If the point of the stimulus package was to create jobs, the Obama Administration missed an opportunity to create 77,000 jobs related to upgrading the air traffic management system, according to International Air Transport Association Director General Giovanni Bisignani who spoke at New York’s Wings Club last week.

Despite making the case that aviation could play an important role in an economic recovery, Bisignani’s message will likely fall on deaf ears in Washington, just as the messages of the domestic industry have in an environment where aviation fails again and again to gain any traction on moving its agenda along.

He recounted his growing concern when early indications of change such as the appointment of Department of Transportation Secretary Ray LaHood and his insistence that expanding capacity rather than auctioning slots is the path to solving congestion problems, were balanced by an almost complete lack of a transportation agenda from the Obama Administration. “Transportation was buried at the end of a section on ‘other issues,’” he said. “Aviation can play a pivotal role in economic recovery. Smart investments - not bailouts. Don’t stop with the planned airport investments. Air traffic management is in desperate need of an upgrade. Airlines and airports cannot be efficient economic catalysts if we operate in gridlock.”

Half of ’09 Deliveries Could be Deferred
In separate remarks, Bisignani predicted that half of the Boeing/Airbus orderbook of 1,480 planes scheduled for delivery in 2009 will be deferred based on the current industry passenger and cargo demand. He indicated conversations with airline CEOs around the world, who he refused to name, also suggest the level of deferrals, especially given the fact that airlines will require $20 billion to acquire the aircraft.

“I don't think that there is $20 billion available to finance those kinds of projects," he said. Other experts, however, suggest that, at least, for U.S. airlines deliveries for this year are already funded. Related Story “At this moment there is a very negative perception of the economy," he said, adding the organization's full-year forecast will be updated at the end of next month. "If we start seeing that the [Obama administration's stimulus plan] starts to give us some sort of positive impact, this kind of perception could quickly change."

ATM Key to Recovery
As with his U.S. counterparts, he said investments in air transport will cascade throughout the economy creating jobs in aviation as well as other industries that are now suffering and losing jobs by the hundreds of thousands.

“Airlines and airports cannot be efficient economic catalysts if we operate in gridlock,” he said. “I urge the President to allocate the US$4 billion needed to get the ball rolling with the first phase of the long-awaited NextGen project that will create some 77,000 jobs in the US economy. And to get the most bang for the buck, there is an urgent golden opportunity - Europe is upgrading its airspace management technology along a similar timeline with a program called SESAR. Harmonizing the two is essential and will generate enormous efficiencies across 60 percent of global aviation.”

IATA also urged the Obama Administration to deliver broad policy changes in the areas of security, environment and commercial freedoms, changes that would yield savings. On security he advised a complete change in the way it is done as well as a worldwide harmonization of security standards, likening it to the methodology that has achieved record safety levels.

“While the security bill since 9/11 has grown to US$5.9 billion,” he said. “I am not convinced that we are much wiser or any more efficient in our processes. Governments must be accountable to show value for every dollar that is invested. Combined, these are the elements of IATA’s renewed security strategy. Our vision for passenger security is a one-stop process. There is no security value in checking people twice against the same parameters. Domestic travel is one-stop, why not international? All governments need to do is recognize standards among like-minded and similarly developed countries - Canada, the EU, Japan, Singapore or Australia.”

But here again, changes will be slow. Many have said security policies are a knee-jerk reaction to perceived threats. “Where is the data that tells us that my shampoo bottle is a greater risk than my belt buckle,” asked Bisignani. “There is none. And we spent millions to limit carry-on liquids around the globe. Despite the global approach on liquids and gels, mutual recognition of standards is very limited. We still confiscate millions of bottles of liquids from international passengers crossing jurisdictions even though those bottles have been screened and carried on board.

“Behind the scenes, it is not much better,” he continued. “We were successful in turning around Department of Homeland Security (DHS) plans that would have seen check-in staff working part-time as immigration officers by collecting fingerprints from passengers exiting the US. But we have still not been successful in getting the various branches of DHS to coordinate with each other on the passenger side. We spend millions to send similar data to neighbors within the DHS bureaucracy. On the cargo-side the government has plans to force airlines to spend billions to scan everything loaded onto the aircraft rather than identifying risks with a supply chain approach.”

He called for a data-driven methodology to security. “We have a great record on safety because data drives decisions that are implemented with global standards,” said Bisignani. “We spend billions on security with little data to support the actions taken. Governments have made minimal progress on recognizing each other’s security standards. We need a system that is threat-based, risk-managed and cost-efficient, with mutual recognition of standards. Security principles must be a part of the corporate structure of all industry players. And governments must be accountable to show value for every dollar that is invested."

