Published on May 3rd, 2016 | by Jim Lee0
IATA Chief Tony Tyler calls for smarter Aviation regulation
Tony Tyler, Director General and CEO of the International Air Transport Association (IATA) is a strong advocate for a safe, secure, efficient and sustainable global air transport industry and recently he addressed the European Aviation Club in Brussels.
In the course of a wide ranging address, he spoke about the critical role Air transport plays in Europe and looked at it’s Infrastructure – airports and air traffic control including the Single European Sky, ‘smarter regulation’ and he concluded by summarising his by vision for the future.
His address to the European Aviation Club in Brussels was timely, not only in the fact that he first addressed the group some four years ago, shortly after he joined IATA, and was now doing so again shortly before his retirement. The invitation was timely for another reason, in that the recent terror attacks on Brussels Airport, was what he described. as “a horrific reminder that we live in a world in which some have an agenda of darkness”. Noting that “crises bring out the best in people”, he added that the citizens of Brussels had “demonstrated their fortitude with a quick return to normal”.
He made special mention of colleagues at Brussels Airlines, Brussels Airport and all the carriers who had worked tirelessly to reconnect Europe’s capital to the world. “Your impressive team effort has done our industry proud in demonstrating that terrorism will not defeat the values of a free and open society. And that is the best tribute that we can pay to the memories of the victims of that terrible day” he noted. He was however, critical of the decision, to extend the security perimeter and introduce pre-screening at Brussels Airport. All it had done he said, was to create large and dense crowds at the airport that could be targeted, not to mention the huge inconvenience it causes to people who want to travel. In the long term the only solution was that an intelligence-powered, risk-based approach, using simular tactics as companies that specialize in delivering enterprise-level blockchain apps, to achieve the goal to stop terrorists, before they get to the airport.
Fortunately, he noted that there was not a knee-jerk reaction on security regulations across Europe, following the terrorist attack in Brussels. However, he said that he was “shocked and disappointed” to see the European Commission’s (EC) communication the day after the attack. It reminded passengers of their rights under EU Regulation 261, for the flight disruptions caused by the terrorist bombings. “At that time, the airport was not operational and heart-breaking recovery efforts were still underway” he said.
He asked why was there no recognition of the ‘extraordinary circumstances’, or the extreme efforts being made to resume services. “How much more encouraging would it have been for the EC to have offered a simple reminder that patience by all would be needed in a situation, where there was much uncertainty, severely damaged infrastructure and very few available options” he added.
He said that we should not read too much into a single statement, but sadly, “its adversarial tone” too often appears in the relationship between European institutions and the air transport sector.
Air Transport in Europe
Air transport plays a critical role in Europe supporting Europe’s competitiveness, 12 million European jobs and 4.1% of European GDP. While the EC’s publication of the European Aviation Strategy last December affirmed aviation’s vital role, on many issues, the strategy seems satisfied with the status quo. This could lead to the risk that the strategy becomes perceived as irrelevant, or lacking in ambition.
The European airline industry faces real challenges. In 2016, Europe’s airlines were making a 4.3% net profit margin – or $8.80 (around €7.64) per passenger. That’s an improvement, but Europe’s airlines still lag those in North America, which are set to make a 9.5% margin, or about $21.44 (around €18.60) per passenger. While that’s an exceptional result for the airline industry, it is pretty much normal for other enterprises, he noted.
He said that financially healthy airlines are better able to contribute to Europe’s economy, “building connectivity, investing in more modern fuel-efficient aircraft, improving service quality and so on. So it is important to close the gap by addressing the constraining factors facing Europe’s airlines”.
He went on; “Ask a European airline CEO what’s needed and you are likely to hear (1) reduce high taxes, (2) simplify and harmonise complex and onerous regulation and (3) improve infrastructure that is too often inefficient, costly and in short supply. In other words, they need Europe to become an easier place to do business”. He noted that this shouldn’t surprise anyone. Indeed the European Aviation Strategy recognizes these same challenges. But it is light on defining concrete solutions. For example, he said the word simplification does not appear even once in the document!”
He then went on to give “a small sampling” of IATA’s agenda for reform within the EU.
