A Perspective on the Evolving Transatlantic Market for Aviation and the Modernization of Air Traffic Management     Print Email

Transatlantic Roundtable on Aeronautics and Space
March 25, 2010
Remarks by David McMillan, Director General of EUROCONTROL


Ladies and Gentlemen: good afternoon. I am glad to be back in Washington and to be with you for this Round Table - my thanks to Jacqueline Grapin and the European Institute for having organized it.

The evolving transatlantic market for aviation

In the 1930s, you could fly on the Pan Am Clipper from New York to Paris for $750.  In today’s terms, that’s about $12,000.  You could only do that if you were very wealthy, of course - most Americans at that time earned about $1,500 a year.

Today, a first class transatlantic ticket will set you back around $15,000. But you could fly business class (and still have a sleeper-bed) for around $5,000.  And if you decided to do without the bed, you could cross the Atlantic for a little over €500 - which is $700 at today’s conversion rates, but it does vary!

You would, of course, get to Paris from New York much more quickly today.  Pan-Am's scheduled time in 1939 was about 29 hours. And, chances are, today you will get there and back safely.

Sixty, seventy years ago, the accident rate in North America was around fifty accidents a year in absolute numbers for a fraction of the air traffic. Last year, there were just 18 fatal accidents in commercial aviation the world over - and that represents less than one accident for every 1.4 million flights.

The democratization of air travel is really one of the wonders of our times - we went from a mere dream of powered, controlled flight to an essential global industry, one that has an estimated economic impact of 7.5% of the world’s gross domestic product.

We in the air transport business hope that our industry will continue to progress, making further exponential leaps in safety and efficiency.

Recent progress - thanks largely to deregulation and liberalization

Enormous progress has been made since civil aviation began, obviously. But the last few decades have seen particular change.

I used to work in Washington two decades ago - actually, I can remember exactly how long ago it was because my son was born here.

I served as the Transport Secretary in the British Embassy and most of my time was taken up with air service negotiations and the Airbus/Boeing funding dispute - some things don’t change.

But it is remarkable how much has, in fact, changed.

Think of the volumes of traffic then and now.

There has been a 70% increase in traffic in the United States and 73% in Europe - and the traffic between the two continents is expected to grow by an average of 2.2% every year.

A great deal of this increase can be ascribed to deregulation and liberalization.  Jeff Shane, latterly of the US Department of Transportation, called the performance of US airlines in international markets after deregulation “extraordinary”.

He pointed out that US airlines carried twice the number of international passengers in 1990 than they had done in 1980.

Their market share grew by some 20% and revenues attributable to international operations more than doubled.

The percentage contribution of international services to their system-wide revenues increased by about 20% in that period.

It was estimated that American consumers saved some $19 billion a year after deregulation, thanks to the lower fares resulting from a competitive market.

Perhaps one of the most striking facts is that in the United States between 1978 and 2007, the price of college tuition went up 8 to 9 times; the price of movie tickets nearly tripled – but the price of domestic air travel increased just 1.5 times!

Europe has seen positive gains on a similar scale.

The number of airline routes within the European Union has increased by 170% since the creation of the single aviation market in 1993.

More cites and remote regions are now served by air transport. Passengers have a greater choice of destinations and the convenience of more direct flights.

The transatlantic market

Let’s look at the transatlantic market on its own now.

The numbers of flights we are dealing with are genuinely impressive.

There are some 185,000 flights going in each direction every year.

When I started in the British Embassy in 1987, only four airlines were allowed to fly between US airports and London Heathrow: BA and Virgin for the UK; Pan AM and TWA for the US. Bermuda 2 actually named those carriers.

So, when the writing was on the wall of bankruptcy for both Pan Am and TWA, the US had to negotiate for the right to replace them - which they eventually were, by United and American.

In the best traditions of mercantilism, we then extracted a very significant price for this right. This was a hugely sub-optimal way to proceed, but it had its own logic in a bilateral context.

It was designed to try to even up the imbalance inherent in the access to the US domestic market which US law and practice accorded to non-US operators.  But this was a battle which was doomed to fail. The weight of the UK market was simply not enough to secure the genuine international liberalization that the UK was seeking.

So, the issue then passed to the European Union. I was the UK Director General of Civil Aviation when the EU-US Open Skies deal came to a conclusion.

The deal done was still not all that I might have hoped for as it left untouched the key issue of national ownership and control laws that continue to frustrate aviation’s emergence as a normal business.

But it did go a long way to normalizing the market, not least through any EU or US operator being able to fly from any point in their territory to any point in the other, with no restrictions on frequency or price.

I was really pleased, this week, to have made meeting facilities at EUROCONTROL’s headquarters available for the current round of talks aimed at pushing the issue yet further - and honored to have been asked to make the opening statement on Tuesday.

