eurozoneincrease of more than 6% in than in 2008, when there was investors a normal return. Such remains a possibility, and the2010. Much of the 2011 yield a similar average rise in fuel a return is generally bench- lack of economic growth in theincrease was as a result of prices. In 2008, cash flows fell marked as the average cost of region means that, collectively,airlines attempting to recoup sharply and turned negative for equity and debt or the WACC European airlines could suffercosts associated with the rise some airlines. In 2011, there (weighted average cost of a loss. Although aviation at ain the price of oil. Airlines man- was a squeeze at the beginning capital). Debt spreads have global level is still expected toaged to improve fuel efficiency of the year but on average cash narrowed, but the volatility of make a small profit, the incred-and reduce other unit costs, but flows, as proxied by EBITDA, airline earnings means that eq- ibly thin industry margin—likelythey still faced an increase in were at quite comfortable uity remains expensive. On av- to be less than 1%—leavesoverall unit costs of 5%. High mid-cycle levels of 8% to 11% erage, the airline industry cost airlines vulnerable to shocks.load factors in the passenger of revenues in all three of the of capital is 7% to 8%. Thebusiness allowed airlines to re- world’s major regions. This, 2010 return on invested capital Rising oil prices are a particularcover part of this cost increase. however, was down on the (ROIC) in the airline industry concern, with an average price 2010 performance. was boosted by the profits of at least $115 per barrel in generated, rising to 4.1%. But 2012. If the industry as a whole Asia-Pacific airlines, in ag- ROIC fell back to an estimated is to remain profitable under gregate, continued to see the 3.5% in 2011. That was less such circumstances, it will be strongest cash flows in 2011, than half the rate required to reliant on robust growth in although the weakness of cargo pay investors what they could Asia and the emerging markets markets meant that they suf- earn from investing that capital in the Middle East and Latin fered a significant deterioration in an alternative industry with a America and on the ability of as the year progressed. US and similar risk profile. airlines in mature markets to European airlines, in aggregate, keep tight control of costs. saw lower but stable cash There were some airlines flows throughout the last three that did create value for their quarters of the year. Investors, investors in the past two years. of course, would want to see This group of airlines includes much stronger cash flows, long-haul network airlines, given the capital they have in- regional airlines, low-cost carri- vested in the industry, but com- ers, and other business models. pared with the average industry It also encompasses airlines experience of past cycles the from most regions of the world. 2011 financial performance is These airlines, though, are reasonably good. the exception and are few in number. Airline fleet numbers Passenger and cargo yields (source: Ascend) (source: IATA) 13
  13. 13. FEATUREWhat is the benefit ofglobal connectivity? The economic component The social componentAviation safely carries some Global business and tourism nearly 100 million jobs. Fully Increasing cross-border travel2.8 billion passengers and 48 rely on air transport. Access 51% of international tourism facilitates ever closer relation-million metric tons of cargo to international markets and relies on air service, according ships, between countries andand supports 56.6 million the increasing globalization of to the World Travel and Tourism between individuals from dif-jobs and $2.2 trillion in eco- production makes worldwide Council. ferent nations. Eased restric-nomic activity. As such, air connections essential. The total tions on the flow of goods andtransport is a vital component value of goods transported by Air transport plays a major role people would encourage evenof modern life and integral to air represents 35% of world in developing nations, generat- further integration.sustainable growth. trade. ing $490 billion in economic activity. Well over half of all the Airlines facilitate a global Beyond this, aviation makes jobs aviation supports glob- workforce and keep family a direct contribution to ally—35.9 million—are based in members united. For example, global GDP greater than developing economies. over nine million Lebanese live most industries, including the abroad. Three million people of pharmaceutical or automotive The industry’s economic impact Lebanese descent live in the $5.3 sectors. In 2010, the $539 will continue to grow. By 2030, United States and around a mil- billion it contributed would have it is forecast that 82 million jobs