Pierre J. Jeanniot
O.C.,C.Q.,B.Sc.,LL.D.,D.Sc.
Opening address to the 17th World Air Transport Forum
World Air Transport: The future is not what it used to be
Opening Address to the 17th World Air Transport Forum
Paris, October 29–31, 2008 >>
Good morning ladies and gentlemen,
A very warm welcome to the 2008 World Air Transport Forum … which … exceptionally … is being held in Paris this year.
A no less prestigious location … you would agree … and at least equally renowned for its gastronomy.
Holding the World Air Transport Forum in Paris is not a diversion … to make you forget … that last year … we were predicting … with confidence … that the airline industry would achieve a profit of five to six billion US dollars in 2008.
Now … if we are to believe the most recent IATA forecast … which was issued in September 2008 … we would be looking at a loss of 5.2 billion dollars.
In retrospect … the number was correct … it was simply the sign preceding that number that was reversed!
No sooner are the fuel prices giving an indication of returning to a more reasonable level … than the spectre of a worldwide recession … now stands to deny the airlines … any chances of financial recovery.
Over the past nine months … the dramatic increase in the cost of fuel … has caused air fares to increase rapidly … reaching a level such that … for the first time … demand was becoming suppressed.
In many markets … this led to a corresponding reduction in the number of price-sensitive travellers.
It is now clear … that the bubble of bargain air travel has burst … and now … of course … economic uncertainty has dampened business travel.
This year … global passenger traffic has slowed down markedly … domestic traffic fell everywhere … and the largest domestic market … the North American market … was hit the hardest.
With revenues dropping as quickly as costs were rising … the convergence of those factors … caused some of the U.S. airline CEOs at the last IATA AGM … in Istanbul … to describe the situation as … “A Perfect Storm”.
But as if that was not bad enough … the situation was soon to deteriorate much further.
And to summarize: … the rapid … and dramatic … “meltdown” of a number of major U.S. financial institutions … accelerated a “Tsunami” … literally devastating the credit markets.
Public confidence was totally shattered … and the U.S. economy reached a very critical juncture.
The vigorous intervention by the U.S. Congress and the Treasury to engineer a massive bailing out … first of some large financial institutions … considered “too big to fail” … and later extended to the entire U.S. financial system … was not able to bring about some stability.
It now remains to be seen … whether the concerted intervention of all major central banks in North America … Europe ….. even in Asia … and of their governments … will truly succeed in calming the markets … and bring back some sanity.
Hopefully … all of this should have signalled the “beginning of the end” … rather than merely the “end of the beginning” … But this was before we began to slide into a recession!
Even before the current deterioration of the economy … thus far this year … almost all U.S. carriers … legacy and low-cost … had lost money.
Their losses were acerbated by a weak U.S. dollar … old and relatively fuel-inefficient fleets … poor balance sheets … and faltering consolidation efforts.
All the major U.S. carriers had announced substantial capacity cutbacks … taking advantage of the crisis … to ground many of their older aircraft.
The low-costs were more particularly affected … by the rapid rise in the price of fuel.
Always the largest portion … fuel costs … went from 40 percent … to 50 percent … of their operating costs … compared to an increase from the 20 percent range to approximately 35 percent for network carriers.
Less affected by traditional legacy carrier problems … Jet Blue for instance … and others … still gained market share … but they nevertheless shaved down their expansion … by deferring delivery of new aircraft.
As always … airlines tend to order new aircraft at the top of the economic cycle … and take delivery at the bottom.
The mainline European carriers … less affected by fuel increases because of the strong euro … and most having hedged a large proportion of their anticipated fuel needs for 2008 … were still making money … and had not dramatically reduced capacity.
The big three … Air France/KLM … Lufthansa/Swiss … and British Airways/Iberia … had announced slowdowns in their expansion rates … but had yet to consider capacity cut-backs … as of a few weeks ago..
The European low-costs are responding less well to the cost challenge.
Easy Jet and Air Berlin are both losing money. … The former is reducing its rate of capacity growth … and the latter has embarked on a major cost reduction program.
