Regional perspective from

the AAPA

Martin Eran-Tasker

Technical Director

Association of Asia Pacific Airlines

2nd APEC TPT-WG Aviation Emissions Taskforce

Singapore

15-16 September 2009

Overview• Introduction

• Current challenges

• Industry trends

• GIAC - Regulatory patchwork

• Industry efforts

• Looking Ahead

• Summary

AAPA Association of Asia Pacific Airlines

• Regional trade association

• Current members include 17 major international airlines based in Asia Pacific

• Open to all scheduled international airlines based in Asia Pacific region

• Committed to promoting sustainable growth of the aviation industry serving both passenger and freight needs

• Permanent secretariat headquartered in Kuala Lumpur, Malaysia

• Representation in Washington and Brussels

always open to new members

Global traffic share by operator region

Data: 2008 Source: IATA, AAPA and various

AAPA 18%

ATA 27%

AEA 19%

AACO 4%

ALTA 4%

AFRAA 2%

Others 19%

PR China 7%

AAPA 32%

ATA 22%

AEA 22%AACO 6%

ALTA 2%

AFRAA 1%

Others 9%

PR China 6%

PassengerRevenue Passenger Kilometres

Scheduled Systemwide

CargoFreight Tonne Kilometres

Scheduled Systemwide

Asia Pacific Aviation

Data: 2008 Source: Combined AAPA + non-AAPA airlines GMT+5 to GMT+12

US$ 151 billion revenue

600 million passengers

407 million domestic

193 million international

16 million tonnes of cargo

3,900 aircraft

Asia Pacific overall market share:

27% of global passenger traffic

40% of global cargo traffic

Current Challenges

• Sharp slowdown in the global economy

• Slump in international trade

• Weak passenger demand

• Oil and currency volatility

• Higher cost of capital

• World GDP 2009 projected to shrink by 1%

Global airline industry trends

• Net loss of USD 11 billion forecast for 2009

• Airline losses will vary by region and relative strength of individual airlines

• Weak passenger and cargo demand

• Trimmed route networks and capacity in response to lower demand

• Reduced utilization, grounded surplus aircraft, seeking deferral of new deliveries

• Tough times, conserve cash, strengthen balance sheet, preserving the ability to respond to any upturn

Economic recovery has begun but there is so far minimal airline revenue benefit due to low yields

Future growth postponed

Significant implications for investment and capacity management, throughout the value chain

Prolonged downturn may mean no growth 2008-2010

Source: IATA

Long term growth prospects still bright

Source: Boeing

Asia Pacific’s share of world traffic projected to grow

GIACC

GIACC report recommendation;

• Global aspirational goals of 2% p.a.in fuel efficiency

• No specific obligations to States

• Basket of emissions reduction measures, from which States may select.

• GIACC failed to agree on more substantive policy measures on climate change

• Chicago Convention v CBDR

• Result encourage the proliferation of uncoordinated regulatory initiatives by individual States, leading to a patchwork of overlapping and inconsistent schemes

• Next Step High Level Meeting 7-9 Oct 2009

Regulatory Patchwork

Economic Measures targeting aviation

• EU, Australia, New Zealand, USA, Japan

• Environmental Taxes

• Questionable environmental objectives - APD

Regulatory Patchwork

Proposals

• Maldives - International Air Passenger Adaptation Levy (IAPAL),levy on passengers, cost the maritime and aviation sectors USD 10 billion per year.

• UK - USD100 billion fund to assist developing countries with climate change. Funding sources, suggested by UK, maritime and aviations sectors

Regulatory Patchwork

• Multiplicity of government response

• National initiatives have international consequences with the risk of overlapping and excessive levels of charges

• No assurance that funds raised will be used to address genuine environmental objectives

• No meaningful progress will be made in addressing environmental objectives.

Absence of global solution results in conflicting regimes, double counting, additional cost and complexity

Industry efforts

• Good progress being made to manage aviation’s carbon footprint through the industry four-pillar approach

• On-going investment in technology, infrastructure and operational improvements are delivering 2% year-on-year gains in fuel efficiency

• Biofuels encouraging progress proving technical feasibility. Next challenge to reach commercial viability and scale.

• Economics of biofuels complex

• Sensitive to feedstock supply

• Oil price

• Government fiscal policies

• Carbon market conditions

Industry efforts

• Industry has recognized the benefits of proactive commitment to action, the value of establishing shared goals

• IATA AGM committed to

• 1.5% p.a. improvement in fuel efficiency to 2020

• Carbon-Neutral Growth (CNG) from 2020 onwards

• 50% reduction in net emissions by 2050, relative to 2005

• In addition

• 10% Usage of alternative fuels by 2017

Looking ahead

• Key meetings

• ICAO High Level Meeting of stakeholders 7-9 October

• COP/ 15, December 2009

• 37th Triennial ICAO General Assembly, September 2010

• To early to judge outcome of talks

• Governments have been making preliminary statements on initial negotiating positions

• Aviation will not be a major focus in the overall political negotiations, we still need to be prepared

• Key for aviation the reconciliation the Chicago Convention principles of non-discrimination versus Common But Differentiated Responsibilities (CBDR)

Negotiation Outcome

• Reaffirmation that aviation requires a global sectoral approach

• Reaffirmation that ICAO is the appropriate UN forum to address aviation emissions

• Explore amendments to the wording of Kyoto Protocol Article 2.2

• Guidance on interpretation of CBDR in a way that would be consistent with the Chicago Convention principle of non-discrimination

• Oppose imposition of arbitrary levies or taxes on aviation

Summary

• Good progress is being made to manage aviation’s carbon footprint through the industry’s four-pillar strategy.

• We need to reaffirm the role of ICAO 

• Aviation requires a global sectoral approach

• The aviation sector requires globally harmonized policies. A messy patchwork of arbitrary taxes on air travel will not save the environment.

•  Fresh thinking and a way forward is needed if we are to reconcile the conflicting demands the Chicago Convention and CBDR

• Even in the current economic downturn, AAPA carriers are committed to playing a full part in efforts to address environmental challenges

www.aapairlines.org

Martin Eran-Tasker

Technical Director

Association of Asia Pacific Airlines

9/F Kompleks Antarabangsa

Jalan Sultan Ismail

Kuala Lumpur 50250

MALAYSIA

Tel: +60 3 2145 5600

Fax: +60 3 2145 2500