Peter Cerda challenges governments to remember all the good that airlines do.
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Rush transcript
Karen Walker:
Hello, everyone and thank you for joining us for Window Seat, our Aviation Week Air Transport Podcast. I'm Air Transport World and Aviation Week Network Air Transport editor-in-chief, Karen Walker. Welcome on board. I've just been in Chicago helping to cover and moderate conference sessions at the 2023 Routes America's event that brings together airports, airline network planners, and many other air transport stakeholders, and this year set a record attendance. As part of that, I did an onstage fireside chat with Peter Cerda, the vice president of the Americas, at the International Air Transport Association, or IATA. It's always great to catch up with Peter, who's a passionate advocate for the industry, and he raised some important points about how unfairly governments and authorities are treating airlines, forgetting about all the good they do and their critical role in trade, tourism and growing economies. So I wanted to share that conversation with you in this week's podcast. Enjoy.
Good morning everyone. Off to a lively start, wonderful to be in Chicago, absolutely fantastic city. So I am absolutely delighted to be here with Peter. Peter, at IATA, you oversee a massive region. A really important region that goes all the way from the tip of South America through Central America and Mexico, the Caribbean, and then of course, the US and Canada, so not only the size, but the strategic importance of that market. Let's just start off for a little bit from you on, is there a sense of optimism, as we're going into the Spring and Summer period this year? What's the feeling from the airlines that you're talking to?
Peter Cerda:
Well, first of all, good morning and thank you to Routes for having me. Thank you to the city of Chicago for having us. It's a great city. There is a lot of optimism in the market, particularly here in the Americas, when you look at, after Covid, the recovery was very strong. The Americas was the strongest recovery region in the world. We're seeing how the North American carriers have performed. They were the only airline industry around the world that made money. We're seeing the recovery from the airport side, also a very strong recovery both in North America, as well as in Latin America.
For the Summer season, we're expecting a very strong North Atlantic connection between Europe and North America, and that's very positive. We just went through the Winter season, or the Summer season in the Southern Hemisphere, in Latin America, and that as well was very strong, so we are seeing an uptake. Asia is finally open. China is open now without restrictions and I think that's going to curtail any acceleration of that recovery that somehow was pulling us back in. The Asia-Pacific market, China market particularly, are very important markets both to Europe and North America. And now with removal of these restrictions, I think it's going to accelerate that kind of connectivity and more passengers traveling, particularly into the Summer season.
Karen Walker:
So we see it in this region, but we see it around the world, everywhere. As soon as those borders reopen, as soon as the Covid related restrictions lift, despite some negative feelings earlier, about will the traffic ever return, will business people ever go back to flying, we're seeing quite the opposite, It's a really strong demand. People want to fly. They want to go and see their friends, and families. They want to take a vacation. And they want to work, just as everybody has come here to Chicago.
But it does seem to me, one interesting thing, and we were talking about this yesterday, particularly here in the US, but there's a little bit of this going on across this region. There's some, what I would call, short memory. It's not that long ago when the industry was in the crisis, when the world was in crisis. This industry was absolutely crucial. It was vital. It still maintained connectivity against all odds, very difficult situations. It supplied all those, it got the medical people to where they needed to be, it got equipment, and then of course it got vaccines around the world, and the incredible heroic effort by the industry. And yet, here we are going into '23 when people are excited and definitely flying, we're starting to see some calling out, almost like that these are the bad boys of the industry, from the regulatory side, from the political side more specifically, targeting things like ancillary fees. What's your take on that?
Peter Cerda:
So I think we do have a short memory, and when we were in the midst of Covid, this was one of the few industries that actually maintained connectivity when countries were closed down. When no one was getting on airplanes for business or for visiting families, connectivity was still there, because when you looked at the beginning of the pandemic, it was all about moving medical folks all around the country, all around the world, bringing equipment which was so necessary to keep people alive. When we were able then to come up with a vaccine, the primary way for just about the vast world of moving these vaccines, was by air.
