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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