removing barriers for air transportclacsec.lima.icao.int/reuniones/2010/cumbre... · eu-latin...

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Removing Barriers for Air Transport:How to Ensure Fair Competition & Growth

Alex de GuntenALTA Executive DirectorMay 25, 2010

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

The Region in Perspective

World Latam & Carib. %

Passengers 2.4 billion 148 million 6.1%

Fleet 25,000 1,254 5.0%

Revenues 480 billion 21 billion 4.3%

Airlines 1,500 80 5.4%

Population 6.7 billion 565 million 8.4%

GDP 60,587 billon 4,247 billion 7.0%

Source: World Bank, ALTA airlines

Latam & Caribbean region small in world context…… but with great potential

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

The Region in Perspective

Source: IMF, ALTA, U.S. DOT, AEA

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

The Region in Perspective

Source: Airlines’ Annual Reports; Normalized graph – American Airlines = 100%

… still smaller than 1 U.S. carrier

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

The Region in Perspective

Source: IMF World Economic Outlook

LATAM: GDP Slowdown in 2009

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Growth of Region

ALTA airlines only – Note: 2006 results affected by Varig crisis

However…still positive growth

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Growth of Region

Source: ALTA, U.S. DOT, AEA

RPK

CA

GR

200

4-20

09

Outpacing the U.S. and Europe

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Source: OAG, 2009

Growth of Region

Traffic Between EU – LATAM

Clear growth potential for LATAM based

airlines in these routes

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Growth of Region

2010 Road to Recovery

March Year-to-date (Jan-Mar)

2010 2009 % 2010 2009 %

RPK (000’000) 15,429.4 13,942.5 10.7% 48,787.2 42,875.5 13.8%

ASK (000’000) 22,061.3 21,206.0 4.0% 65,934.1 62,234.4 5.9%

PAX 10,937,004 9,647,920 13.4% 33,598,672 29,109,065 15.4%

PLF 69.9% 65.7% 4.2 74.0% 68.9% 5.1

FTK (000) 327,935 229,162 43.1% 904,124 658,666 37.3%

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

New Aircraft Orders Fleet Age (Narrow, Wide Body)

Source: AirbusSource: Boeing/Airbus*Ascend

Growth of the Region

Fleet Improvement

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

New Aircraft Orders Fleet Age (Narrow, Wide Body)

Source: AirbusSource: Boeing/AirbusThe region has ordered nearly 600 aircraft w

orth $30 billion in the last 5 years.*

*Ascend

Growth of the Region

Fleet Improvement

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Air Transport Under-Valued in Region

► Not recognized as key engine for development

■ Generates 700,000 jobs■ Contributes >$22.2 billion to GDP■ Multiplying effect of air transport industry increases

jobs to 2.7 million & GDP to $157.3 billion

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

What’s Needed to Succeed & Grow?

■ Elimination of Barriers to Growth

■ Level Playing Field

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Liberalization

Currently a wide spectrum & no consensus…

…but agree more flexibility needed

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Ownership

■ Foreign Control & Cross-border investment:

■ Access to capital■ Copa with Continental■ Volaris with TACA■ Avianca with Synergy Group■ Pluna with Jazz

■ Ability to establish subsidiaries in other countries

■ Government owned vs. private

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Barriers to Entry & Exit

■ Unbalanced Entry and Exit Protection ■ Chapter 11 ■ Mexico experience

■ Government Involvement in Distress Situations (Bail Out/Subsidies) ■ Japan■ Italy■ Argentina

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

The Environment

■ LATAM Carriers support the goals and targets set collectively by the industry■ An average fuel efficiency improvement of 1.5% per year until 2020;■ Carbon-neutral growth from 2020; and■ A 50% reduction in aviation’s net carbon emissions by 2050, compared with a baseline of 2005

■ International aviation must have a specific approach■ ICAO should be the entity responsible for the application of a global scheme

■ We urge States to adopt ICAO’s principle of considering the special situations and needs of the airlines in developing countries:■ Avoid punishing Early Adopters: The implementation of a global scheme

and goals must take into account the relative efficiencies and previous efforts of carriers to improve performance

■ Do not penalize Developing Markets: The consideration of the above should not impose additional barriers in traffic rights

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

ETS – As a Barrier to Entry and Growth

ETS will penalize growth and new

operations

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Human Capital

■ Barriers for nationality of technical human resources

■ Common licensing & regulation = desirable & joint goal■ Crews■ Mechanics■ Flight dispatchers, etc.

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Regulatory Challenges

■ Eliminate barriers in use of aircraft of foreign registration

■ Common certification of repair stations, parts, airworthiness, etc.

■ Interchange, wet leasing, temporal dry leasing, etc.

■ Inconsistent standards (FAA/EASA…etc.)

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Fees & Taxation

■ Unrealistic Import Parity Prices (Fuel)■ Monopolies & State Owned Monopolies■ Brazil, 15% more expensive than in the US – More than 80% is NOT imported

■ Extremely High Taxes and Fees (Fuel, Airports)■ Ecuador DAC (income from PAX, ATC, 5% fuel tax, fuel fee)■ USD 20M/yr on fuel alone go to the Civil Aviation Authority – no service

provided

■ Higher Distribution Costs■ 50% to 80% higher than in the US■ USD 300M/yr extra costs for airlines in the region

■ Airports and Taxation: Lack of Compliance of Industry Principles■ No consultation with stakeholders■ Lack of transparency■ Charges not related to costs

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

Infrastructure Challenges

Top 15 Airports in Latam/Caribbean

Source: OAG/ALTA Airlines

Highly Congested

Congestion is a problem in many of our key cities

Congested

Ann

ual T

otal

Dep

artu

res,

Sch

edul

ed P

asse

nger

Flig

hts

EU-Latin America Civil Aviation Summit | Alex de Gunten | May 24 – 26, 2010

What’s Needed to Succeed & Grow?

■ Level Playing Field■ Elimination of Barriers to Growth■ Less Ownership Restrictions – More Cross Border

Investment■ Balancing Barriers to Entry & Exit■ Less Barriers to Human Capital■ Air Transport Must be Recognized as Key Engine for

Development ■ Must Address Tax, Regulatory and Infrastructure Issues