IATA's Director General Willie WALSH:  'Sustainable Aviation Fuel Costs Are Not a Supply Chain Issue, We Just Don't Have Sufficient Production'
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IATA's Director General Willie WALSH: 'Sustainable Aviation Fuel Costs Are Not a Supply Chain Issue, We Just Don't Have Sufficient Production'

Issue 19 - 2023
IATA's Director General Willie WALSH:  'Sustainable Aviation Fuel Costs Are Not a Supply Chain Issue, We Just Don't Have Sufficient Production'

The 79th AGM and World Air Transport Summit, brought some 1500 aviation leaders, Strategic Partners and media to Istanbul, Türkiye, 4-6 June 2023, hosted by Pegasus Airlines and co-hosted by AnadoluJet..

During the gathering, IATA's Director General, Willie WALSH, and Chair of the IATA Board, Mehmet Tevfik NANE, made presentations on the Annual Report of the Air Transport Industry and IATA's Board of Governors. Following the opening speeches, they answered the questions of the members of the press.

In line with IATA's 2050 'Fly Net Zero' commitment, Airlines around the globe are doing their best to utilize SAF (Sustainable Aviation Fuel) in their specific flights. Responding to our question on whether IATA has any plans to increase SAF production and support Airlines in solving this challenge. IATA's Director General Willie WALSH emphasized that current SAF prices are not a supply chain issue but due to insufficient production facilities. WALSH pointed out that they focused on ensuring government policies to significantly greater production of SAF and said: "It is not a supply chain issue when it comes to SAF. We just don't have sufficient production facilities producing SAF, and that's why at IATA, we focus on ensuring government policies are there to incentives the building of these facilities so that we can see significantly greater production of SAF.

So, the reason that SAF price is so much higher than the traditional jet kerosene is because it's been produced in low quantities. We believe that this can be addressed, and it will be addressed. Personally, I believe that there will always be a premium for SAF over traditional kerosene, where our economies can see a day when SAF becomes cheaper. When that happens, it will be great. We are continuing to call on governments to understand the opportunity that exists for countries to incentivize the production of Sustainable Aviation Fuel. As I said in my presentation, Airlines have bought and used every single drop of SAF produced. In 2022, we estimated that came with an additional cost of 350 million USD. Airlines will buy the product or will want to spend more to use the product produced in lower quantities."

Chair of the IATA Board Mehmet Tevfik NANE also stressed that IATA needs the government's support to increase global SAF production. NANE underlined that Aviation is the only industry stating a target zero emissions, yet they are not getting enough support from governments around the world. "So, we need your support, ladies, and gentlemen, at this point. We need your advocacy for the aviation industry. Why? As we mentioned, we are ready to buy any product available for SAF around the globe. However, we are the victims of manufacturers of SAF. Governments are not taking the right regulations in communicating with the aviation industry. So, if there is production, we are the only industry… Last year, ICAO Summit announced the 2050 Carbon Emission Zero Target. When we look at the carbon emissions of the industries, land transportation is around five times more than ours. So, we need your support to lobby on behalf of us. This is not fair. Aviation is the only industry stating a target zero emissions, and we are not getting benefits from this. We are becoming victims of it because of the manufacturers and decisions of the governments not focusing on the aviation industry."

IATA's SVP Sustainability & Chief Economist Marie Owens THOMSEN: ‘The Industry Is Absolutely Phenomenally Talented in Terms of Controlling Costs’

Speaking at the Economic Outlook – Media Briefing, IATA's Senior Vice President Sustainability & Chief Economist, Marie Owens THOMSEN, talked about the post-pandemic aviation era and stated that while demand is recovering, other challenges are also emerging.

Emphasizing that while fuel prices are heavily impacted by the Russia-Ukraine conflict that started in 2022, THOMSEN shared the following about how the rising fuel prices affected the aviation industry in the recovery period from COVID. "For sure, one of the reasons behind the inflation figures is the fuel prices that are heavily impacted in the course of the war that broke out in February 2022 in Europe. So, our industry is unique in this context because we use more fuel than sort of consumers do. Yes, fuel weighs more in our pricing. Because it represents up to 30 percent of the airline costs, and on top of it, we don't use crude oil. We use jet fuel, so we have a higher price and a larger weight than normal people. That has always been a challenge for us that impact our margins; no doubt that it still is not necessarily impacting the traffic, as we will see soon.