The shocker … of course … is Ryanair … which appears to be headed for a full-year loss … because of un-hedged fuel … massive write-downs on its investment in Aer Lingus and … said Mr. O’Leary in July …“plummeting consumer confidence in the UK and Ireland.”
The situation is also very difficult on the Indian sub-continent … where the airlines could lose as much as 1.5 billion dollars this year.
The high cost of fuel … aggravating general inflationary trends … coupled with extensive price wars … resulting from excess capacity … will force re-structuring.
As the market growth is now slowing down considerably … capacity is now being cut back … and consolidation is likely to accelerate.
Elsewhere in the world … airline executives … although increasingly cautious … were not convinced that they were facing a major crisis.
Perhaps this is because … the structure of the world economy has changed considerably … since the last financial crisis.
Rapidly growing Asian economies … have increased their internal and inter-Asia trade … and are now less dependent on the U.S. economy.
China … India … and other Asian nations … as well as the Middle East … particularly the Gulf States … were still expanding aggressively … and so were their airlines.
Over the past two years … an unprecedented number of new aircraft have been ordered …from both Boeing and Airbus … by the so-called “BRIC” economies – … Brazil, Russia, India and China … – where air traffic had been growing in double digits.
No sooner had the fuel crisis given signs of abating somewhat … than growth … rather than replacement … become once again the order of the day for these airlines.
Emirates … for example … announced in August that if oil prices fell to $105 per barrel … the airline would launch services to Durban … Algiers … Amsterdam … Kiev …Barcelona … and Buenos Aires.
As we look ahead … and try to anticipate the performance of our industry … there are a few pertinent questions still to be answered … For instance …
Do we have now … total visibility on the state of the bad debts crippling the U.S. financial institutions … and on the amounts exported from there … to the non-U.S. institutions?
Have the actions taken by the various governments … national and international banks … been sufficient to restore liquidity and rebuild public confidence?
Warren Buffet … the well-known financial guru … still expresses deep concern … regarding derivative financial products.
And finally
Given the credit crunch … and its associated loss of appetite for risks … and the slowing down of worldwide growth … not to mention the recession …
Can we still justify … and finance … the huge numbers of aircraft we have ordered … in the past two years?
Obviously … the storm is far from over … and for all airlines the crisis is very serious.
To borrow from Mr. de la Fontaine …
“Ils n’en mourraient pas tous … mais tous étaient atteint ». (les animaux malades de la peste).
As an eternal optimist … I keep looking for silver linings behind those dark storm clouds.
One of those silver linings is actually green.
It’s our industry’s determination … now well documented … to take our environmental responsibilities seriously.
Flying green was the theme of this Forum last year.
Our objective was to raise awareness of the environmental issues facing our industry … and I believe that everyone would agree … that this industry is now fully aware of its environmental responsibilities.
IATA followed up its vision statement … of a carbon-free industry within 50 years … with a hopeful expectation … that the industry will at least be “carbon-neutral” – meaning continued traffic growth without any emissions increase – by about 2020.
ICAO committed to “aggressive action” on aircraft emissions … and in their customary fashion … created a new group of senior government officials … to formulate an “implementation framework.”
At Farnborough … everyone … and everything was green.
There were green flags everywhere.
So today … the environment is no longer at the top of our forum’s agenda … because it is now on everyone’s agenda.
While environmental pressure on airlines … has yet to reach European proportions in other parts of the world … carriers everywhere are working … to build environmental initiatives into their core strategies.
Some of our critics were quick to accuse us of “green-washing” … in other words … trying to make ourselves look more environmentally friendly … than we really are.
But it’s not just good PR.
Like other big business … we see potential profits in flying green … by appealing to more green travellers … by saving on fuel … and by attracting more capital … from environmentally-conscious investors.
To say nothing of the goodwill being generated … by being good corporate citizens.
One of our speakers at last year’s conference … warned us … that any airline that does not have a strategy to address environmental issues … might even find itself unable to get financing.
And this was even before the “credit crunch”!
