Latin America is a good news story. Aviation supports more than 4.6 million jobs and $107 billion in GDP across the region. Latin American carriers are expected to post a collective profit of some $400 million this year. Thats $100 million better than in 2011. The expected EBIT margin of 2.7% would be the second strongest in the industry behind North America at 3.0%. And the demand for connectivity across the region is growing. Passenger traffic was up 10.1% over the first nine months of the yearthe second highest growth rate after Middle East carriers at 16.6%. The region is showing great promise. But it also faces challenges, said Tony Tyler, IATAs Director General and CEO.
Tylers comments were made at the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Conference in Panama, in which he highlighted safety and infrastructure as top priorities for the region.
Safety: In 2011 the global hull loss rate for Western-built jets was one accident for every 2.7 million flights. In Latin America there was one accident for every 780,000 flights. That was a 32% improvement on the 2010 performance and the trend for 2012 is pointing towards an even bigger improvement. We are moving in the right direction, but that must not lull us into complacencyglobally or at a regional level. There is more work to do, said Tyler.
IATA highlighted the important role of the IATA Operational Safety Audit (IOSA) which is a condition for membership for IATA and ALTA. No IOSA-registered Latin American carrier has had a fatal accident in more than four years. And not one of the four accidents occurring to a Latin American carrier this year has involved an IOSA-registered airline. IOSA is not a guarantee that there will never be another accident. But the strong safety performance of IOSA carriers gives us confidence to encourage governments to incorporate IOSA into their safety oversight programs, said Tyler.
Last year IATA and ALTA commenced a safety trend program to guide safety improvement efforts in Latin America. This has resulted in workshops on flight data monitoring, runway safety and fatigue risk management strategies. Additionally, the implementation of Performance Based Navigation (Area Navigation, Required Navigation Performance) across the region is a priority to improve both safety and efficiency.
Infrastructure: Airport and air navigation infrastructure has not kept pace with rising demand for air connectivity in Latin America. Unless there is sufficient capacity, efficiently operated and at cost effective prices, airlines cannot be successful businesses, meeting growing demands for connectivity, said Tyler.
IATA urged caution in light of the developing trend across the region to invite private sector participation in airport development. Too often airport privatizations fail for lack of effective economic regulation. Charges rise, traffic growth is stunted, economic opportunities are lost and the airport suffers from lack of sufficient investment. We need to learn from many bitter past experiences, said Tyler.
The recent privatizations of three airports in Brazil: Guarulhos, Viracopos and Brasilia illustrate the challenge. It is clear that a concession model provided the best opportunity to address deficiencies at these airports ahead of the 2014 FIFA World Cup. Auctioning the concessions garnered some $14 billion for the Brazilian governmentmany times the minimum bid. Safeguards were not put in place to ensure that the new owners recover their investment through efficiency gains and traffic growth, rather than by raising non-aeronautical fees which are monitored but not capped. It is important that the Brazilian government absorb the lessons of this experience as it moves forward on the next round of airport concessions, said Tyler.
While citing a consensus that investment in infrastructure is a critical need for the region, Tyler said that diversion of tax receipts and other charges to the general treasury is widespread. Airlines understand that infrastructure is not free. But under international standards it is important that users have a formal role in the setting of fees and charges and in the case of airports, of capital investment decisions. Furthermore, money raised from aviation needs to stay in aviation to further develop its foundations to support economic growth and development. While this is what governments have agreed through the International Civil Aviation Organization (ICAO), too often it disappears into the general fund, said Tyler.
IATA joined with ALTA, Airports Council International and the Civil Air Navigation Services Organization to sign a declaration calling on Latin American governments to better support the efficient development of aviation infrastructure in the region in line with global standards.
Tyler encouraged the regions leadership to take full advantage of developments in three global challenges:
- Security: The Checkpoint of the Future is moving from concept development to testing. The vision is for a hassle free security experience made possible by uniting advanced technology with the effective use of passenger information to move us away from todays one-size-fits all approach. Component tests will continue in 2013 with first generation Checkpoints of the Future scheduled for trial deployment in 2014. I hope that we will have some airports from the region participating, said Tyler.
- Environment: Tyler reiterated the industrys support for the EU decision to stop the clock on its plans to include international aviation in its emissions trading scheme. This should create the space for governments to agree at ICAO on a global approach to market-based-measures (MBM) to manage aviations emission, said Tyler. At the same time, Tyler noted that this development puts more pressure on airlines to build a compromise consensus on how MBMs can be implemented fairly. No solution will satisfy every airline 100%. We will need to find the fairest possible compromise, remaining consistent at global and regional levels. If we fail or lose unity, that opens the door for individual governments to pick us apart and impose solutions that will, quite probably, be more expensive and less workable for our complex global industry, said Tyler.
- Distribution: With the adoption of the foundation standard for a New Distribution Capability (NDC) last month, the next year will focus on detailed standards definition and the development of pilot projects. NDC is a unique opportunity to unleash innovation in airline retailing. NDC will offer product differentiation, personalization and sales of ancillary products and services, advantages that are already standard on airline and other websites but which have proven very difficult to implement through the Global Distribution Systems-agency channel, said Tyler.