lion live in the São Paulo area. placed air transport as the 19th and $6.9 trillion in economic Aviation brings them and their largest country in GDP terms, activity will have air transport at families together. trillion approximately equivalent to Switzerland or Poland. their root. Airlines also provide a means for labour mobility, which in turn The total value of goods And the boon of connectivity lead to remittances, whereby transported by air annually, which is 35% of all world trade. goes further than these impres- sive figures to touch peripheral areas, such as encouraging $200 migrant workers are able to send money home. Remittances are an important source of rev- investment and innovation and billion enue for developing countries. 82.2 allowing companies to attract In the Philippines, more than talent across borders. 10% of the domestic economy The boost to the world’s relies on remittances. In Tonga The numbers do not include economy from global and Moldova the percentage is million tourism, which would not be able to post its impressive figures without support from aviation’s increased connectivity in the last 20 years. even higher. The total estimated the airlines. In 2011, tourism jobs to be supported generated $1.8 trillion in global by aviation in 2030. economic activity and provided d & Drink Foo Industry GDP contribution comparisons Chemical Transport Air $1.162 $977 Au tomotive ar maceutic trillion $539 Ph al billion $484 $445 Textile billion billion billion $236 billion 14
  14. 14. Source: All figures are 2010 data from the Aviation Benefits Beyond Borders publication www.aviationbenefitsbeyondborders.org. 60% 3.5x The real-term reduction The average aviation job isAviation’s global employment in the cost of air travel 3.5 times more productive and GDP impact since 1970. than other jobs. A 2007 World Bank report offered cargo space. British conservatively estimates that Airways carried vital materials overall remittances are worth on a scheduled flight to ease twice as much as official devel- the water situation and then opment aid globally. Research later dispatched a 747F on shows that a 10% rise in remit- behalf of Oxfam and UNICEF. tances would lead to a 3.5% Lufthansa Cargo also donated decline in the number of im- two critical relief flights. These poverished people worldwide. are only a few examples of the Each dollar remitted produces many instances of help from the more than $2 in additional air transport industry. economic activity. It is not just about assisting Aviation, moreover, supplies a in times of trouble. Air trans- vital lifeline to remote communi- port is equally intrinsic to the ties cut off from road networks. good times. Aviation’s ability In such isolated areas, essential to connect distant locations services, such as health care, quickly, safely, and securely has depend on speedy air links. For given the world the chance to example, over 1,000 communi- share and experience firsthand ties in Russia’s far north and its amazing cultural heritage, more than 200 communities in including the great treasures Alaska rely mainly on aviation. of yesterday, such as the GDP impact Terracotta Warriors, the Mask of Aviation direct Emergency response to natural of Tutankhamen, and the works jobs by region disasters or in times of war of Caravaggio. is likewise equally reliant on $538.9 aircraft speed and reliability. In 2011, the United Nations de- billion clared a famine in East Africa. Food, medicine, and other relief aid were quickly donated, and UNICEF called on the airlines to help get the donations to the region. FedEx promptly pro- vided a Paris-Nairobi service. UPS and Virgin Atlantic Airways Aviation direct $58 $5.0 billion jobs by region 8.36 million billion The annual European subsidy to rail travel (2007- 09). Air travel received a The cost of the Icelandic $440 million subsidy for volcano to the world’s the same period, mostly economy due to lack of for economically unviable air services. lifeline routes. 15
  15. 15. SAFETYMaking flying even safer. Implementation of ICAO standards and recommended practices is the essential starting point.Aviation had its safest year At 0.37 hull losses per million IATA has been engaged with have systems on board thatever in 2011. Zero accidents flights, the 2011 accident rate ICAO over six decades in the can exploit new technologies,remains the industry goal. for Western-built jets (WBJ) development of ICAO global such as Performance-Based was the lowest in aviation standards, which are at the Navigation (PBN). PBN can history, surpassing by 39% heart of the industry’s excellent deliver safety benefits by pro- the previous low set in 2010. safety performance. The chal- viding navigators with vertical 2.8 Over the last decade there has been a 61% improvement in