The tourism sector is certainly cashing in on green travel.
Eco-tourism is growing at three times the rate … of the mainstream travel market.
Nine out of ten of the tourists surveyed … say they prefer tourism … that shows concern about the natural environment.
In the Asia-Pacific region alone … well over a hundred hotel … resort … and visitor complexes … are now certified by the industry’s Green Globe program.
For tourism … green may be the new gold!
The world’s attention … including that of our industry … is now on Greenland … fittingly enough.
Its melting glaciers … have become a focal point … for world concern about climate change.
Delegations of politicians … and industry leaders make pilgrimages to Illulissat … to see the glacier melting before their very eyes.
They have to change places at Hangerlussuaq … however … because the glacier there is inconveniently growing . . .
That wasn’t meant to chill your commitment to flying green.
Rather … it was to remind us … that the evidence of global warming is not all consistent.
Nor is it fully understood.
Drastic and hurried solutions … to problems we are only beginning to understand … can create more harm than good.
Biofuels are a case in point.
The rush to turn plants into energy … is compounding a third world food crisis.
We now realize that any new generation of biofuels must not compete with food crops … for land use.
I do not think that we want to be perceived … as taking food out of the mouths of underprivileged babies … in order to fuel our airplanes.
Last year … at this forum in Cannes … I suggested that algae were probably the most likely … and least damaging source of biofuel.
Some 35,000 square kilometres of algae farming … could produce enough biofuel to totally replace jet fuel … whereas it would take six million square kilometres … an area the size of Europe … to do the job with soybeans.
Airbus and Honeywell … in cooperation with JetBlue and International Aero Engines … are developing a process to produce jet fuel from algae-based oils … that could provide up to 30% of all commercial aviation needs by 2030.
Air France-KLM are in a pilot project with a Dutch technology company … that produces algae on a large scale.
Such industry initiatives deserve to be encouraged.
Carbon trading is … in my opinion … another example of a hurried response to the greenhouse gas problem.
Buying permits to emit … can only be an interim solution … and could detract from the real objective!
Lets face it … carbon trading is passing the buck among the players.
Getting rid of carbon emissions is where the buck stops.
I am pleased … and somehow gratified … by how much our industry has accomplished already.
Every day brings announcements of new achievements.
The fuel-efficiency improvements promised by the Airbus A-380 now a reality – … and hopefully soon the Boeing 787 … and the Airbus A-350XW … will also meet expectations.
Airlines are pushing airframe manufacturers to launch new narrow bodies … that are at least 15% more efficient than the current generation. … But that will have to wait to the 2020’s.
In the meantime … the manufacturers are constantly coming up with aerodynamic tweaks and low-drag packages … designed to improve the fuel efficiency of aircraft currently… in … or just coming into service.
The engine world … is pursuing the development of geared turbofans … and un-ducted fans … all aiming for that 15% fuel improvement target.
Rolls-Royce and General Electric are also talking about developing an engine for natural gas-powered aircraft.
This followed an announcement by state-owned Qatar Airways … that it aimed to become the first carrier in the world to fuel its fleet with natural gas.
Not surprising! … The Emirates hold more than 15% of the world’s proven natural gas reserves.
In July … Boeing reported that United … Air New Zealand and Japan Airlines … had completed 57 flights using continuous descent approaches (CDA) rather than a series of level segments … resulting in a 40% decrease in fuel consumption … during descent.
SAS completed Europe’s first ever transatlantic “green approach” last December … and has been collecting data on some 1,300 CDA flights since then.
However … ATC congestion remains a significant complication in achieving the potential fuel savings.
Streamlining air traffic management … through the Single European Sky (SESAR) initiative … an efficiently coordinated and integrated ATC operation … could deliver significant reductions in CO2 emissions.
The same could be said of implementation of the Next Generation Air Transportation Systems (NextGen) in the U.S.
Unfortunately, governments are still dragging their feet in this area.
In June … ICAO launched its Web-based Carbon Calculator tool.
This gives airline passengers … an unbiased and transparent first-order assessment of CO2 emissions… for a given flight between city pairs … for use in carbon offsetting programs.
