Good infrastructure and tax incentives crucial for sustainable aviation industry - IATA chief

Alexandre de Juniac is the International Air Transport Association (IATA) director general and global CEO. Business Times’ Peterson Tumwebaze caught up with him at a recent IATA meeting in Geneva, Switzerland to discuss a number of issues, including the potential of the aviation sector in Africa as well as current trends in the industry and what IATA is doing to ensure green and sustainable grow of the airlines business. You took over as CEO at IATA recently, what should stakeholders expect from you? What is your take on the airline business so far? I am relatively new at IATA having started my duties as director general and CEO at the beginning of September. Since then it has been intense trying to fit in and get to know IATA stakeholders and to understand how people view us in different parts of the world. However, I have focused on the aviation industry for most part of my life and I had spent years in Thales, which supports the industry with vital technology. I led Air France and then Air France-KLM over the previous five years. Previously, I worked in government, dealing mostly with economic matters. I am at IATA, which has a critical mission. The recent past has been challenging for the aviation industry with increasing numbers of accidents, what is going on? The success of global aviation rests on safety, security, sustainability and global standards above anything else. Any accident that occurs makes us even more determined to make the industry even safer. Our efforts to make flying safer include strengthening the flagship IATA Operational Safety Audit (IOSA) and progressing well with the Global Aviation Data Management project (GADM). The initiatives, we believe, will help airlines to more easily exchange safety information…By collecting and analysing aviation data we can identify and mitigate risks. Aviation players have been accused of not doing enough to combat climate change. How will you ensure stakeholders commit to green and sustainable growth?The aviation sector is committed to carbon-neutral growth from 2020 and, by 2050, we want to cut net emissions to half of 2005 levels. The Carbon Offset and Reduction Scheme for International Aviation (CORSIA) initiative is a ground-breaking and historical achievement that is critical to meeting our carbon neutral growth targets. IATA supports and is fully behind ICAO, governments and airlines to work out the details and ensure it is implemented successfully. CORSIA is not, however, a full solution for sustainability, a global market-based measure that is one of four pillars in the industry’s strategy. Alongside CORSIA we must continue to improve technology, operations and infrastructure. We expect the same from governments, particularly with respect to eliminating inefficiencies in air traffic management and supporting successful commercialisation of sustainable alternative fuels for aviation. How is IATA working with stakeholders to improve aviation infrastructure? It is also a constant struggle to get governments to understand and fulfill the industry’s infrastructure needs. We expect nearly four billion travellers in 2017, which is projected to grow to 7.2 billion by 2035. Therefore, this growth will bring net economic benefits, but only if governments strengthen infrastructure development efforts. Our demands are simple, airlines need sufficient capacity, which should be efficient and available at affordable prices. Unfortunately, I believe that could be headed for an infrastructure crisis. We will continue to engage governments through consultations and partnerships. However, it is the responsibility of governments to provide the necessary aviation infrastructure because economies will only attract business if they are easily accessible. For airports and air traffic management, these are best done through consultation and partnership with airlines as the key users. This way, we can be able to build capacity, as well as enhance efficiency and ensure affordability. Most governments prefer privatising aviation infrastructure, including airports. What is your take on this? Our view is that government should be cautious on the issue of privatisation of aviation infrastructure, particularly for airports. We understand the desire to harness commercial discipline in managing important pieces of infrastructure. Countries around the world have privatised aviation infrastructure, but we are yet to see private players who have sufficient capacity, ensure efficient operations and affordable costs. Governments must be careful and balance public and private interests, starting with the selection process for the concessionaire. Finding the highest bidder should not be the main motivation, the focus should be on getting the best long-term solution to support the local and national economies. Besides, the entire project must be guided by iron-clad regulation to ensure that the privatised entity does not become an out-of-control monopoly. What is your assessment on African aviation industry? The continent is still underserved, which is a huge opportunity for African airlines. However, governments must consistently ensure they liberalise their space to boost traffic. Do you African airlines need protection from international foreign airlines? African airlines are like many other airlines suffering from foreign competition, especially from gulf and European carriers and that is not always favourable to African firms. However, I think the major issues have a lot to do with internal costs and, secondly, consistent investment in infrastructure by government on the continent. Infrastructure development is key for aviation and must be a consistent effort for African governments. In addition, governments must know that aviation is a fragile industry, and avoid introducing a lot of taxes. They should understand that if you reduce charges it brings more trade and prosperity which compensates for the taxes. Therefore, ministries in charge of transport and finance should always work together on such issues and draft tax policies that support the sector. What are you take on current trends in terms of aviation business? Fortunately, recent years have seen improvements, and this transformation of the industry in recent years is making airlines better businesses. It is helping airlines to better serve the nearly four billion travellers we expect in 2017. With 18,000 direct routes and average fares down about 60 per cent (in real terms) over 1995 levels, air travel is a better deal than ever. This year we expect global airlines to earn $35.6 billion, a record profit margin though slightly below earlier projections. This strong performance is expected to be extended into 2017 with a projection of $29.8 billion profit. This will be the third year in row where the return on invested capital (7.9 per cent) will exceed the cost of capital (6.9 per cent). business@newtimes.co.rw

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Good infrastructure and tax incentives crucial for sustainable aviation industry - IATA chief