The route charges that North Atlantic flights bring to Europe is an impressive total of almost six hundred and twenty four million euros.

The two most common aircraft flying across the Atlantic today are the B777-200ER and the B767-300ER, costing roughly two hundred and fifteen million dollars and one hundred and fifty million dollars respectively.

With all this money at stake, it is in our collective interests to make the system safe and efficient.

I’d like to share with you how we are doing this in Europe.

EUROCONTROL and the first vision of a single sky

But before I do, let me backtrack a bit and talk about EUROCONTROL.

Fifty years ago this year, EUROCONTROL’s six founding member states decided to plan for a single service provider in their upper airspace; if you like, to create a mini single European Sky.

Times change; the idea proved to be ahead of its time. And EUROCONTROL has had to adapt to meet changing circumstances.

We carried on as the upper airspace service provider in four European States - the Benelux countries and the northern part of Germany - but we added other activities, too: route charges collection, traffic flow management, training; research and development, and other improvement initiatives, all intended to simulate a single market.

During that process of change and evolution, the organization became one of the world’s repositories of excellence in air traffic management.

More recently, the pace of change in ATM accelerated.

Nationally, most EUROCONTROL and European Union member states have separated regulatory functions from service provision. In one member state, service provision has been privatized.

And the European Union’s arrival on the ATM scene, particularly with the Second Single European Sky package, has created new needs.

I think it fair to say that EUROCONTROL fell a bit behind the curve on these changes.

So, we are now separating out our activities which support service delivery and industry from the key work we do to support regulators in our member states and the European Commission.

We are creating separate areas so that we can provide the necessary expertise to complement the European Commission’s regulatory and legislative strengths, while continuing elsewhere to deliver the services and products that our stakeholders want.

Modernizing air traffic management - the Single European Sky

Let’s turn now to the second part of my address: modernizing air traffic management.  Less than a month ago, the European Commission held a high-level conference on the Single European Sky.

Hosted by the Spanish EU Presidency, it was attended by senior people in every branch of air traffic management in Europe - they not only represented member states but also military authorities, other European institutions and agencies as well as a range of aviation associations and organizations, including EUROCONTROL.  I was there, too, and I was with them when the “Madrid Declaration” was adopted:  “to give the necessary impetus to a timely implementation of the Single European Sky”.

The Single European ATM Research Programme, SESAR, is the technical program which will help build the Single European Sky.

Technology is the key to the future. We need a paradigm step in air traffic management. Keeping the controller at the heart of the system is a certainty. But much greater automation is needed in the separation of aircraft if we are to cope with the heavy traffic loads we are predicting.

Of course, technology cannot solve everything - despite the old story of the controller who was told that a new flight control system would cut his work in half. He was very enthusiastic. So much so, that he said he’d like two of them, so he could go home. Doesn’t quite work like that!

Back to SESAR.

A set of different aviation players work in SESAR - civil and military, legislators, operators, manufacturers of airframes, on-board and ground control systems, as well as airspace users.

A SESAR Joint Undertaking has been set up, with EUROCONTROL as one of its founding members.

We are currently in the development phase at the moment - the big test will come with deployment when we have to make certain that all the components are put to use when and where they are needed. The proof of that pudding will be in the eating.

Cooperating for a seamless future

Air transport has no boundaries - and so the same rules and practices must be applied uniformly and similar systems used to enhance safety and efficiency.

Cooperation between Europe and the United States is particularly close as far as their future air traffic management systems are concerned.

The Next Generation Air Transportation System - or NextGen - and Europe’s SESAR program are being developed with reference to each other.

It’s interesting to see that the two big airframers - Boeing and Airbus - are cooperating on both programs. They see clearly that we cannot afford incompatible development between Europe and North America: we must make sure that we share the same stringent requirements for technology, equipment and processes.

In conclusion

Air transport has made astonishing progress since it began.

These days, it is infinitely safer and much faster - and travelers now have a wide choice of ticket prices and carriers.

It’s incredible when you think how many people travel by air today. Last year, 2.3 billion people flew safely on 35 million flights - that is the equivalent of between a quarter and a third of the entire world’s population.

For air traffic management to keep pace with these travelers’ expectations, all parties have to work together and make sure that even if our systems are not identical, they do need to be compatible; they need to be interoperable.

I know that by your presence here today at this Institute - an Institute which is dedicated to cooperation - that you, too, are right behind a concerted approach. Of course, cooperation does not happen all on its own. It is something that needs to be worked at.

We need constant dialogue and sharing to build understanding and trust, so as to enable the continuous, safe development of the market.

Ladies and Gentlemen: my thanks for your attention!

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