For its part … IATA is developing an electronic ticket … that will have room for an environmental fee or pledge.
It should be in place by next year.
Although I’m lukewarm on carbon trading … I believe carbon offsetting projects can make a significant contribution in reducing our carbon footprint.
Constructing wind farms … or buying solar panels … for a village that formerly burned kerosene for its energy … may not have the dramatic impact of reforesting the Sahel . . . but such projects all have the merit of reducing CO2 emissions.
And thus … with some notable exceptions … the air transport industry as a whole seems determined … and dedicated … to making concrete progress in reducing its carbon footprint.
Not to belabour the argument … the EU’s insistence on a rapid conclusion of Phase II … for example … could undermine the most significant development for global air travel in the last decade.
I am referring … of course … to Phase I of the new “open skies” agreement between the United States and Europe.
As it stands … the agreement is truly a “silver lining” in many ways.
All those cumbersome bilateral agreements signed over the years between the U.S. … and European countries … have been replaced by one agreement covering all 27 members of the Union.
Any airline from the EU will be able to fly … unrestricted … from any city on the Continent to any American airport.
The log jam on Heathrow is unlocked.
The most coveted airport in Europe … no longer restricts London-U.S. flights to two British and two American carriers.
Air France/KLM became the first European carrier to take advantage of the liberalization with … on April 1 … a new flight from London to Los Angeles.
Despite the shaky condition of the U.S. economy … threatening to further dampen demand … European and U.S. airlines are preparing to launch a wave of additional flights … in response to the new open skies agreement.
British Airways having bought L’Avion … has now launched a new subsidiary … appropriately named OpenSkies … to operate Boeing 737s from Paris and Brussels to New York.
The first route was inaugurated in June … and the second is to start up soon.
New transatlantic routes … between points previously unserved … and increased competition on those already well served … should bring down airfares … or at least prevent them from being raised excessively.
The parties also agreed to rapidly conclude Phase II … which includes the sensitive issues of foreign investment limits in U.S. carriers … and cabotage rights.
A positive step in this direction was taken in Phase I … with the recognition of acquired rights of airlines … (landing rights … slots … access to routes …etc.) … from different countries after they merge … or after one buys another.
When … and whether … Phase II is completed … will depend on the economy and the health of the U.S. airline industry … and nothing will happen until the new administration is fully in place.
Jeffrey Shane … the former U.S. Undersecretary for Transportation Policy … and other speakers … will have a lot to say about this watershed development in our afternoon session.
Ten years ago …I suggested that a “big bang” solution to worldwide liberalization was most unlikely.
The way to go … was the continued expansion of regional common air markets … such as has been achieved by the EU … and the pursuit of bilateral agreements between the regional areas . . . or “block-lateralism,” … to use an expression I coined at that time.
Hopefully … this first block-lateral agreement … which has now taken place … will encourage other regional common air market agreements … by like-minded nations in Asia … in Latin America … and elsewhere.
Combined with increased market access of the low-costs … over the past two decades … the accord’s flexible arrangements … if emulated elsewhere … will open endless opportunities for the expansion of business … trade … and tourism … around the world.
Our industry structure is continuing to evolve to cope with … the persistently turbulent skies of commercial aviation … and new consumer demands.
One of the most remarkable developments of the last decade … is the emergence of the Gulf States … as the new hubs for international air travel between East and West.
Recently … Dubai Airport caught up with Singapore in passenger traffic volume.
The Gulf airports have to meet the needs … of the rapidly expanding Emirates Airline … with almost sixty A380s arriving over the next five years … as well as the expansion of Etihad … Qatar Airways … GulfAir … and others!
The almost adjoining airports of Dubai … Jebel Ali … Sharjah … Doha … Bahrain … and Muscat … will together … by 2012 … offer an annual capacity of over 300 million passengers.
Three hundred million! … That’s just short of a million passengers per day … and all from elsewhere.
Talk about reshaping the industry.
But some wonder whether this huge wager will pay off.
