"We need meaningful targets monitored by a truly independent regulator"

We have seen a steady recovery throughout 2022 in most regions of the world. North America was the standout performer, and the outlier was Asia-Pacific, which remained in the doldrums because of continued COVID restrictions. But we have a lot of optimism for Asia in 2023, especially now that China has announced it will relax its international travel restrictions – provided everyone is sensible about COVID restrictions.

We are expecting airlines to generate an overall USD4.7-billion profit in 2023, but we can’t get carried away – that is only just over one dollar profit per passenger. And we need to put that in the context of collective losses of USD187 billion for the 2020-2022 period. But I think 2023 is looking positive. We should see growth continue to rebound and the industry strengthen. The key challenge will be to stop politicians ruining it all. Mostly we will face what I call "business as usual challenges" – that is, relatively high oil prices, rising infrastructure charges, capacity bottlenecks, and so on. These are the sorts of things that airlines have dealt with on an ongoing basis for many years. There is a particular extraordinary circumstance that is more difficult – the continued closure of Russian airspace.

The direct impact on passenger numbers has been quite limited. The Russian market and Russian travellers are a relatively small part of the global business. But the closure of airspace to many airlines looking to transit to Asia is a major challenge. The first problem is the extra time, cost, and environmental impact of rerouting south. But an even bigger problem is we are seeing a looming competitive imbalance. Airlines that Russia permit to overfly, for example Chinese carriers, will have a tremendous competitive advantage over airlines unable to use Russian routes.

There is no immediate solution while the war in Ukraine continues. We all want to see a just end to the war. Until that happens, it is important that the industry clearly sets out the problems that the airspace ban has caused, because I don’t think the public and policy-makers are aware of the competitive imbalance. The difficulty has been masked so far because China remained a closed market. But now that it is opening up, the impact is soon going to be obvious. So even though an immediate solution is not likely, I think it is incumbent on politicians to set out the frontiers of what a solution could look like.

It is a concern, there’s no doubt about it. Thanks to the excellent statistical monitoring published by EUROCONTROL, we can see that in 2022 the familiar delay problems started to return in exactly the way we were seeing them in 2019 and earlier. Unfortunately, it seems that the opportunity afforded by the pandemic to put in place better flow management has been squandered. We can expect delays and inefficiencies to increase as traffic rebounds. Not to mention the return of the old-fashioned air traffic control strike. So, costs are going up and performance is going down. Not an edifying combination.

We all know what can be done about it – the Single European Sky (SES). But since that seems as far away as ever, we have proposed two steps which would deliver a lot of what we need.

At the moment, States sit as judge and jury on their own ANSPs – a system which has been proven to fail, yet States are looking to entrench it even further. It is essential that the European Commission and Parliament continue to resist this. We must have an independent referee able to adjudicate on ANSP performance, and where necessary levy fines or use other means to improve performance. At the moment the system in Europe is all carrot and no stick.

There’s the old Ronald Reagan line about government looking at something moving, and taxing and regulating it until it stops. That’s exactly what I fear we are seeing in Europe. A hugely successful 30-year period of deregulation which has opened up Europe and driven huge prosperity, is going into reverse.

Instead, we are seeing a plethora of taxes, and of threats to undermine CORSIA (Carbon Offsetting and Reduction Scheme for International Aviation), which is the only international agreement to manage global air transport emissions. We see a bizarre fixation to fiddle with the Slot Regulation – one of the better performing pieces of legislation – while failing to get a grip on the ineffectual Airport Charges Directive. And like Marley’s Ghost, we see ideas we thought had been killed off years ago for good reason – like compulsory bankruptcy protection – rattling their chains again.

Good regulation helps all parties achieve desired goals. Safety regulation, for example, has worked very well. Aviation is the safest form of transport precisely because regulations have been constructed in consultation with industry and to a large extent been harmonised globally. That is the model we want to see for CO₂ emissions. I see no reason why aviation can’t become the cleanest, most sustainable industry in the world. That’s the goal we have been patiently exploring with ICAO. It led to the CORSIA agreement in the past, and now it has produced the long-term aspirational goal to reach net-zero by 2050. I understand why some people are frustrated by what might seem like slow progress. But frankly, there is a form of neo-colonial thinking on behalf of some in the West, who demand that the rest of the world must have exactly the same targets and the same regulations as, say, the EU. Climate change is a global challenge. Aviation is a global business. And these issues are best tackled in a spirit of global cooperation and action.

No – there are some actions which can and should be taken on a national or regional basis. For example, the goal of the Fit for 55 legislation to promote Sustainable Aviation Fuels (SAF) is one with which we can all agree. But again, the way it is being pursued in Europe has some big flaws, especially when you look at the successful model in the United States. The EU model puts the cart in front of the horse, mandating airports to supply a set amount of SAF to all carriers. That’s going to create supply and transportation problems all over Europe. Not to mention, it makes little sense to mandate the use of something which doesn’t exist in sufficient quantity yet. It would be better to put the onus on the fuel producers to increase the supply of SAF and put in place a book-and-claim system so that airlines can purchase the SAF directly from wherever it is being most efficiently produced.

The aviation industry works on the basis of science, and what is possible. When we toughened our environmental commitments to become the first global industry to commit to Net Zero CO₂, we did so only because we had also done the background work to understand if it was feasible. The short answer is that it is perfectly possible to reach net-zero. However, the speed and efficiency with which we reach the target does depend on a number of factors not totally within the industry's control. I have already spoken of the need for oil majors to step up SAF production. The same is true for governments and the promotion of the hydrogen economy. We think hydrogen and electric options will contribute only around 13% by 2050. That's because apart from the technical challenges to power aircraft, there needs to be a massive step-change by governments to plan for a “green hydrogen” economy. I am not confident many governments are able to think that far ahead.

Yes, I am an optimist. The human desire to travel is too strong to keep aviation down for long. But we have to accept that the age of ever-cheaper air travel is probably coming to an end, at least for now. SAF is more expensive than traditional fuel, but it is a price airlines and their passengers will pay, because it has a clear and direct line to reduced emissions and a more sustainable industry. But we have to be very careful to ensure air travel remains accessible to those on lower incomes. We mustn’t lose the progress of the last 30 years. So that means keeping regulatory costs in all other areas low. Passenger taxes, infrastructure fees, other costs – these should all be reviewed to ensure that air travel can be competitive while still meeting its environmental obligations. That can be achieved if regulators and industry work together for a common global vision of developing a strong, sustainable and accessible air transport industry.