safety for WBJ. Within this lenge is to increase compli- ance with ICAO standards. According to ICAO’s Universal guidance at locations where no such guidance exists. billion excellent overall performance, regional disparities exist. Africa, Russia and the Commonwealth Safety Oversight Audit Program (USOAP) audit results, ap- proximately 41% of ICAO Compliance with the targets for implementing PBN, agreed by all ICAO contracting states The number of people of Independent States, Latin Standards and Recommended at the ICAO General Assembly safely flown in 2011. America, and the Middle East Practices (SARPs) have not in 2010, is, however, slipping, and North Africa remain signifi- been effectively implemented even though many airlines have cantly behind the performance on a global basis. There are po- already equipped their aircraft 38 of other regions. (See feature tentially thousands of individual and trained their crews with on page 21 for more on safety examples of non-compliance. PBN. The implementation of performance in Africa today.) PBN procedures by ANSPs is million Less than one-third of audited crucial to raise safety levels. A To address these concerns, the countries have implemented systematic investment plan to industry and governments are a runway safety program, and ensure the worldwide imple- working together to improve only half of those countries mentation of PBN must be put The number of flights in safety by pursuing greater com- require the provision of runway into action. 2011 (30 million by jet, pliance with International Civil end safety areas in compli- 8 million by turboprop). Aviation Organization (ICAO) ance with ICAO’s USOAP. This Adherence to new ICAO standards, increasing participa- can mean that even airlines recommendations is particularly tion in audit programs, tackling with excellent safety records important to prevent a repeat of 0.37 human factors, and encourag- ing greater sharing of safety information. are sometimes penalized and added to banned lists, because their home nation is not compli- blanket airspace closures such as that caused by the volcanic eruption in Europe in 2010. A losses ant with ICAO standards. A significant number of ac- co-branded document, Flight Safety and Volcanic Ash, has been published by ICAO and The global hull loss cidents could be prevented industry partners, including rate per million flights through the use of the latest IATA. It represents a water- of Western-built jets. technologies and procedures shed in the way operations are on approach. Modern aircraft handled in airspace with known or forecast volcanic ash con- tamination. In essence, airlinesWestern-built jet hull loss rate per million sectors 2001-2011 will decide whether to fly or not, based on a risk assessment. 61% safer The improvement in the accident rate for Western- built jets, comparing 2002 performance to 2011. 18
  16. 16. Audits ensure that globalstandards are followed. IATA Circle of ExcellenceThe IATA Operational Safety aims to bring airlines into all of Since ISAGO’s inception inAudit (IOSA) is the world’s only the interconnected audit and February 2008, and up toglobal airline operational safety safety programs. The support of 1 May 2012, more than 460audit program. As of 1 May governments and regulators for audits have been conducted2012, of the 376 airlines on the IOSA and for the IATA Safety with over 100 ground serviceIOSA registry, 133 (35%) are Audit for Ground Operators providers. ISAGO is supportednon-IATA member airlines. In (ISAGO) is vital. IOSA is by 65 governments and airport2011, IOSA-registered airlines mandated by 11 governments authorities. In early 2012,flew 64% of all commercial worldwide, a figure that IATA is ISAGO received endorse-flights. The total accident rate looking to increase. ment by all 44 members offor IOSA carriers continues the European Civil Aviationto be better than the industry Ground damage costs the Conference (ECAC). Therate and was 52% better than industry billions of dollars per ISAGO Audit Pool includes 44non-IOSA operators. Since year. ISAGO is a globally- member airlines and consists of Audits2003, over 1,300 IOSA audits approved audit for reducing 200 ISAGO-qualified auditors. IOSA: IATA Operational Safetyhave been completed. IOSA ground accidents by eliminating Auditis active in all regions of the ground hazards, for reduc- ISAGO: IATA Safety Audit forworld and is mandatory for IATA ing aircraft ground damage Ground Operationsmembership. and personnel injuries, and for IFQP: IATA Fuel Quality Pool reducing the number of redun- IDQP: IATA Drinking WaterDespite the success of IOSA, dant audits. Complementing Quality Poolairlines could do more to the ISAGO program is the DAQCP: IATA De-Icing/Anti-participate in the other safety new IATA Ground Operations