The trend is still in favour of non-stop … long-range service … from any major city in the world … to any other.
Why go through Dubai if you don’t have to … other than because the city is becoming a glamorous playground for the rich … richer … and richest.
The shape of things to come … among mainline carriers in Europe …is pretty well determined by the so far successful “big three” mergers.
Air France/KLM … Lufthansa/Swiss … and now … after a bumpy courtship … British Airways/Iberia … will dominate the European scene.
Alitalia will end up in one of the “big three” … even Prime Minister Berlusconi has now realized … that he cannot escape the inevitable.
Still largely undetermined … is the fate of the smaller European carriers … yet to find a role in a rapidly changing industry … being buffeted by volatile fuel prices … overcapacity … and an economy sliding into recession.
Finnair’s profits are down. … SAS earnings have slumped badly … and the group plan to unload Spanair ASAP.
British Midlands (BMI) is likely to be acquired by Lufthansa. … That is almost a foregone conclusion.
BMI controls over 11% of the slots in Heathrow … worth … incidentally … about $10 million to $40 million a pair for the peak morning time.
The slots are probably worth more than the airline.
Austrian Airlines is on the market for a big brother … to help determine its future … as are Czech … and JAT.
They should find buyers. … Despite current difficulties … the markets of Eastern Europe are looking increasingly attractive in the long term.
In the U.S. … a bid by Delta and Northwest … to form the world’s largest airline… is about to become a “fait accompli” … despite substantial discontent by the Northwest pilots.
The merger could be eclipsed by the potential larger pairing of Continental and United.
American Airlines is also making noise about a merger with US Airways … despite reports that its merger with America West has led to poor service … low morale … squabbling workers … and a very significant drop in stock price.
But one should remember that size does not guarantee survival.
If this had been the case … Eastern Airlines and Pan Am would still be around today.
Even consolidations of that magnitude … may not streamline the U.S. industry enough to snap it out of its downward spiral.
The potential mergers seem to offer little opportunity … for the level of capacity reduction still required.
There is almost no overlap between the Delta and Northwest networks … for example.
The excess capacity in southeast Asia and India … caused by the recent proliferation of low-cost carriers … has led to rampant price wars.
The situation is unsustainable … and will lead to more consolidation … and mergers … within a year or two … India is particularly vulnerable.
Although China’s airlines are still reaping the benefits of a rapidly growing economy … and don’t feel threatened to the same extent … by the “slowdown” in international markets … there is some pressure for consolidation.
Air China … for example … is looking for greater access to the country’s biggest city … by taking over second-level carrier Shanghai Airlines.
This could be a big step toward creating the balanced … nationwide operator … that China still lacks in any of its big-three airlines.
To return to the liberalisation of the Atlantic air market … the sea changes being brought about by the U.S.-EU agreement … include stronger commercial alliances … and even joint ventures within those alliances.
We have there … clearly … the seeds of potential transatlantic mergers … if and when they would become allowed in Phase II.
Air France initiated the first big Open Skies joint venture late last year by proposing that they … and Delta Airlines … merge their long-haul North Atlantic routes.
In June … Continental announced it would join Star Alliance partners Lufthansa … Air Canada … and United … in a now antitrust-immunized venture … that coordinates flight schedules … capacity … fares and services … and pools revenues on transatlantic flights.
In earlier days … pool agreements on the Atlantic and elsewhere were the norm. … Plus ça change . . .
Not to be outdone … in August … American Airlines and British Airways (with Iberia) signed a potential joint venture agreement … for flights between North America and Europe.
The last time they tried … in 2002 … U.S. regulators demanded that the two carriers hand over to competitors … enough slots for 16 daily departures at Heathrow.
This … incidentally … was a number equal to the whole of American’s operations at the airport.
Now that Heathrow is fully open to all EU and U.S. airlines … such concessions should no longer be required.
Many of the new services resulting from this “liberation of the Atlantic” … are aimed squarely at the business market.
L’Avion … which British Airways bought … and fused with its OpenSkies subsidiary … offers business class-only flights between Paris and New York.