So now there is some easing in those prices, and that's good news, but the spread remains on the high side between jet and crude. So, the traffic has not been dented by any of these cost solutions, and we expect the full year 2023 traffic to spend 12.2 percent below 2019. Our definitions are revenue passenger kilometers, and it's a measure that takes into account the number of passengers at the distance they travel, both of which are important and very important to measure our traffic. So, we're nearly 2019 levels, and we think that the industry as a whole will exceed 2019 levels next year. So next year is when we expect full recovery from the COVID itself. But we have to also remind ourselves that that doesn't call up the trend that we have in traffic from 2019. If COVID had never happened, we are still well below the trend. So, we are recovering 2019 level, but we're still here compared to a normal non-COVID scenario."

Praising the industry's phenomenal talent in terms of controlling costs, THOMSEN expressed that air cargo was the real savior of the aviation industry in 2021 by generating most of the revenue during the COVID pandemic. "The industry is absolutely phenomenally talented in terms of controlling costs. So, the expenses are limited to 781 billion USD this year, and revenue, thanks to passengers really wanting to travel, is rising to US$ 803 billion this year, leaving an industry operating profit of 22 billion. So, of course, when you see the passenger minus 1.1, you might think that's problematic, but then we have to put it again in the context of previous experiences in 2022 to yield 98 percent.

The cargo was our absolute savior in 2021. I'm sure you all are aware, and some of the buoyancy is going out of the cargo because of the growth and trade. But nevertheless, you're expecting US$142 billion in cargo revenue this year, which is significantly higher than the 100 million USD revenue that the cargo generated for at least 2019. The yielding cargo is likely to drop by almost 29 percent this year, but that has to be analyzed in the context of the absolutely phenomenal years of 2021-2022. This leaves us with a profit of US$ 900 million, and again I cannot recommend this industry strongly enough for the absolutely marvelous resilience that we have to be able to go from a loss of about US$ 140 billion in 2020 to a positive result of nearly US$ 10 billion in 2023. That's an amazing turnaround in such a short period of time."

Chairman of the Turkish Airlines Ahmet BOLAT: ‘Turkish Airlines Total Contribution to the Turkish Economy Will Be US$140 Billion by 2033!’

Chairman of the Board & Executive Committee of Turkish Airlines, Ahmet BOLAT, made a presentation at the 79th IATA Annual General Meeting (AGM) and World Air Transport Summit held in İstanbul on June 5. In his speech, BOLAT shared information about Turkish Airlines’ next 10 years strategy, future fleet size, and planned new destinations.

Last year, Turkish Airlines (THY) announced a record high profit in the history of the company. According to BOLAT, THY’s first quarter (2023) results showed that the Türkiye’s flag carrier airline going to have similar results this year also. The total revenue increased was 42.7%, compared to the first quarter of the last year after the pandemic. Also, the net profit increased by 45% compared to last year. In the same period, THY secured US$230 Million, which was the highest first quarter profit in the company’s history.

Stating that Turkish Airlines will increase its fleet size to around 800 aircraft in the next 10 years, Chairman of the Board & Executive Committee of Turkish Airlines, Ahmet BOLAT emphasized that the total contribution of Turkish Airlines to the Turkish economy is expected to be US$140 Billion by 2033. BOLAT said: “After hearing this little brief about our financial results, I’d like to talk about what we'll do for the next 10 years. According to our next 10 years strategy, the Turkish Airlines fleet size will increase to 800 aircraft, actually 830. We are going to have 830, so what we need to reach around 600 aircraft, we have talked with Airbus and Boeing the main providers to the whole aviation industry. We are basically talking about around 400 MAX and NEO aircraft, 200 wide-bodies, mainly 787s and 350s. We are also looking around 25-30 777X or A350 XWB. These are the combinations we are considering, and we are also talking with the engine providers for this fleet. The presidential election took a little longer than expected. In fact, we were very close to make a deal with one of the manufacturers but to be fair to the other manufacturer we are going to delay around two months to announce our final decision. We will not rush. We'll have a separate event in İstanbul to announce for such a big order in the next two months.