And we're not talking moving from Brussels to Chicago. We're talking about moving from Chicago to third tier cities, in the middle of a jungle in South America, or in Africa, and in places that you rarely saw that type of connectivity. And when borders started being lifted, people began to fly. And one thing that demonstrated, during this entire period of the Covid and now the recovery, people have a desire, a need and a want and are traveling. And we're seeing this recovery more than ever.
This year, the commissioner mentioned in one of our data, 4 billion people will travel. That's going to be a record. We're seeing connectivity return very strongly. But as I was saying, I don't know how many politicians there are here, across the board, across the world, I have not seen a particular government that has actually thanked the industry for economic and social recovery. I have not seen a government that has actually said thank you to the industry for saving lives. And I think with all the credit to the medical industry, without air transportation, many of our medical experts, many of our doctors and so on, wouldn't have been able to have the vaccines, wouldn't have had the vaccinations, and that would have caused the number of deaths to go up. So, air transportation was part of that solution, was part of that recovery.
And now with the border's opening, it's all about people visiting and traveling. You come to this great city and you see the amounts of people going up Michigan Avenue, and they're coming to see a city. And they're coming to shop. And they're coming to experience something different. And that brings economic stability, economic recovery, more jobs, middle class increases.
But what we're seeing from many of our governments around the world, the US now being an exception is, we're seeing the regulators, the governments, looking at what's not going right. The few incidents that do occur, the industry gets back-lashed on, "You're not doing what you should be doing. You're not being responsible. You're just thinking about the dollars." And you have to remind yourselves and remind our politicians that restarting an airline, restarting an airport, bringing people back when they weren't working for many months, training technicians, takes a considerable amount of time. And as an industry, we're still recovering.
You look at United, you look at American, you look at Lufthansa, we're still bringing planes out of the desert. We're still trying to find staff that have left our industry into something else. We're trying to bring pilots and technicians and mechanics back and they need to be certified. This all takes a period of time. And I think this is more than ever that we need governments to be collaborative, to be a good strategic partner, instead of being an enforcer on what's being shown in Twitter or in Facebook, and again, these are isolated incidents.
I think we have a much bigger problem as an industry. When we look at the US, we have some really important issues that we have to resolve here in the US. We've had a series of safety incidents, that they may be incidental coincidences, but we have to evaluate that. That's our primary responsibility, ensuring that this industry remains safe. We've had a major issue with 5G, which has huge implications and impact with the telecommunications world. And obviously most of us, we want to make sure we have great service with our phones and we can use it everywhere, at high speed. But we also have to make sure that those signals that are used for the telephone industry, are also safeguarded to make sure that our industry remains safe.
Our infrastructure, Chicago has done a fantastic job in modernizing their airport system and they continue to do that. But we have many other cities around the US and around the world, and as recovery continues to become strong, we're going to have to improve the infrastructure. And that's not something you can do overnight. Building a new runway, building a new terminal takes considerable amount of time, resources, and approval. And I think what we should be doing with the government is focusing on providing the best customer service to passengers, making sure it's secure and reliable, instead of fixating on, "Should we be giving seats out, how wide the seats should be." We're in a world where the consumer will dictate and the consumers will decide on where they want to fly to, what they want to pay, and what kind of ancillary service they want to purchase. And those airlines that are able to meet the customer needs, will be successful. Those that are not, will not.
And the same thing I say around the world, when we talk about governments in terms of imposing taxations and fees. We hear every government around the world, particularly here in America, that have said from the top of the president or prime minister level say, "Travel and tourism is going to be our number one means of social and economic recovery." And every head of state that I've heard say that is every government that has imposed some sort of taxation fee on tourism. So that's very contradictive, that you're saying this is going to be our safeguard, but we're targeting the industry again, travel and tourism as a whole, the airlines, also the airports, as an easy way of generating... It's a cash cow.