Icing Quality Control Poolprograms that IATA has devel- Manual (IGOM), which pro-oped. Of the nine IATA audit vides globally standardized Programsand safety programs, IATA procedures, and a new Ground GSIC: Global Safetymembers participate, on aver- Damage Database (GDDB) Information Centerage, in only three. Only 23% program, which provides per- FDX: Flight Data eXchangeof IATA members participate in formance monitoring. STEADES: Safety Trend Evalu-more than four programs. IATA’s ation Analysis & Data ExchangeCircle of Excellence campaign System GDDB: Ground Damage Database Western-built jet Total accidents hull-loss accidents (all aircraft types) Fatal accidents Total fatalities 17 11 94 92 23 22 786 486 2010 2011 2010 2011 2010 2011 2010 2011 19
  17. 17. There is a human element Shared safety information isto safety that is being key to embedding a safetyaddressed. culture worldwide.Pilot error in handling aircraft A Safety Management System Governments, regulators, and aims to address runway excur-is a contributing factor in (SMS) is a systematic approach the industry have a responsibil- sion risks by capturing aircraft20% of accidents. To as- to managing safety. It covers ity to embed a genuine safety performance data at over 700sist with the rigorous training all operator activities, including culture across the industry that airports worldwide. A newthat the industry already has areas such as organizational encourages the open reporting Operational Data Managementin place, IATA’s Training and structures, accountabilities, of safety incidents in a nonpuni- (ODM) initiative will furtherQualification Initiative (ITQI) policies, and procedures. The tive atmosphere. Information integrate operational data withhas developed a number of key world’s first SMS assessment sharing is an underlying prin- existing safety information.training programs for pilots and standards for airlines are now ciple of improved safety, andmaintenance technicians. included in the IOSA standards the effectiveness of a safety IATA released a number of manual, thus providing the first culture can often be measured documents in 2011 to as-Crew fatigue is also a key area global SMS benchmark. These by reporting rates alone. sist in safety efforts. Theseof focus. Led by new research standards have been validated included the second editionin recent years, which has to be in full compliance with Two programs have become of the Runway Excursion Riskfocused on the timing rather ICAO standards. particularly important for safety Reduction Toolkit, in partner-than just the length of crew data: the IATA Global Safety ship with ICAO and more thanrest periods, mitigating fatigue Information Center (GSIC) and a dozen international safetyhas become an important ele- the Global Safety Information organizations. Also publishedment in safety management. Exchange (GSIE). The GSIC were implementation mate-IATA and ICAO are leading provides IATA members with rial for competency-basedthe standardization process access to aggregated, de-iden- training and qualificationof Fatigue Risk Management tified information from IATA’s schemes for engineering andSystems (FRMS), which have safety databases. More than maintenance and the first jointbeen adopted by a number of 420 organizations contribute EUROCONTROL-IATA safetyCivil Aviation Authorities. A joint data into six active databases, bulletin.FRMS implementation guide with analysis and industrywas produced in 2011, and trends displayed in more than All these programs are alignedIATA has led a series of regional 25 categories. Over 85% of in IATA’s well-establishedFRMS workshops to ensure IATA carriers participate in the six-point safety program to sys-the implementation of these GSIC (http://gsic.iata.org). tematically tackle the causes ofessential safety systems. accidents. This focuses on (1) The GSIE agreement between safety data management and IATA, ICAO, the European analysis (2) auditing (3) safety Commission, and the US management systems (4) infra- Department of Transportation structure safety (5) operations allows participating organiza- and (6) maintenance. The tools tions to share safety information and projects developed under globally. IATA’s contribution the six-point program are in line includes multiple forms of with ICAO requirements and GSIC safety analysis, including are being increasingly adopted information from the world’s by governments and regulatory largest operational incident authorities worldwide. IATA wel- database, and the only global comes the opportunity to work database of airline audit results with aviation regulators to help through IOSA. raise the bar for aviation safety around the world. Runway excursions continue to be the leading cause of 1in 5 accidents and are being ad- dressed with a three-year series of regional runway safety seminars. In addition, the Flight 20% of accidents count Data eXchange (FDX) database pilot handling as a factor. 20