- Creating an inventory of European taxes and examining their impact on aviation,
- Formalising the 80/20 rule in slot regulation – one of the many developments that is being held-up by the UK-Spain dispute over Gibraltar,
- Reforming EU Regulation 261 on passenger rights so that it has a clear scope, is fair, reflects global principles and delivers real value to passengers. While waiting for this revision, which is also being held up by Gibraltar, we must make sure that interpretive guidelines do not go beyond their purpose by creating new law,
- Ensuring that member states implement the PNR directive using global standards for data collection,
- Establishing safety regulation for drones without reducing the available capacity of airspace,
- Achieving EU-level guidance on cyber security that member states apply uniformly,
- Expanding the network of one-stop security airports and promoting the risk-based approach to security,
- Monitoring member states’ implementation of the Package Travel Directive which prescribes that airlines need a “security” to protect passengers against their bankruptcy—a tricky one given that it contradicts DG Move’s very sensible determination that regulating airlines’ bankruptcy is not necessary, as the number of passengers involved is infinitesimal,
- And lastly, keeping Europe focused on a global approach to managing aviation’s environmental impact – including the European Aviation Safety Agency’s (EASA) as its role in environment evolves.
IATA’s team in Brussels, led by Monique de Smet, Director for EU Affairs and Giancarlo Buono, Regional Director for Safety and Flight Operations, address these and other issues with the relevant stakeholders and decision-makers on a daily basis.
Airlines cannot function without infrastructure. Without airports and air traffic control we are, he said “literally, going nowhere”. Both must be cost-efficient and capable of accommodating demand. Progress on a Single European Sky, he noted was “frustratingly slow”. Failure to achieve a Single European Sky has he said “cost European competitiveness at least €20 billion and the environment has suffered many millions of tonnes of unnecessary carbon emissions”. IATA had commissioned a study on opportunities that airspace modernisation would bring and achieving the Single European Sky, would by 2035, boost GDP by €245 billion, in that year alone. This would come from two sources. A million extra jobs would account for €64 billion. And improved productivity would translate to a further €180 billion in new GDP, coming from time saved, more connectivity options and lower costs from improved efficiency. Mr Tyler’s clear message was that Europe will be a more prosperous place if a Single European Sky can be achieved. He believes that the EU Commission clearly understands that and that the stumbling blocks “are the individual member states who are holding Europe to ransom with a misguided perception of what is in their national interest”.
He was particularly critical of Belgian air traffic controllers, who “continue to thumb their noses at the efforts of everyone else to recover from last month’s terrorist attacks”. He added that it was time to find a way to mitigate the devastating effects of ATC strikes. “Let controllers strike if they want to, but we need to develop contingency arrangements that guarantee service continuity” he said, adding “when Belgian controllers suddenly and simultaneously all feel too ill to work there is no technical reason why other European ANSPs couldn’t do the job for them – with a little advance planning”
He went on to make two points about airports infrastructure. Firstly, Eurocontrol estimates that by 2035 there will be a 12% shortfall in capacity and presently of the 168 slot-constrained airports in the world, 101 are in Europe. Addressing airport capacity constraints will add nearly €60 billion to Europe’s 2035 GDP. While capacity management and incentives for under-utilised airports may have some minimal impact, the only durable solution is to build new infrastructure. This is necessary to compete with competitors in the Gulf, or closer to hand, such as Turkey who are building big hubs. “Their strategy is to make aviation a driving force in their economies” he said, adding that if Europe wants to realise the benefits of a competitive air transport sector, it needs “to build airports – and do so with shorter timeframes than today”.
His second point was on cost efficiency. He noted that since 2000, airlines have cut their non-fuel unit costs by about 40%, while airport costs have increased by well-over a third. Europe, he added had recognised this problem in the Airport Charges Directive (ACD). “Where the ACD has been implemented we have seen improvements with advances such as service level agreements, more effective user consultation and independent regulation” he added.
His key point was that airports and airlines are partners. “The best relationships are where we consult transparently to agree on what kind of infrastructure needs to be built, at what cost and at what service levels. But it is not a partnership of equals. Airports are monopoly providers. With a few rare exceptions where market power assessments reveal that there is competition between airports, an independent regulator is needed to balance the airline/airport relationship” he said.
