Articles & speeches

World Air Transport: The future is not what it used to be
Opening Address to the 17th World Air Transport Forum
Paris, October 29–31, 2008

Another low-cost business model change that’s on the rise … is going long-haul.

Air Berlin went that route in May … when it launched services to Beijing and Shanghai.

But it is in Asia-Pacific skies … that the spirit of Sir Freddie Laker really soars.

Since October 2006 … Oasis Hong Kong Airlines… has been offering a two-class … full-service operation on the Hong Kong-Gatwick route …and since July last year … six weekly flights between Hong Kong and Vancouver.

In May … after just five months of operation … Kuala Lumpur-based AirAsia … had already sold 100,000 seats on its two routes to Australia and the Chinese city of Hangzhou.

The airline plans on an eventual network of some 77 long-haul destinations.

Will these ambitious plans succeed?

Many hurdles need to be overcome for successful long-haul operations … such as complex international regulations … the need to provide costly amenities … like real food … more expensive airports … longer turnaround times … etc.

This will require a significant departure from the successful low-cost model.

The ultimate in convenience … of course … is business class “on demand” in a private jet.

This business model has existed for some time … in the form of time-sharing aircraft operated by Netjets … Bombardier Skyjet International … Flexjet … and others.

Instead of owning the aircraft … you buy any number of return trips … but on a per plane basis … not on a per seat basis.

Lufthansa Private Jet (LRJ) has gone one step further … by recently acquiring a dedicated fleet of Cessna Citations … and Bombardier CPJ200s … all with tailored livery and 12-seat VIP interiors … which are … or will be … available 24 hours a day … 7 days a week.

DayJet … which began operations in Florida last December … goes still further … by offering “per-seat on-demand” private jet service.

Customers reserve online … telling the airline where they want to go … when … and how far in advance they are prepared to travel.

The more flexible they are … the lower the fare.

This new business model … of private jet service … is being made possible by the development of new Very Light Jets (VLJ) … like the four-passenger Elipse 500 … whose airframe made of strong but light composites … and Pratt & Whitney engines … barely the size of a washing machine … allow a sticker price of under $2 million.

Per-seat … on-demand … private jet service would offer flexibility … the calm of dedicated terminals rather than the hassle of hubs … and promises to be affordable.

It may well be a model that transforms the business market.

My friend Bob Crandall …who will be joining us for the great debate on Friday … certainly thinks so.

His POGO airline was to start with 100 Elipses. … However … the current financial crisis may make it difficult to attract the required funding.

Ladies and gentlemen … last year at this Forum … I concluded my remarks with a plea … for this industry to come together in a coherent … determined and visible fashion … to address the threat of greenhouse gases.

This year … I would like to propose another “bête noire” to worry about … and which represents a hidden threat to our industry and our planet … just as serious as environmental pollution.

That threat is … infectious viral disease pandemics.

A virtual elephant in the room … still largely invisible in terms of public … and governmental concern.

Remember how the SARS epidemic of 2003 shocked the world … and the damage it did to our industry?

Modern air transportation made it possible for SARS … to spread from mainland China to all corners of the world … in a matter of weeks.

The epidemic cost the world many billions of dollars … a forewarning of the disastrous social and economic consequences … of a more widespread pandemic.

Worldwide … infectious diseases account for over one fifth of human deaths … killing some 17 million people a year.

In many of the poorest countries … infectious diseases are responsible for over half of all mortalities … trapping entire populations in a vicious circle … of disease and poverty.

Little has been done to develop effective … readily available … antiviral drugs to treat these diseases.

Less than 10% of the money invested in global health research is applied to infectious diseases.

The increasing cost of research and development … and competitive pressures … have led pharmaceutical companies … to focus their research dollars almost exclusively … on the more lucrative ailments of the West.

In the last 30 years … only 1% of new commercial drugs were designed specifically for infectious diseases.

Yet the threat of infectious diseases is not limited to the developing nations … and international air travel can allow pandemic infections … to circle the globe a matter of hours … with potentially devastating effect.

To address this problem of “neglected diseases” … an international … not-for-profit Consortium has been established … linking some 200 scientists in twenty-four countries.

This innovative model facilitates the sharing of academic research in a collaborative network … and will speed up the identification of promising therapeutic discoveries.

To solicit funds to finance the research and development of antiviral therapies … a Foundation has now been established.

Its specific role is to take promising drugs from academic laboratories through pre-clinical and clinical trials …a stage of the development process that receives little public funding.

I have agreed to become the Chairman of this International Foundation … and I am pleased to announce that Mr. Jacques Chirac … former President of France … and Mr. Jean Chrétien … Former Prime Minister of Canada … have both agreed to be Honorary Patrons.

The Foundation on Antivirals … known as FAV … has been approaching high-profile individuals … corporations … and institutions to seek their financial support … and moral endorsement for this critically important cause.

For obvious reasons … we would naturally expect the travel and tourism industry to be supportive.

And many of you … present today … are indeed representatives of these industries.

I look forward to your support!

Ladies and gentlemen …

Caught in the downdraft of the financial crisis

Tossed around by the turbulence of fuel price volatility

Buffeted by an economic recession of potentially worldwide proportions

The air traffic world is flying through perhaps the most threatening skies… it has ever encountered.

The storm is far from over … and while the airlines in the U.S. are taking the brunt of the storm … European carriers will increasingly be exposed … and so will the BRIC airlines.

Even the Gulf carriers … up to now largely unconcerned … would be wise to prepare to be engulfed as well.

No one will escape the fury of the current storm.

But … there are some positive elements of importance to our air transport world:

Those looking for silver linings need look no further … than our industry’s strong commitment to flying green.

Concrete progress is being made by almost every sector …the notable exceptions being air traffic control … and government-imposed carbon taxes.

Another silver lining … is Phase I of the new “open skies” agreement between the United States and Europe.

I hope this watershed block-lateral agreement will encourage … other regional common air market agreements … in Asia … Latin America … and elsewhere.

Still another encouraging sign … is our industry’s ability to evolve its structure … to cope with economic downturns …, changing markets and traffic patterns … and varying customer needs.

Among the most remarkable structural changes taking place are:

The emergence of the Gulf States as the new hubs for international travel;

The successful “big three” mergers in Europe … and their attendant effects on the non-aligned airlines; …

The antitrust-immunized joint ventures on the North Atlantic; …

Some mainline carriers launching all-business class services as the start-ups in this market go belly up; …

The low-costs modifying their successful formula with business class and long-haul services; … and

The emergence of affordable … per-seat-on-demand … private jet service.

Managing in this uncertain environment will require strong nerves … a steady hand … and the occasional dose of tranquilizer!

One thing is certain …

The future is not what it used to be!

Thank you

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