  18. 18. FEATURE How safe can we be? Commonwealth of Europe Independent States North America 0.00 1.06 0.10 0.45 0.00 North Asia 0.00 0.10 Middle East & 0.34 North Africa Industry 2.02 Africa average 3.27 0.72 Asia Pacific 0.37 Latin America 7.41 0.25 0.61 & the Caribbean 0.80 1.28 IATA 1.87 members 0.41 0.25 Western-built jet hull loss rate per million sectors. Blue is 2011 Gray is 2010In 2011, aviation was safer than average, and was 80% better Center (GSIC) Flight Data consultation with all aviationever. Even so, safety programs than that for non-IOSA carri- eXchange (FDX) program, stakeholders and predicated onare being strengthened. The ers in Africa (1.84 accidents which will provide performance global standards will help cutultimate goal remains zero per million flights versus 9.31 assessments at every commer- accident rates even further.accidents. accidents per million flights). cial runway worldwide. Indeed, no IOSA-certified car- The African Safety Summit,The regional breakdown of rier was involved in a Western- The African safety action plan meanwhile, expands the reach2011 safety figures show that built jet accident in 2011 in is working. Greater participa- of industry efforts to improvesome regions are in need of Africa. tion in industry programs will safety on the continent. Allmore help than others. Africa is help improve the region’s safety African airlines and civil aviationthe region most in need of im- The IATA-funded statistics. Nigeria, Madagascar, authorities are invited to attendprovement, and aviation safety Implementation Program for and Egypt have all approved to learn best practices and towork on the continent typifies Safe Operations in Africa IOSA at the national level. help drive a safety culture inindustry efforts on the global (IPSOA) has also been Poor safety oversight in Africa the region. The summit has twostage. extremely influential. IPSOA remains an issue, however, ambitious goals for 2015: to provided airlines with flight data and more African nations must reduce Africa’s overall accidentAlthough Africa continues to analysis tools, backed up by adopt IOSA as the global stan- rate to the global average andpost the worst safety statistics, regional seminars to ensure the dard to follow. to remove African carriers from2011 saw a 56% improvement data was used accurately. This the European list of bannedin the region over the previous was effective in preventing the An example of leadership on airlines. IATA does not supportyear. IOSA has made a big unstable approaches that are a the continent, Nigeria is in banned lists, preferring to workdifference. IATA committed $3 precursor to runway excursions, the process of implement- with airlines to adopt globalmillion to its Partnership for which are the largest cause ing Performance-Based standards in safety.Safety program in Africa to help of accidents. Deviations from Navigation across 24 airports.the continent’s carriers achieve optimal flight trajectories were But elsewhere a general lack ofIOSA recognition. The accident reduced 56%. This program investment in African aviationrate for African airlines that ended in 2011, and is being infrastructure is holding backare on the IOSA registry was replaced on a global basis with overall safety improvements.almost equivalent to the world the Global Safety Information Infrastructure built through #21
  19. 19. SECURITYAchieving convenient andeffective security. Through a closer relationship with authorities, the industry is helping to shape and har- monize the security regula- tory framework.Governments and the indus- The safety and security of pas- Through the concerted efforts data-alignment initiatives weretry must continue to work sengers is always the number of IATA and its industry part- successfully concluded totogether to replace inflex- one concern for airlines. Since ners, many regulatory authori- round out the tools available toible security measures with 2001, flying has become much ties are including the industry countries. ICAO has updatedharmonized and responsive more secure, but this has come in their security deliberations its passenger data blueprintsecurity systems based on at the cost of greater passen- at a much earlier stage than based on these agreements,data and risk management. ger inconvenience. With around was previously the case. and IATA has led efforts to 700 million extra passengers Since 9/11, aviation has been create new PNR message expected to fly by 2015, subjected to a large number of standards and to standardize fundamental improvements to security regulations, many im- the use of Extensible Markup the security system are needed