BA has ordered two Airbus A318s … configured for 32 business class seats convertible to lie-flat beds … for a twice-daily London City-New York service beginning next year.
Virgin announced in June … that it plans to acquire 15 new planes … for business class only flights to New York and … eventually …to other U.S. cities from London … Paris … Amsterdam … Frankfurt … Milan … and Zurich.
Timeframe is the next 12 to 18 months.
Singapore Airlines plans to convert five A340-500s to a 100-seat… all-business class configuration … and offer daily service to New York and Los Angeles.
Lufthansa is also considering expanding its all-business class service … which presently uses two Airbus A319s … and one Boeing 737.
Why would these larger airlines remain convinced that a market for such service exists … when three business class-only pioneers … MAXjet … Silverjet … and EOS … have failed?
And this despite the weakening economy … and an already significant decline in premium demand … in some markets?
Well of course … the start-ups could not offer … the back-up convenience of an extensive network … and a frequent flyer program … to say nothing of the fact that they were operating out of secondary airports.
In 1971 … Southwest initiated a daring business new model …a no-frills … one-class service … operating one aircraft type … out of cheaper second-tier airports.
Surprisingly … Southwest has now decided to introduce business class into its business model … expand service to major airports … offer more frills and benefits … etc.
The airline believes the modified model will deliver $100 million a year … but it has muddied a clear fundamental formula that has delivered great results for 37 years.
Will the change be successful?
Another low-cost business model change that’s on the rise … is going long-haul.
Air Berlin went that route in May … when it launched services to Beijing and Shanghai.
But it is in Asia-Pacific skies … that the spirit of Sir Freddie Laker really soars.
Since October 2006 … Oasis Hong Kong Airlines… has been offering a two-class … full-service operation on the Hong Kong-Gatwick route …and since July last year … six weekly flights between Hong Kong and Vancouver.
In May … after just five months of operation … Kuala Lumpur-based AirAsia … had already sold 100,000 seats on its two routes to Australia and the Chinese city of Hangzhou.
The airline plans on an eventual network of some 77 long-haul destinations.
Will these ambitious plans succeed?
Many hurdles need to be overcome for successful long-haul operations … such as complex international regulations … the need to provide costly amenities … like real food … more expensive airports … longer turnaround times … etc.
This will require a significant departure from the successful low-cost model.
The ultimate in convenience … of course … is business class “on demand” in a private jet.
This business model has existed for some time … in the form of time-sharing aircraft operated by Netjets … Bombardier Skyjet International … Flexjet … and others.
Instead of owning the aircraft … you buy any number of return trips … but on a per plane basis … not on a per seat basis.
Lufthansa Private Jet (LRJ) has gone one step further … by recently acquiring a dedicated fleet of Cessna Citations … and Bombardier CPJ200s … all with tailored livery and 12-seat VIP interiors … which are … or will be … available 24 hours a day … 7 days a week.
DayJet … which began operations in Florida last December … goes still further … by offering “per-seat on-demand” private jet service.
Customers reserve online … telling the airline where they want to go … when … and how far in advance they are prepared to travel.
The more flexible they are … the lower the fare.
This new business model … of private jet service … is being made possible by the development of new Very Light Jets (VLJ) … like the four-passenger Elipse 500 … whose airframe made of strong but light composites … and Pratt & Whitney engines … barely the size of a washing machine … allow a sticker price of under $2 million.
Per-seat … on-demand … private jet service would offer flexibility … the calm of dedicated terminals rather than the hassle of hubs … and promises to be affordable.
It may well be a model that transforms the business market.
My friend Bob Crandall …who will be joining us for the great debate on Friday … certainly thinks so.
His POGO airline was to start with 100 Elipses. … However … the current financial crisis may make it difficult to attract the required funding.
Ladies and gentlemen … last year at this Forum … I concluded my remarks with a plea … for this industry to come together in a coherent … determined and visible fashion … to address the threat of greenhouse gases.
This year … I would like to propose another “bête noire” to worry about … and which represents a hidden threat to our industry and our planet … just as serious as environmental pollution.
