Improving Canadas Air Transport Competitiveness

Air transport is key to Canadas economy.  Canada is a great place to visit and to do business, but the country is losing its competitive edge.  Canada needs a comprehensive strategy to keep it competitive in the world market, said Giovanni Bisignani, IATAs Director General and CEO.  Bisignani outlined short and long-term opportunities for Canada in a speech to the Montreal Council on Foreign Relations.

Bisignani noted that Canada fell from the 8th most visited country in the world in 2002 to the 15th in 2009. The World Economic Forums Travel and Tourism Competitiveness report ranks Canada at 106 in terms of cost competitiveness, behind Japan (86), the United Arab Emirates (50), India (46) and China (20).  Aviation is the engine for tourism, which accounted for 650,000 Canadian jobs and $71 billion in spending in 2009.  But instead of having policies to welcome more visitors, Canadas excessive taxes turn them away.  Compared to the United States, a visit to Canada is $160 more expensive, said Bisignani.

Bisignani took aim at Canadas unique system of Crown rents as one of the root causes of weak cost competitiveness.  Canada has good airports, but the $257 million annual Crown rent bill is an unnecessary competitive disadvantage. No other country in the world has such a system. It discourages visitors and encourages Canadians to start their air travels from the United States. Its time to abolish it, said Bisignani. 

He also said that governments around the world are too involved in the industry and are preventing airlines from operating like other industries.  Airlines need the freedom to consolidate wherever it makes business sense.  Airlines that facilitate globalization are stunted national businesses because of government protection. The industry is structurally sick and traditional leaders like Canada will be challenged to improve competitiveness with change and innovation. Too often governments try to live off past glory by protecting the status quo and avoiding change. The challenge for Canada and governments around the world is to improve competitiveness on a level playing field that allows airlines to compete profitably like any other business, said Bisignani.

Canada and other governments must also take a global approach to security.  With todays terror threat, we need to find bad people, not the bad objects that airport checkpoints were designed to detect.  We need to deploy airport checkpoints that use intelligence from government and airline sources to match checks with a passengers risk level.  We look forward to working with governments through the International Civil Aviation Organization (ICAO) to build a Checkpoint of the Future, said Bisignani.

Bisignani also outlined a long-term vision using technology to allow passengers to be screened without time wasted in queues. My vision is for hassle-free tunnels of technology. Passengers would identify themselves with their fingerprint, biometric passport and bar-coded boarding pass on a mobile device. After a risk-level assessment, most passengers would stroll through a tunnel of technology that checks for all forms of terrorist elements without unpacking or undressing. Its in everybodys interest to use the billions being spent on security to make it more effective and more efficient, said Bisignani.

No industry has a future unless it is environmentally sustainable.  Aviation is the most ambitious and united industry in combating global climate change. Airlines, airports, air navigation service providers and manufacturers are committed to improving fuel efficiency by 1.5% annually to 2020; capping net emissions with carbon-neutral growth from 2020 and cutting net emissions in half by 2050 compared to 2005. The challenge is to keep governments focused on effective measures to reduce emissions.  For Europes cash-strapped governments, environment is an excuse to raise taxes.  I urge the Canadian government to formally oppose Europes plans to bring international aviation into its emissions trading scheme and support a global approach through ICAO, said Bisignani.

Bisignanis call for renewed competitiveness came as the airline industry entered a second consecutive year of profitability. Following a $15.1 billion profit in 2010, IATA is predicting that this will shrink to $9.1 billion in 2011. IATA contributed to these profits with cost savings since 2004 that now exceed $55 billion. For an industry that generates nearly $600 billion in revenues the margins are pathetic. The 2.7% margin that airlines earned last year does not even cover the cost of capital which is around 7-8%. And the margin will shrink to 1.5% this year, said Bisignani.

IATA is using this window of profitability to host Vision 2050 in Singapore on 11-12 February. Over 30 strategic thinkers will join me to look ahead with a mission to lay the foundation for air transport to have the technology and infrastructure to meet the needs of 16 billion passengers sustainably and profitably in 2050, said Bisignani. Vision 2050 will benefit from the inspirational leadership of Singapores Minister Mentor Lee Kuan Yew and the competitive expertise of Harvard Universitys Professor Michael Porter.

IATA is proud to call Montreal its home and contribute to Montreals status as a global capital for aviation. The future for this industry is challenging. But I am confident of aviations future and of Montreals leadership role in shaping this industry, said Bisignani. 

View Giovanni Bisignani's speech