While praising the long-awaited change in the U.S. government’s position on climate change, Bisignani urged the President to support aviation’s global efforts to contain and reduce the two percent of man-made carbon emissions attributed to aviation. Just since 2004, he said, aviation has saved 59 million tons of CO2. “This year, aviation’s carbon footprint will shrink by 4.5 percent - 2.5 percent from capacity reductions and 2 percent from efficiency gains,” he said. “We need government leadership with a global vision. Governments must stimulate the economy with green investments such as bio-fuel research and tax breaks for new aircraft purchases. And they must remain true to the vision of Kyoto which entrusted the International Civil Aviation Organization (ICAO) to deal with aviation’s international emissions. In preparation for December’s Climate Change Conference in Copenhagen, the ICAO Group on International Aviation and Climate Change (GIACC) will produce an action plan in September. We need the US, a member of GIACC to be a strong voice opposing Europe’s unilateral, illegal and ineffective regional emissions trading plans while building consensus for a global solution.”

At a time when anti-trust legislation against global alliances has been introduced by one of the most powerful aviation members in Congress – Representative James Oberstar, chair of the House Transportation and Infrastructure Committee – Bisignani urged the U.S. complete the job of deregulation started 30 years ago. However, his call also comes at a time when legislators have been rethinking industry deregulation, including aviation, and moving toward re-regulation. Such efforts have included a passenger bill of rights and industry concerns include efforts on maintenance outsourcing both of which could benefit from the data-driven mentality advocated by Bisignani for aviation safety and security.

IATA is workong on reforming the 60+-year-old bilateral system. Objections that airlines are a strategic resource have been diluted by the fact that the Department of Defense has no objection to relaxing ownership rules. The organization is working with 14 governments and the European Commission on a Multilateral Statement of Policy Principles, said Bisignani, calling for early government action to structure of aviation, “not with bailouts, but with commercial freedoms that will generate value for investors and provide a more secure future aviation jobs."

“International markets remain closed until governments negotiate them open, and foreign ownership restrictions still limit access to global capital and prevent cross-border consolidation,” he continued. “What worked in the 1940s is killing the industry today. To manage through this crisis without bailouts airlines cannot have one hand tied behind their back with outdated restrictions on ownership. Why does the US restrict ownership of its airlines to 25 percent, effectively limiting the ability of international capital to offer Americans aviation jobs? Passengers don’t care who owns an airline, so long as it is safe and provides efficient service. Governments should take the same view. The priority of government is to create jobs and restore the economy to health. In the US, aviation supports 10.2 million jobs and US$1.1 trillion in economic activity. Meaningful change in government’s approach to security, the environment and commercial freedoms will ensure that aviation plays its role as an economic catalyst.”

He noted that airlines ended 2008 with a US$5 billion loss with another $2.5 billion loss expected this year. “To better illustrate what this means, the industry-wide top line revenues will fall by US$35 billion (6.5 percent). The industry is getting smaller. Airlines are cutting capacity. The US carriers were particularly effective with early cuts in June last year. Combined with cheaper oil and a stronger dollar, North American carriers will turn the worst losses last year - US$3.9 billion - to basically break-even this year. However, this is the exception. Other major markets will see increased losses—US$1.1 billion in Asia and US$1 billion for European carriers. This is a sick industry in need of strong dose of change.”

Unlike other sectors of the economy, airlines have been restructuring to become more efficient and competitive. Indeed, Bisgnani pointed to efficiency gains since 2001, an important indicator that the airline industry is ahead of the power curve amongst other industry in cutting costs. Airlines have cut non-fuel unit costs by 13 percent and fuel efficiency up 19 percent. These included a savings of US$3 billion with e-ticketing. Further efficiencies include IATA standard Bar Coded Boarding Passes with conversion will be completed next year. Bisignani also said its Fast Travel program, common-use kiosks, already live in 136 airports, will work even harder - from scanning documents at check-in to helping passengers find mishandled luggage targeting the reduction the $3.8 billion annual cost of mishandled bags with its Baggage Improvement Program. By 2010 the e-freight revolution will cover 81 percent of international air freight. Combined with e-ticketing, the total potential annual savings of these programs is US$14 billion.

Other savings have include US$3.5 billion in fuel fees, taxation and infrastructure charges after IATA worked with 74 airlines to implement best practice in fuel management. We did the same with ANSPs, optimizing 214 routes. “As a result we saved US$5 billion in fuel and 15 million tons of CO2, and we will do more this year,” he said.

However, the biggest frustration in the industry’s cost cutting initiatives is the fact that much more could be done, but the solutions are beyond the industry’s control “We depend on governments for change,” said Bisignani. “In my seven years at IATA my experience with governments has been that most don’t understand our industry, few have vision and almost all are too slow.”

In these difficult times there are no easy answers for business or for political leaders. Our agenda, however, is low risk. The value of global standards for security has been proven with our success in safety. Our four-pillar strategy on climate change is reducing emissions and the numbers tell us that without commercial freedoms this industry is not financially sustainable. I hope that your new President will find ways to incorporate these changes into his plan to restore the economy."

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