That threat is … infectious viral disease pandemics.
A virtual elephant in the room … still largely invisible in terms of public … and governmental concern.
Remember how the SARS epidemic of 2003 shocked the world … and the damage it did to our industry?
Modern air transportation made it possible for SARS … to spread from mainland China to all corners of the world … in a matter of weeks.
The epidemic cost the world many billions of dollars … a forewarning of the disastrous social and economic consequences … of a more widespread pandemic.
Worldwide … infectious diseases account for over one fifth of human deaths … killing some 17 million people a year.
In many of the poorest countries … infectious diseases are responsible for over half of all mortalities … trapping entire populations in a vicious circle … of disease and poverty.
Little has been done to develop effective … readily available … antiviral drugs to treat these diseases.
Less than 10% of the money invested in global health research is applied to infectious diseases.
The increasing cost of research and development … and competitive pressures … have led pharmaceutical companies … to focus their research dollars almost exclusively … on the more lucrative ailments of the West.
In the last 30 years … only 1% of new commercial drugs were designed specifically for infectious diseases.
Yet the threat of infectious diseases is not limited to the developing nations … and international air travel can allow pandemic infections … to circle the globe a matter of hours … with potentially devastating effect.
To address this problem of “neglected diseases” … an international … not-for-profit Consortium has been established … linking some 200 scientists in twenty-four countries.
This innovative model facilitates the sharing of academic research in a collaborative network … and will speed up the identification of promising therapeutic discoveries.
To solicit funds to finance the research and development of antiviral therapies … a Foundation has now been established.
Its specific role is to take promising drugs from academic laboratories through pre-clinical and clinical trials …a stage of the development process that receives little public funding.
I have agreed to become the Chairman of this International Foundation … and I am pleased to announce that Mr. Jacques Chirac … former President of France … and Mr. Jean Chrétien … Former Prime Minister of Canada … have both agreed to be Honorary Patrons.
The Foundation on Antivirals … known as FAV … has been approaching high-profile individuals … corporations … and institutions to seek their financial support … and moral endorsement for this critically important cause.
For obvious reasons … we would naturally expect the travel and tourism industry to be supportive.
And many of you … present today … are indeed representatives of these industries.
I look forward to your support!
Ladies and gentlemen …
Caught in the downdraft of the financial crisis
Tossed around by the turbulence of fuel price volatility
Buffeted by an economic recession of potentially worldwide proportions
The air traffic world is flying through perhaps the most threatening skies… it has ever encountered.
The storm is far from over … and while the airlines in the U.S. are taking the brunt of the storm … European carriers will increasingly be exposed … and so will the BRIC airlines.
Even the Gulf carriers … up to now largely unconcerned … would be wise to prepare to be engulfed as well.
No one will escape the fury of the current storm.
But … there are some positive elements of importance to our air transport world:
Those looking for silver linings need look no further … than our industry’s strong commitment to flying green.
Concrete progress is being made by almost every sector …the notable exceptions being air traffic control … and government-imposed carbon taxes.
Another silver lining … is Phase I of the new “open skies” agreement between the United States and Europe.
I hope this watershed block-lateral agreement will encourage … other regional common air market agreements … in Asia … Latin America … and elsewhere.
Still another encouraging sign … is our industry’s ability to evolve its structure … to cope with economic downturns …, changing markets and traffic patterns … and varying customer needs.
Among the most remarkable structural changes taking place are:
The emergence of the Gulf States as the new hubs for international travel;
The successful “big three” mergers in Europe … and their attendant effects on the non-aligned airlines; …
The antitrust-immunized joint ventures on the North Atlantic; …
Some mainline carriers launching all-business class services as the start-ups in this market go belly up; …
The low-costs modifying their successful formula with business class and long-haul services; … and
The emergence of affordable … per-seat-on-demand … private jet service.
Managing in this uncertain environment will require strong nerves … a steady hand … and the occasional dose of tranquilizer!
One thing is certain …
The future is not what it used to be!
Thank you