As Turkish Airlines, our goal is to contribute to the country US$50 Billion revenue in 2033. With the ecosystems and other contributions, total contribution of Turkish Airlines to the Turkish economy will be US$140 Billion, which will be equal to the 59th largest economy in the world. If you compare the figure this year, we are doubling the size of Turkish with the contribution almost 2.8 times.”

BOLAT stated they will begin additional promotional activities to increase the number of the number of tourists visiting Türkiye. In this regard, THY will hold several organizations at the US, Japan, Korea, and Singapore. THY will also increase its destinations by adding Detroit and Melbourne before the end of this year, BOLAT stated. “Turkish Airlines is the main body of the Turkish Services Exporters' Association. Last year, around 50 million guests visited Türkiye. Half of them was carried by Turkish Airlines and this year our expectation is 60 million tourists will come to Türkiye. Immediately after the earthquake, the numbers declined but now we see that there is a big improvement. We had three organizations in the US to double the number of tourists to come to Türkiye. Our goal is 2 million. Last year 1 million Americans visited Türkiye.

Similarly, we will have more promotional activities in Asia. Next month we have an organization in Japan, Korea and also Singapore. Also, we will visit Melbourne because we are planning to fly to the Sydney and Melbourne before the year is over and for that reason, we're going to have first activity in Melbourne probably later in Sydney. So, before the year is over, we will have one stop flight from Singapore to one of the great cities of Australia. In November this year, we are going to fly to Detroit. This will increase our destinations to 345 and when will fly to Australia the number of countries will increase to 130.”

Chairman of the Board & Executive Committee of Turkish Airlines, Ahmet BOLAT ended his speech stating that Turkish Airlines aims to first airline in the world providing free of charge wireless Internet access to not only domestic but also international routes. BOLAT also shared their year-end targets for 2023. BOLAT said: “We're also going to improve customer experiences. I’m really glad to hear that most of the passengers, most of our guests in this event travelled by Turkish Airlines and most of them were very happy with the services that we provided. But we're going to further improve the service quality. Very soon we're going to offer free of charge wireless Internet access to all our passengers, both business and economy. We are having discussions with the providers now. So, very soon we will be the first airline in the world providing free of charge wireless Internet access to not only domestic but also international routes. Also, our goal is to make Turkish Airlines one of the top three global airlines providing the best digital experiences.

What is our expectation for end of 2023. The number of aircraft will be 435, Available Seat Kilometer will be US$235 Billion, which is almost 20 percent higher than 2022. We're going to carry more than 86 million passengers and total revenue will be over US$19 Billion, and the number of employees will be around 82,000.”

Pegasus CEO Güliz Öztürk: “We started 2022 operationally and financially well-prepared and became the airline with the highest operational profitability in the world with our performance”

Pegasus Airlines held a press conference on 6th June 2023 as part of the 79th IATA General Assembly and World Air Transport Summit, hosted by Pegasus. Presenting the latest developments at Pegasus, plans for 2023 and future goals, Güliz Öztürk, CEO of Pegasus Airlines, said: "We started 2022 operationally and financially well-prepared and became the airline with the highest operational profitability in the world with our performance. In the first quarter of 2023, we maintained our strong performance despite the hardships we experienced in Türkiye. This successful performance also led to an increase in our credit rating.”