And what's funny is, when you look at the amount of increases in the fees that are being imposed, it's minute from the amount of revenue that can be accessed from customers that come to a city, if you make it attractive. They're going to spend much more than $24 going to restaurants, paying hotels, going to the theater, than imposing a fee because it's easy money. The easy money turns out to be not so easy, particularly in a world... And I think one thing Covid has demonstrated, this is a very competitive world we live in now, particularly in travel and tourism. Every city, every beach resort, every hotel chain is now competing amongst each other.
It's not about Chicago competing with LA, or Rio competing with Santiago, or Paris with London. It's all these cities competing on a global platform, and whichever city can provide the best value proposition, both from on the ground in the air, connectivity. You talk about connectivity, how important connectivity is for Chicago, your Chicago. You could be in any part of the world. So someone who's sitting in their home can say, "I want to be in the Maldives, or I could go to Dubai. Where am I going to get the best package, at the best price, with the best experience?" That's what's going to win. And that's where my thought process with governments, we need to be much more open minded. How do we stimulate an industry? How do we help recover it, so it brings more social and economic stability and wealth to our communities.
Karen Walker:
If governments and regulatory authorities focus on the safety and security of the system and the capacity of the system. Look at air traffic control systems, for example. Endless talk about improving those and it tends to just be talk. So really what we're saying is, "Yes, focus on that, but don't make the solutions an interference in how airlines do their business, the marketing side and the revenue side."
Peter Cerda:
Absolutely. You look at the most two developed regions in the world in terms of air transportation, Europe and the US. We are still working on NextGen. We're still working on Single European Sky. It's been 28 years. How difficult is it? We'll get to the moon and back quicker than we will implement in these two areas twice. So I think what we have to do is improve what's already lagging. We have to do a much better job. Because again, we're here in a great city, in Chicago. The airport, the city can do as much as it can on building as many runways as possible, and boy, does Chicago have a lot of runways. Build a world-class terminal, gives great service to passengers, but then the passengers sitting in a terminal for five hours, because we have a delay program in New York. Well, I'm not flying to New York, I'm flying to LA. But what happens in the northeast has a huge impact. And the same thing that happens in Europe. We see this in Europe all the time, so we have to fix our house, before we want to fix other people's house.
And again, this industry has done a great job since deregulation back in the '80s for open competition. Those who are effective, those who provide a good quality, good service at a reasonable price will succeed. Those that don't, will not. And this is a country that has shown, we've had it from the Pan Ams to the Easterns that have failed over time, because they could not acclimate to the changing environment. Those that are unable to, will not succeed. But we have to make sure, particularly from a government standpoint, that we do produce and provide the best infrastructure possible, at the best price, so we can continue to accommodate the 4 billion passengers that are expected to travel this year. And if you look over the next 15 years, we're going to continue to grow extensively around the world.
And when you look at emerging markets, like Latin America, Africa, Asia, a lot of those passengers are going to be coming into the US. So we're going to see a massive uptake of newer airlines. You talked again, we're here in Chicago. You look at Chicago and it's ties to Latin America. And you look at where we were 15 years ago, where we are now, and that is dramatically increasing. And I think the aircraft manufacturers have done a fantastic job because now airplanes can fly longer, you have different sizes and you can fly a single all airplane for eight hours. In a market where you wouldn't really think about flying a wide body because you just didn't have enough capacity, enough lift, now you can put in A320neo or 737 MAX and start flying from Chicago to third tier cities in Latin America, or even into Europe. So it's a game changer. And again, we have to be ready for that, what's coming our way, because it's going to come very, very quickly. And we haven't even talked about EVTOLs and the other types of air mobility that's going to be out there.
Karen Walker:
But it's that market-based system. You allow that to happen, you provide the infrastructure, and like I said, the safety security side of it. It's that market-based system that's allowed the low cost carriers to come. They're some of the most innovative. That's what's really driven the whole affordability to a much, much larger market. So again, it just seems like, and particularly here in the US, there's a little bit of harking back to the good old days of pre- deregulation, which is nonsense, isn't it? I mean, both in terms of fares, and service, and connectivity.