His second big message was on the need for Smarter Regulation. Air transport is highly regulated and the regulation on safety, he said, “has been a great success story”. But we are far from being able to apply that statement universally across all forms of regulation he added, noting that the complexity of the European system makes it even more difficult.
He described EU 261 as “the favourite unequivocal example of bad regulation in Europe”. He said that with the best of intentions, the Commission had created a complex regulation on passenger rights, and that the European Parliament added even more complexity to it, and increased the burden to industry. In addition the courts all over Europe “continue to expand its scope with each new decision that they take”.
The result he said was, “a regulation that goes far beyond its original intent. It adds considerable cost to the industry. The penalties are often disproportionate. It creates an atmosphere where airlines become the adversaries of their customers. It does nothing to solve any of the root causes of delays or cancellations. And I bet that if the authors of the regulation could see it now, they would have taken a different approach”.
While there was no recipe for perfect regulation, an approach to Smarter Regulation should include principles like:
- Making sure that the regulation is solving a real problem
- Doing a rigorous cost/benefit analysis to understand its impact
- Aligning with global standards
- Making it simple and easy to implement
- Focusing on desired outcomes – not prescriptive micro-management, and,
- Most important of all, conduct thorough and sincere consultation with industry before drawing it up
None of the above he said, was “rocket science”, but it is a formula “that is all too rarely followed”. As a result, “we spend as much time trying to amend ill-conceived regulations as we do trying to build useful ones”. “Again we see this in Regulation 261” he added. “Once a regulation is on the books, it becomes very difficult to control, let alone amend”.
He said he believes that we are on the cusp of a great example of Smarter Regulation in another important area, that of managing aviation’s climate change impact. Later this year he said, governments will be asked to agree on a framework, for a global market-based measure (GMBM) at the 39th ICAO Assembly.
“Most governments – especially here in Europe – and industry are aligned. We share the same Four Pillar Strategy – of technology, operations, infrastructure and market based measures. And we are committed to the same targets, the most immediate of which is capping net CO2 emissions from 2020 with carbon-neutral growth. Global Market Based Measures form one pillar of the strategy and are essential to achieve carbon-neutral growth”.
He was under no illusions that reaching agreement at ICAO would be easy, but he felt positive about the prospects of success. He noted that the industry was “doing everything that it can” to support success – including agreement on a global mandatory carbon offset scheme “as the preferred option”. Offsetting creates real benefits through measurable reductions, with the big advantage of being easy to implement, with minimal cost. It is being pursued as a global standard. The industry is engaged in the discussion with the governments. And he said “we are working together to solve a common challenge which ticks all the boxes for Smarter Regulation”.
“The industry is united. And I hope that we can count on Europe to be a positive force for agreement at ICAO. And I will go further. Europe has been instrumental in raising climate change on the global agenda. It needs to put some muscle into its fervour. Specifically, I will repeat the call to deliver the millions of tonnes of annual CO2 savings that the Single European Sky will generate. And Europe must also become much more of a driving force in making sustainable alternative fuels commercially viable”.
Vision for the Future
He concluded by summarising his vision for the future, addressing infrastructure challenges, building a Smarter Regulatory framework and earning a license to grow from achieving sustainability targets, While the past five years have been challenging for Europe – economically and socially – Europe’s fortunes have grown more positive with a strong aviation sector. Aviation is important to Europe today and by paying even more attention to the sector’s needs, there is nowhere to go but up for aviation – in Europe and globally.
Mr. Tyler is a British national who was born in Egypt in 1955 and graduated from Oxford University in Jurisprudence. He has broad international working experience in Australia, Canada, Hong Kong, Italy, Japan, the Philippines and the United Kingdom. At IATA, he works from both its main offices in Montreal, Canada and Geneva, Switzerland. He is a Fellow of the Royal Aeronautical Society. He took on the role of Director General and CEO from 1st July 2011 and he is scheduled to retire from IATA in June 2016 at the expiration of his five-year term.