Assessing the year 2022, which began and continued under challenging conditions, Güliz Öztürk, CEO of Pegasus Airlines, said: "2022 was a year in which we achieved significant success thanks to the rapid increase in travel demand, especially in the summer season. In line with our expectation that travel demand may pick up with strong momentum after the easing of restrictions, we kept our operational network and colleagues in all our business units ready to meet the potential demand and increased our capacity to meet the rise in demand." Öztürk continued: "In 2022, we increased our total number of guests by 34% to 26.9 million. Compared to the previous year, the number of guests on our international routes increased by 96%, a much better performance than the overall market. We increased our revenue by 139% to 2.45 billion euros. Compared to 2019, the last normal year, our revenues increased by 41%. Compared to 2019, our total ASK capacity increased by 8% and international capacity by 23%. Our EBITDA margin reached 34.1% at the end of the year, the best performance in the world for this metric. Our net profit for the year was 431 million euros.

"We are pleased with the momentum we have achieved ahead of the peak summer season." 

Commenting on the first months of 2023, Güliz Öztürk said: "We started 2023 under challenging conditions due to global macroeconomic concerns, and subsequently as our country unfortunately experienced a major earthquake disaster. We are also in the midst of a period where global inflationary pressures are causing challenges with planning. As Pegasus Airlines, in the first four months of 2023, we have increased our capacity by 32% and the number of our guests by 31% compared to last year. International passenger numbers were up 43% and we are pleased with this momentum ahead of the peak summer season. We aim to continue to develop and improve our key operational and financial performance results in 2023.

100th aircraft in the 100th year of the Turkish Republic

With the aim of increasing its total capacity by around 20% in 2023, Pegasus Airlines plans to pass the 100 aircraft mark in the 100th year of the Republic and continue to grow its fleet. Pegasus plans to take delivery of 10 A321neo aircraft in the remainder of 2023, 21 in 2024 and 11 in 2025. Pegasus will continue to focus on digital transformation, sustainability, diversity, equality, and inclusion, and wholeheartedly supports aviation's sustainability goals. Pegasus' pioneering digital transformation efforts, fleet transformation with new generation aircraft, rapidly expanding flight network, investment in technology and people, sustainable aviation initiatives and commitment to diversity, equality and inclusion will be the pillars of its sustainable success.

"Moving towards a sustainable future”

Emphasizing that Pegasus is taking firm steps towards its environmental and social goals as well as its strong economic performance, Güliz Öztürk said: "We are determined to do our part. In 2021, we set a target of net-zero carbon emissions by 2050 and reinforced this with our emission intensity reduction target for 2030. On the way to net zero, we are building on the momentum created by many initiatives that not only directly reduce carbon emissions through investments in the new generation fleet and the use of alternative energy sources, but also indirectly contribute to this goal, such as waste management and the transformation of our business processes. The Export Credit Agency-backed aircraft financing model, in which we made emission intensity reduction and gender equality commitments for the financing of 10 of the 17 Airbus A321neo aircraft that joined our fleet last year, was the first of its kind in its category for being the first ever sustainability-linked aircraft-secured term loan. While we continue to work with stakeholders on sustainable aviation fuel (SAF) production, particularly in Türkiye, we are also increasing our experience and impact in the use of SAF. We are moving forward in line with our 2050 and 2030 environmental goals.

Öztürk continued her speech: "We also place great importance to diversity, equality and inclusion. Through our initiative called 'Harmony', we are setting our targets for a more equal and pluralistic future by implementing various projects within the framework of spreading an inclusive culture, with a focus on gender equality. As of May 2023, 35% of our employees are made up of women. Aligned with IATA's '25 in 2025' targets, we aim to increase the proportion of female pilots, engineers, and technicians, and as well as the ratio of female managers to at least 32%.

Commenting that the 79th IATA General Assembly was a first in terms of environmental impact, Güliz Öztürk said, "In all industry events we attend, we talk about our goals in line with the 2050 net zero target, but we also need actions that show we can achieve our goals. With this in mind, we wanted to set an example by taking action to mitigate the flight-related greenhouse gas emissions of all IATA AGM attendees and cargo flying with Pegasus Airlines through the corresponding amount of sustainable aviation fuel (SAF). With this initiative we want to send two strong messages to our industry and to the public. On the one hand, we are highlighting the importance and impact of effective use of SAF on aviation's net-zero goal. At the same time, this initiative sets an important example for future industry activities in terms of commitment to the Net Zero goal” 

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