plemented unilaterally. Aviation Language (XML). to further strengthen security is a global business, however, and deliver a better customer and aviation-related regulations Other IATA efforts resulted in experience. must, as much as possible, be India committing to a single agreed upon and implemented window for the receipt of pas- 39 globally. The security regulatory framework should be designed to recognize the unique chal- senger data and adopting the United Nations EDI directories for administration, commerce, countries lenges facing aviation and should follow a risk-based, data-driven approach. and transport (UN/EDIFACT) message standard. Globally, paper is being removed from Currently impose API with security processes by regula- another 32 countries For some years, govern- tors. During 2011, IATA worked in the pipeline. ments worldwide have been with its industry partners to making use of Advanced convince the US Customs Passenger Information (API) Border Patrol to eliminate and Passenger Name Record two widely used paper-based 7 (PNR) programs to aid border forms: I-92 and I-94W. security. Information of this kind is a crucial tool in the countries fight against terrorism and illegal activity. Previously, the standards for the transmission Require access to PNR of such data were not always data with another 29 harmonized. In 2011, several countries to follow suit (mostly in the EU).“IATA is promoting a checkpoint ofthe future, which I strongly endorse.”John S. Pistole, US TSA Administrator, interview on C-SPAN 10 August 2011. 22
  20. 20. The Checkpoint of the Future—based on the latest New cargo security measures technology with risk-based, must preserve the speed data-driven measures—offers and flexibility of air freightSecurity regulations must a new vision for passenger and focus on a supply chainavoid duplication. security. approach.In 2011, five European coun- Despite the successful work In 2010, the discovery of In addition, the Global Airtries embraced the concept with governments to date, much explosives disguised as printer Cargo Advisory Group, a pan-of one-stop security, which remains to be done. To accom- cartridges on board cargo industry alliance of airlines,enables passengers to connect modate growing passenger aircraft was a major issue for freight forwarders, and ship-between flights without need- numbers and evolving security cargo security. Throughout pers, spoke with one voiceing to go through the security threats, the entire checkpoint 2011, numerous reactive, on cargo security issues. Itprocess a second time. This process has to be addressed. emergency measures—includ- pushed, for example, for thestreamlined procedures for the In 2011, IATA unveiled the ing calls for the 100% physical adoption of an electronic ver-millions of passengers travel- first conceptual example of a screening of all cargo, demands sion of the standard securitying from the United States to passenger Checkpoint of the for electronic cargo data, and declaration.Europe. IATA continues to be Future (CoF). myriad other proposed screen-a relentless champion of such ing measures—confronted the IATA’s Secure Freight initiativesecurity efficiency measures. The CoF is designed to en- industry. helps regulatory authorities hance security, reduce lines, implement a quality assuranceThe government of Israel was eliminate the unpacking and IATA promoted a strategy aimed process that secures cargoconvinced to suspend a costly packing of carry-on bags, and at providing data for managing upstream at the start of theand ill-conceived security mes- minimize the intrusive searches risk, securing the supply chain supply chain and then pro-saging program to be used be- that characterize the air travel upstream, and incorporating tects cargo from interferencetween air traffic controllers and experience today. Year-end new technology. This practical until it reaches its destination.pilots. Also, the US government 2011 witnessed nations like approach helped to blunt or A successful trial program inand European Commission the United States and Canada alter numerous poorly-prepared Malaysia was followed in 2011were persuaded to collaborate implementing trial programs of regulations and facilitated by test programs in Kenyaon developing a system for risk-based security measures at cooperation with the US gov- and Mexico. Further trials arethe mutual recognition of their checkpoints that align with the ernment and the European expected in Chile and thecargo security programs. IATA vision. (See page 24 for Commission in formulating United Arab Emirates in 2012. more on the CoF.) test programs for cargo data Secure Freight helps countries collection. enhance their regulatory and operational frameworks and their infrastructure to achieve compliance with ICAO Annex 17 standards.Anticipated passenger security throughput 2011-2015(Source: IATA passenger forecast) 3.5 billion (2015) 2.8 billion (2011) 175 700 million million Average annual increase Total extra passengers in passengers. to pass through airport checkpoints by 2015. 23
