Airlines pin hopes on Copenhagen

Tony Tyler, chief executive of Cathay Pacific Airways.

When the United Nations meets in Copenhagen next month to work out a climate deal to succeed the Kyoto Protocol, Tony Tyler will be holding his breath.

The chief executive of Cathay Pacific, and chairman of the board of governors for the International Air Transport Association (IATA), is hoping world leaders will approve a plan to develop a global climate agreement for the aviation industry, which is struggling to emerge from the worst crisis he has seen.

Airlines have made a bold, three-part proposal: to cut emissions by 50 per cent by 2050 from 2005 levels, reduce them by 1.5 per cent a year over the next 10 years, and to make all growth carbon-neutral by 2020.

Through IATA they are pushing for a single global scheme to regulate international airlines and enforce this proposal.

What they are trying to avoid is a range of potentially conflicting regulations that would apply to an airline as it passes from country to country.

In particular, they want out of the European Union's emissions trading scheme, which they are scheduled to join in 2012.

Tyler, a 54 year-old Oxford University graduate, told the Business Herald in Hong Kong that airlines have had to face up to their climate obligations.

"Our view is that while everybody would love to get on with things and not have to worry about this, it's not going to happen. You've got your head in the sand if you think that's going to happen."

Tyler and IATA want airlines to be regulated by the UN's airline body, the Montreal-based International Civil Aviation Organisation (ICAO), rather than by individual countries and regions.

He says the international airline industry's emissions have to be regulated and managed in a different way from individual regions.

"Practically, if you've got a flight leaving Hong Kong for London, whose quota should you use? If you just say 'all emissions belong to countries' then whose quota should that be? Should it be China, should it be the UK? Should it be all the places we had to fly to on the way? There's no rational way of doing it.

"The much simpler way is to say, 'countries worry about what goes on inside your borders, which you've got some control over, and ICAO, which is a United Nations body, you regulate international aviation emissions' ."

Halving emissions by 2050 seems a tall order. Tyler says airlines won't be able to meet the targets on their own.

"Cathay Pacific can't wave a magic wand and cut our emissions by 50 per cent for 2050 - it's going to mean biofuels. We can't deliver biofuels - the right incentives have got to be in place for suppliers to deliver that technology. So governments have got to help."

IATA plans to buy carbon credits on the world market and Tyler says governments need to deliver effective emissions trading schemes. They could also provide better infrastructure and air traffic management and perhaps even emissions standards for manufacturers.

Tyler was in the audience last month when Air New Zealand chief executive Rob Fyfe blasted climate talks as a "bureaucratic circus" of procrastination, turgid presentations, backroom deals and unwieldy agreements.

"First of all I've got to say that it was good to see him with his clothes on for a change," Tyler jokes in reference to Air New Zealand's "nothing to hide" advertising campaign.

"All this bureaucratic to-ing and fro-ing on environmental measures is frustrating but unfortunately that's the way the world is, it's got to be done and we've got to get a scheme that works for the airlines."

If airlines do not get what they want at Copenhagen, it will be another blow for an industry that has hit severe headwinds during the global financial crisis. IATA predicts international losses will reach US$11 billion ($15 billion) this year.

Cathay Pacific's latest figures show the number of passengers it has carried has fallen, dropping 3.8 per cent so far this year. The airline, which flies to 36 countries and carries about 25 million passengers a year, posted an annual loss last year of HK$8.56 billion ($1.5 billion), diving into the red for the first time in 10 years.

Tyler has described the slump as "deeper and more unpredictable than any crisis we have seen before". Adding to airlines woes, particularly Hong Kong-based Cathay's, has been this year's swine flu outbreak.

Tyler said Cathay's revenue loss as a result of swine flu fears was "hundreds of millions of Hong Kong dollars".

"Certain markets are well known to be particularly sensitive to this kind of problem and Japan is one of them. It did impact markets like Japan, China and Southeast Asia."

The recession has prompted talk of a "new normal" - where there is a recovery but profits and revenues do not return to the heights reached before last year's meltdown.

"I'd like the new normal to be like the old normal - especially the normal of 2007. But I think we're in for a period of time when normality is a lot less pleasant than it was in 2007. I think we are in for a time when premium traffic is weak, cargo traffic is at best highly seasonal and competition is intense."

Tyler says the crisis has hit two areas which can't be stimulated by cutting prices: cargo and premium passengers.

"If a bank is not sending its people on a trip, it's not going to send them on a trip because you've cut 30 per cent off the fare. And cargo is the same.

"Cutting price does not stimulate new business. I'm afraid we've got to wait until the world economy picks up."

However, Tyler believes the worst of the downturn has passed. In a message to staff this week he noted an improvement in cargo demand.

But he wrote that recovery would be a long, gruelling crawl.

With China heavily tipped to drive such a recovery, does this mean more flights to New Zealand? Cathay flies twice a day to Auckland in summer and 10 times a week in winter but is unlikely to add other centres.

"If we did have more frequencies it would probably be more to Auckland.

"If we suddenly looked at our numbers and saw we were carrying a planeload a day out of Christchurch, then okay. But it would have to be pretty robust figures."

Tyler, a rugby fan, could be on a flight to New Zealand himself for the 2011 World Cup, having visited during the Lions tour in 2005.

"If I can find anywhere to stay I might.

"I was down there for the Lions tour and I'd rather not talk too much about the rugby but I had a great time.

"I've been to the last two World Cups, in Australia and France, and the scale of the World Cup now compared to when New Zealand won it back in 1987 is just chalk and cheese. I think New Zealand is going to have a shock when they see everybody turn up."

Tyler may be hoping for an England victory in 2011, but he will be more desperate for a win for airlines at Copenhagen next month.

What he fears most is the "nightmare scenario" - that the UN will disregard the airlines' climate proposal in favour of a broad levy on aviation, which would add to the myriad taxes already in place.

"We would end up paying several times over and not reduce any carbon."

But Tyler is confident progress can be made in Denmark's capital.

"If you're optimistic you would say this is a definite goer.

"There's a lot that can be done with a bit of imagination and a bit of determination and we in the industry are ready for it, we're ready to play our part."

TONY TYLER


* Chief executive, Cathay Pacific Airways.


* Chairman of the board of governors, International Air Transport Association (IATA).


* Age: 54.


* Born: England.


* Education: Oxford University.


* Career: Joined John Swire & Sons in 1977 and moved to Cathay Pacific in 1978. Appointed chief executive in 2007 after roles as chief operating officer and director of corporate development.


* Family: Three children - two sons, one daughter.


* Hobbies: Playing guitar and harmonica and singing in band Night Flight.

* David Rowe travelled to Hong Kong courtesy of Cathay Pacific.