Achieving aviation’s promise in Latin America

The International Air Transport Association (IATA) has urged stakeholders in the Latin American and Caribbean region to work together with the common goal of a safer and more efficient air transport industry in the region.

Aviation supports more than 4.6 million jobs and $107 billion in GDP across the region. Latin American carriers are expected to post a collective profit of some $400 million this year.

That’s $100 million better than in 2011. The expected EBIT margin of 2.7% would be the second strongest in the industry behind North America at 3.0%. And the demand for connectivity across the region is growing. Passenger traffic was up 10.1% over the first nine months of the year – the second highest growth rate after Middle East carriers at 16.6%.

“The region is showing great promise. But it also faces challenges,” said Tony Tyler, IATA’s Director General and CEO.

Tylers comments were made at the Latin American and Caribbean Air Transport Association (ALTA) Airline Leaders Conference in Panama, in which he highlighted safety and infrastructure as top priorities for the region.

Safety: In 2011 the global hull loss rate for Western-built jets was one accident for every 2.7 million flights. In Latin America there was one accident for every 780,000 flights. That was a 32% improvement on the 2010 performance and the trend for 2012 is pointing towards an even bigger improvement. “We are moving in the right direction, but that must not lull us into complacencyglobally or at a regional level. There is more work to do,” said Tyler.

IATA highlighted the important role of the IATA Operational Safety Audit (IOSA) which is a condition for membership for IATA and ALTA. No IOSA-registered Latin American carrier has had a fatal accident in more than four years. And not one of the four accidents occurring to a Latin American carrier this year has involved an IOSA-registered airline. “IOSA is not a guarantee that there will never be another accident. But the strong safety performance of IOSA carriers gives us confidence to encourage governments to incorporate IOSA into their safety oversight programmes,” said Tyler.

Last year IATA and ALTA commenced a safety trend programme to guide safety improvement efforts in Latin America. This has resulted in workshops on flight data monitoring, runway safety and fatigue risk management strategies. Additionally, the implementation of Performance Based Navigation (Area Navigation, Required Navigation Performance) across the region is a priority to improve both safety and efficiency.

Infrastructure: Airport and air navigation infrastructure has not kept pace with rising demand for air connectivity in Latin America. “Unless there is sufficient capacity, efficiently operated and at cost effective prices, airlines cannot be successful businesses, meeting growing demands for connectivity,” said Tyler.

IATA urged caution in light of the developing trend across the region to invite private sector participation in airport development. “Too often airport privatizations fail for lack of effective economic regulation. Charges rise, traffic growth is stunted, economic opportunities are lost and the airport suffers from lack of sufficient investment. We need to learn from many bitter past experiences,” said Tyler.

“The recent privatizations of three airports in Brazil: Guarulhos, Viracopos and Brasilia illustrate the challenge. It is clear that a concession model provided the best opportunity to address deficiencies at these airports ahead of the 2014 FIFA World Cup. Auctioning the concessions garnered some $14 billion for the Brazilian governmentmany times the minimum bid.

“Safeguards were not put in place to ensure that the new owners recover their investment through efficiency gains and traffic growth, rather than by raising non-aeronautical fees which are monitored but not capped. It is important that the Brazilian government absorb the lessons of this experience as it moves forward on the next round of airport concessions,” said Tyler.

While citing a consensus that investment in infrastructure is a critical need for the region, Tyler said that diversion of tax receipts and other charges to the general treasury is widespread.

“Airlines understand that infrastructure is not free. But under international standards it is important that users have a formal role in the setting of fees and charges and in the case of airports, of capital investment decisions. Furthermore, money raised from aviation needs to stay in aviation to further develop its foundations to support economic growth and development. While this is what governments have agreed through the International Civil Aviation Organization (ICAO), too often it disappears into the general fund,” said Tyler.

 

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