IATA, Director General, Willie Walsh, speaking to CAPA TV at the IATA AGM 2023

Transcript

Willie Walsh:What we're facing now are what I described as business-as-usual challenges. I think what's frustrating this year, though, is that the areas where we were rightly criticized last year in terms of getting our resources in place, we're now seeing these problems replicated in other areas— air traffic control, You know, we've already seen capacity reductions forced upon the industry in the United States, ongoing problems in Europe, French ATC strikes impacting on everybody. And what's particularly frustrating is the supply of spare parts from the OEMs and the delivery of new aircraft, because that's impacting at the pace at which we can recover. But it's particularly frustrating when we have aircraft that we can't use because They're sitting on the ground waiting for a spare part that should be there, and it's taking weeks to appear. So you know it's it's it's been it is important that we reflect on the industry improving and on the right path, but frustrating that we're being hampered by these issues outside of our control. I think it's right for us to shine the spotlight on people who aren't performing. Like it's very frustrating, for example, if you look at the United States where you have the president, even the president talking about the need to penalize airlines, you know, for not serving their customers, when the biggest problem airlines in the United States face at the moment is the lack of air traffic controllers, which is a government issue. So people are very quick to point the finger at us, and I think it's appropriate that we respond and defend the industry, that we accept where we haven't delivered, but that, you know, where others aren't delivering, and impacting on our industry. I think it's right that we do that. We'll always try to work with people, and we've successfully done that in some areas. But the particular concern that we have around OEMs, I think that's an area where, you know, we will need to work together. I'm not sure if they fully understand the problem that they have created, but we'll certainly be, you know, detailing that and monitoring performance as we, as we go forward. I think we're beyond the blip, you know, and the concerns that people had that this was just, you know, a short-term effect of the reopening. It is sustainable. We're seeing seat factors, as you say, back to levels that we witnessed in 2019, which is very encouraging. Overall, domestic markets are above where they were in 2019. International markets strongly recovering. So I think the picture is pretty encouraging, actually, and we should be cautiously optimistic that that will continue through the rest of this year and indeed into 2024. But as we've witnessed the recovery, I think that's been built on strong foundations. So, you know, I've no doubt that this recovery is sustainable. We've got to highlight this issue because it is important, you know, that if an airport wants to expand or make investments, that it's done in a sensible way. You know, we don't, as an industry, want to see our customers being forced to bear additional costs so that it is driving higher profitability for an industry that does not face competition like we do. And, you know, when I hear calls for the airport industry not to be regulated, we've got to push back against that. You know, airports do not compete in the same way as airlines compete. We need to ensure that the economic regulation that's in place incentivizes the right sort of behaviors. And there's still work to do in that area. But, you know, Our job is to represent airlines. Our job is to call out people who aren't performing, aren't behaving in an appropriate fashion. But where necessary, you know, we're ready to work with people where there's common ground. And we have to acknowledge, in a lot of cases, there is a lot of common ground. You know, I've previously said airports and airlines probably have about 80% in common. It's the 20% that we disagree on. And often that 20% particularly relates to the charges that they want to apply and the costs that we're going to have to bear. I think we can say that we will be a sustainable industry in the long term. There's clearly a lot of work that we need to do, and we recognize that it is going to be challenging and it's going to be expensive. And I think that's important because explaining to our customers that the transition to net zero is going to take time, is going to be a challenging task for us, but it's also going to mean our cost base increases. And as a result of that, that's going to have to be reflected in higher fares. So honesty in relation to this, I think, is absolutely critical. I think in the past, people felt, you know, we can make these sort of commitments, we don't have to worry how we get there, we don't really have to worry about how much it's going to cost or how challenging it's going to be. That's unacceptable now. People are looking to support the nice words that we're saying with action and tangible measurement of progress. And clearly, what we want to see is we want to see greater production of sustainable aviation fuel because it is the most important. Thank you, Willie. Issue for us in terms of getting the abatement to net zero in 2050. You know, I'm encouraged. We've used every single drop of SAF that has been produced. We've estimated that that led to an additional $350 million of cost in 2022 at a time when the industry was losing money. So when you see the commitment that airlines are making, you know, the strong signal that we've sent to manufacturers that you produce it, we'll buy it. And the more that gets produced, the more likely we'll see the unit costs decline. Now, personally, I believe there's always going to be a premium for sustainable fuel over traditional kerosene. There are others who would argue that we'll get to a point where it'll cross over and sustainable fuel will be cheaper. But that would be nice if it happens in the future. But what I'm encouraged by is the fact that airlines are making the commitment today, are spending money, And particularly doing so at a time when the industry, you know, has not been profitable. So, you know, we should be confident. Personally, I am confident that we will get there. I recognize it's going to be very challenging. I recognize it's going to be expensive. But, you know, we've never failed as an industry to overcome challenges that get thrown at us. You know, we've never failed to overcome the crises that we've had to face. And the fact that our industry is still standing in 2023 after what we've gone through since 2020, I think is amazing. And, you know, so if anybody doubts our determination or our ability, all they have to do is look at our track record. And that's why, you know, I'm very encouraged about the future. The industry has to do better than we're doing this year. You know, we're forecasting profits in the order of $9.8 billion on revenues of just over $800 billion, $803 billion. That's a net margin of 1.2%. That's not enough. So we have to do more. But it's encouraging, given where we were, that we're now on the path to greater profitability. And I think we've got to be much more vocal about, you know, the level of profitability that this industry needs. It's wrong that people say, you know, this is an industry making billions. Yes, yes, we hope to make billions. 9.8 is a big figure. But when you look at it in terms of the The margin that we're making, it's wafer thin. There's very few industries in the world would even get out of bed to tolerate margins that low. So understanding the financial challenges and the economic challenges we face is important. And that's why it's very important for IATA to highlight these issues, because it's much easier for us to focus on the industry as a whole, because there is quite a significant variation based on geographic location or indeed the performance of individual airlines. As an industry, you know, we are not a very profitable industry, and we definitely need to do more. I certainly hope that progress, tangible progress on the road to net zero, I think that's, you know, that is very important because I genuinely believe it's an existential issue. If we don't deal with our environmental challenge, we're not going to have an industry in the future. And therefore, you know, now's the time for us to build on the foundation of getting agreement to achieve net zero in 2050 with measures that will start delivering on that, you know, very challenging path, but one that I think we will be able to achieve. Thank you.

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