  21. 21. FEATUREDo I need to take my shoes off? Average hourly throughput at airportThere is little doubt that air Acceptance, however, is the passenger security checkpointstransport is far more secure easy part. The challenge aheadfollowing the tragic events of9/11. Still, from a passenger is to implement these ideas and principles before security lines avg.viewpoint, the security processhas too often become intrusive, become even more onerous. 350 bestintimidating, and inconsistent. Technically, a lot has alreadyLong lines, pat downs, andconstant packing and unpack- been achieved. X-ray scanners, for example, are constantly 250ing blight many a journey. Fromprocessing an average of 350 being improved, and other detection methods have come avg.passengers per hour prior to9/11, security checkpoints into force. Moreover, innovation and competition in the market 149have slowed to a throughput of are fast giving rise to technol-just 149 passengers per hour. ogy that will perform to high worstGiven that traffic numbers aregrowing—2.8 billion people standards on moving passen- gers. Two components will be 60took to the skies in 2011—the tested by the end of 2012, andproblem will only worsen. a first version of the CoF should be operational by the end of Pre-9/11 Post-9/11The slowdown is unneces- 2014.sary and partly a result of and Canada’s Nexus are the this meeting is ongoing. Globalthe patchwork approach to The complete technology suite only two programs designed to harmonization—achievedsecurity by governments. IATA’s is still a few years away, but risk facilitate a smoother security through the mutual recognitionCheckpoint of the Future (CoF) assessment using passenger checkpoint process. of multiple programs rather thanlooks to resolve these issues data is a step that is already through a single scheme—iswhile strengthening the global being implemented in some Perhaps more important than possible only if consistentsecurity system. It is a risk- countries. The big question where programs are in place data set parameters and riskbased, data-driven concept is how to correctly use and to collect data is how the data assessment methodologies arethat will differentiate screening harmonize this data around the from those programs is being applied.through the analysis of passen- world. As such, emphasis is used and what, specifically,ger information. Resources can being placed on how exist- constitutes a data set. An ICAOthen be focused where the risk ing Known Traveler programs Technical Advisory Group,is greatest. can be leveraged. There are comprising 19 states and in- a number of such programs dustry partners, met to discussThe principles behind this idea in the world, such as the US this issue and many others inhave been widely welcomed. DHS’s Global Entry, with most late 2011. The follow-up toThey have been endorsed by focused on expediting customsthe European Commission, the and immigration clearance. TheChinese government, and the US Transportation SecurityUS Department of Homeland Administration’s PreCheckSecurity (DHS). And Interpoland 16 countries have signed astatement of principles for next-generation screening. 24
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  23. 23. TAXATION & REGULATORY POLICYGetting a fairer deal from governments.Aviation creates jobs and The major contributors to 6.27% reduction in its air trans- its air travel tax, and the newdrives economic growth. Its industry taxation included dis- portation tax in early 2012 to Danish government abandonedcompetitiveness and connec- appointing increases in the UK offset the inclusion of aviation in plans to introduce a levy on airtivity should inform govern- Air Passenger Duty and in the the European Union Emissions transport outlined in its elec-ments’ tax and regulatory Indian service tax on air tickets. Trading Scheme (EU ETS), but tion manifesto. In the US, IATApolicies. Germany’s new transportation the Austrian government has worked with national industry tax came into effect in January yet to follow suit. stakeholders to oppose suc-Many governments continue 2011, and Austria began col- cessfully plans for the in-to treat aviation as a cash lecting a similar levy from There were some positive creased taxation of air transportcow. Industry taxation grew 1 April 2011. The German gov- developments during the year. to finance the federal govern-$2.7 billion in 2011. ernment, though, announced a The Irish government reduced ment’s debt reduction strategy. UK Air Passenger Duty revenue (in £ millions) 26