Peter Cerda:
It is. And I don't want to pick just on the US, because I think there are major issues. You go to Europe, in certain countries within the EU, you have fly shaming. Passengers are getting shamed for getting on an airplane and going on travel tourism with their families. You go to Latin America and you're seeing a shift in mindset trying to make it a very regulated market, where you're going to restrict the airfare, you're going to restrict the liabilities. So we're seeing governments trying to impose themselves on an industry more than so than any other industry around the world. So when you look at manufacturing, when you look at cruising, when you look at any type of other industry, they're not as regulated, or on a watch list, as much as we are. And I think, probably because our industry is so fascinating, it has so much impact on every day's life. Somehow we're connected.
You may be in Ecuador and you may be in a small community, that 99% of that community is dependent on flower business. The flower business around the world is moved by aircraft, so those communities... Those people may never get on an airplane, but their livelihoods depend on air connectivity. So air connectivity is very important to our day-to-day lives. Politicians, for some reason... It's not only here in the US. In many parts of the world, they love picking on us and it's always a constant uphill battle. But at the same time, it's an industry that's easily imposed taxation.
In Argentina, again, we're trying to recover one of the last few countries that remain with their borders open. The moment they opened it, they imposed a 32% tax on international tickets. Today, 52% of the taxes in Argentina to fly is on taxation. In a country that has a recession, that the dollar is very expensive, you're basically telling your population, "Sorry, if you want to travel, do it domestically, but you won't be able to do it internationally because it's so expensive." So we're seeing all these type of examples around the world that are not helping, facilitating the recovery, not helping facilitating encouraging people to travel.
And then again, you look at the shaming in Europe, you look at the EU on the environment. There's not one industry around the world, when we talk about environment, that has done more on sustainability, social responsibility than this industry. The commitment that we have from an IATA standpoint with our members, by 2050 we will be zero neutral. You see what's being done by airports, by airlines buying the latest technology. The emissions is now more than half less than what we used to have 10, 15 years ago, but we still get pushed on it. So it's a big challenge.
Karen Walker:
We could talk for ages on this. It's always wonderful talking with you. We are almost out of time here, but these are important messages that you've flagged here. And what I would say is, that everybody in this audience and everybody in the industry is aware of the issues that you've been talking about, and of course, and the good that this industry does. IATA is a very important representative of the world airlines. Is there more that needs to be done getting that message out outside of the industry? And do you talk a lot these days to the politicians about this?
Peter Cerda:
Yes. Well I spent a lot of time talking to the politicians. I don't know if they want to talk to me lately. But I think as an industry, we do have to do a better job in how we communicate in telling this story. We're very good at defending what's being attacked on us. But we're not very good storytellers. And I think as an industry, particularly when we have social media, with Twitter and Facebook and everything else, you look at the new generation, it's all about what's on the phone. We have to do a better job in telling what we are doing really well, how we're contributing to everyone's life in a better way, instead of seeing it on a tweet. "We had a bad experience on an airplane. We had a fight, or my flight was delayed."
We should take this upon ourselves to do a better job communicating how we are bringing social and economic wealth and stability to our communities, to our families, and how that's going to stimulate a better future for our lives. And I think if we're able to be successful with that, well, hopefully politicians and our governments will listen a little bit closer and treat us more as a... Let's call it a strategic partner, instead of a strategic adversary, that we sometimes feel we are.
Karen Walker:
Let's be optimistic and hope for that. Meanwhile, let's hope also to see that great '23 season come through. So thank you again for your time, Peter. Thank you.
Peter Cerda:
Appreciate it. Thank you.
Karen Walker:
I full heartedly endorse Peter's message, and thank him for joining me at Route Americas. I hope you enjoyed that conversation. And a big thank you to our listeners. Make sure you don't miss us each week by subscribing to our Window Seat Podcast on Apple Podcasts, or wherever you listen. And if you listen Apple Podcasts, you can also review us and send us your thoughts and ideas on what you'd to hear from us. Until next week, this is Karen Walker disembarking from Window Seat.
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