Economic Impact Of ATC Jeff Poole, March 2007

Air transport is critical to the global economy Ö We are a US$450 billion industry Ö We support US$2.9 trillion in economic activity

But an industry in crisis since 2001 needs leadership

series of crises that changed air transport Since 2001: series of crises that changed air transport Ö 2001-2005 airlines globally lost over US$40 billion Ö 2006 expect losses of US$1.7 billion

Airlines improved their bottom line even as fuel prices skyrocketed

The industry is moving in the right direction

Since 2001… Ö Ö Ö Labor productivity increased 33% Sales & distribution costs dropped 10% Ö Non-fuel unit costs reduced 13%

But it’s a bit early to celebrate… Ö Globally ATC unit costs raised with 9,4% Ö The costs of ATC inefficiency are too high

ATC impacts an airline in many ways Ö Safety Ö Performance Ö Capacity Ö Cost Efficiency

We need to ensure the right balance SAFETY CAPACITY PERFORMANCE COST-EFFICIENCY

We need a continuous focus on Improved Performance Ö Financial Performance Ö Operational Performance Both Impact Our Bottom Line

Financial Performance:

The global Airport & ATC share of the costs is large: Ö Global USD 42 billion bill Ö 11% of average airline cost base

We experience major global differences in: Ö Efficiency Ö Stakeholder Engagement Ö Transparency

And major ATC cost variations: From USD 0,04 per KM to USD 4 per KM of controlled flight

Efficiency: Ö Ö Ö Ö Control overhead Control operational costs Invest wisely Ö Harmonize Services

Invest Wisely: Hudson Bay Example Ö Ö Ö Radar Investment $ 37 mln ADS Investment $ 10 mln Ö Annual operational benefits: $ 11 mln

The choice for ADS-B: Ö Ö Ö Lower investment Operational benefits Future technology

Avoided Investment, USD 22 million…… through: Ö Proper Cost Benefit Analysis Ö Stakeholder Engagement

Stakeholder Engagement Ö Airlines are customers and are directly affected Ö Airline involvement will lead to successful implementation Ö Involving airline expertise will lead to more efficient investments

Transparency Ö Ö Ö Ö Airlines should exactly know what they pay for Justification is required that charges are cost based Ö Major investments should be justified and required Ö Transparency should lead to improved benchmarking

Operational Performance:

The high price of oil continues to hurt airlines

The industry fuel bill rose from… 2001 fuel bill: USD 43 billion 2005 fuel bill: USD 91 billion 2006 fuel bill: USD 115 billion

Which Reinforces: Flying Time = Money

There are multiple ways From A 8200 nm 9100 To B

With Major Cost Differences…. 8200 nm Ö Saving 43 Minutes Ö Saving 8400 kg of fuel

Move from this……

To this……

Straighter routes and removal of barriers are of great importance to an improved performance

Pretoria Algiers UM731 UM998 RUDAS GBV MAIDUGURI NODJAMENA ORAN Ö African Red Carpet express routes annually save the industry USD 7.6 million in costs

The European Challenge EUR 9,5 billion in ATM costs Ö EUR 7 billion in provision costs Ö EUR 1 billion in delay Ö EUR 1,5 billion in inefficiency

The European Challenge EUR 3,3 billion in possible improvement Ö EUR 2,5 billion consolidation Ö EUR 0,5 billion airspace redesign Ö EUR 0,3 billion capacity planning

Military operations are also affecting performance……….

One Military Atlantic Exercise Ö 600 NM Restricted Airspace Ö NAT traffic heavily impacted Ö Airlines lost USD 1,9 mln In one day

The Global Performance Challenges Ö Harmonization of airspace Ö Standardization of Infrastructure Ö Consolidation of providers Ö Lower Unit Costs

What can ANSPs do? Ö Drive cost reduction and efficiency improvement with more speed Ö Agree to challenging efficiency targets Ö Work together with airlines as business partners in long term strategies and investments

What can Governments do? Ö Ensure independent regulation Ö Establish a level playing field Ö Set clear efficiency targets Ö Remove obstacles

Let’s improve our performance as an industry IATA is here to help