Airlines 2018-02 AGM

2018 – 02

airlines.iata.org

AIRLINES.

Airlines.

THE AGM ISSUE

2018 – 02

CEO Interviews Qantas, Turkish, ANA, American | Airports Ramp it up IATA Opinion Improving safety | Technology Artificial intelligence plans Australia's challenge Building a greener future with the help of aviation

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04/05/2018 08:09

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Airlines.

Contents 2018 – 02

Comment

42 Welcoming the world

9 Alexandre de Juniac, Director General

ANA CEO, Yuji Hirako says attracting tourists will be hugely important to the airline's business in the coming years

Our world can prosper through aviation, but governments must help the industry

27

18 IATA Opinion: Gilberto Lopez Meyer, Senior Vice President, Safety and Flight Operations

52 Doing the right thing

IOSA shows safety has no limits

Doug Parker, American Airlines Chairman and CEO, on the carrier's partnerships and airport privatization

Digest

Dossier

12 IATA and industry update

27 Going green for gold

Night flights vital to UK economy; Al-Baker backs Qatar; Vistara joins IATA

Australia's vast landscape makes air travel vital, but challenges remain

16 Data: In numbers

Features

Industry Performance Story 2017

36 Ramping it up

7

The role of autonomous vehicles

CEO Interviews

36

20 Making the most of opportunity

Qantas CEO, Alan Joyce explains how the Group hopes to sustain growth, and encourage further female participation

48 Sustainable progress

Sustainable aviation fuels getting closer 58 Revolutionizing the airline

AI can improve the travel experience 32 Full speed ahead

Mehmet Ilker Aycı, Turkish Airlines CEO, is excited by the options Istanbul New Airport can deliver for the carrier

IATA Corporate Communications Vice President Anthony Concil Creative Direction Richard McCausland Assistant Director Chris Goater www.iata.org Editorial Editor Graham Newton Head of content production DeeDee Doke Assistant editor Patrick Appleton Senior designer Gary Hill Picture editor Claire Echavarry Production Production manager Jane Easterman +44 (0)20 7880 6248 jane.easterman@redactive.co.uk Publishing director Aaron Nicholls

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60 Seconds with...

20

Advertising Business development manager Nigel Collard +44 (0)20 7324 2763 nigel.collard@redactive.co.uk

Follow IATA on Twitter @IATA and join our LinkedIn group For Airlines International subscription requests, or change of address notifications, email Airlinesint@iata.org We welcome feedback and content ideas

62 Goh Choon Phong, CEO of Singapore Airlines

Printed by PCP Airlines International ISSN 1360-6387

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The opinions expressed in this publication are those of the individual authors or advertisers and do not necessarily reflect those of Redactive, IATA or its members. The mention of specific companies or products in articles or advertisements contained herein does not imply that they are endorsed or recommended by IATA or Redactive.

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All of this publication’s content is subject to copyright, design rights and trademarks of Airlines International and third parties.

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2018 – 02 Airlines

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Comment: Director General and CEO, IATA

The Power of a United Voice Our world prospers when aviation brings it together, which is why governments must work hand-in-hand with the industry to help aviation continue to enrich lives ver the last year, the importance of uniting behind global standards, smarter regulation, and cooperative dialogue have been constant themes.

Take the difficult challenge of the portable electronics (PED) ban. Despite the unpromising start, with a unilateral announcement by the US (swiftly followed by the UK), we have actually ended up in a position where our relationship with security regulators is arguably the strongest it has ever been. This came about because, as vital partners to governments, we proposed credible alternative measures. It was an example of IATA and the industry at its best: united, responsible, and focused on the best outcomes for passengers.

We’re taking the same approach in many other areas. Human trafficking is a terrible crime that destroys lives. Building on our track record of collaboration to stop the illegal trade in wildlife, we have our “eyes open” against human trafficking and are determined to support law enforcement efforts to stamp out this scourge.

We are also united on climate change. We have set out visionary targets to achieve carbon-neutral growth from 2020, and to cut our carbon footprint in half by 2050 (compared to 2005). Our goals can only be achieved in partnership with governments. With united industry support, and under the leadership of the International Civil Aviation Organization (ICAO), governments agreed to the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). And we are building on the momentum of this landmark agreement to work with governments on the commercialization of sustainable aviation fuels—with some success, as you will read in the article on page 48 of this issue.

ILLUSTRATION: SAM KERR

O

airlines.iata.org

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Looking to the future, it is clear that we are facing a crisis: Demand for air transport is growing faster than infrastructure development. We must engage governments to ensure that we have the capacity to accommodate demand, built to meet customer expectations and available at affordable prices.

With governments increasingly looking to various forms of privatization, particularly when building airports, there is an additional danger. As American Airlines Chairman and CEO Doug Parker says in his interview starting on page 52, “If you get monopolies determined to maximize profits, you’re in trouble.”

We’re going to be relentless in reminding governments that giving poorly-regulated monopolies a license to print money at the passenger’s expense is bad for the connectivity that drives modern economies.

That’s the key. A successful aviation industry is safe, efficient, sustainable and accessible. And it augments people’s well-being. Our world grows more prosperous when aviation brings it together. Lives are enriched by the power to visit and explore every corner of our planet. Aviation is the Business of Freedom. And that’s a message that will ring loud and clear when we meet in Sydney, Australia for our 74th Annual General Meeting and World Air Transport Summit.

9

Alexandre de Juniac: Director General and CEO, IATA 2018 – 02 Airlines

04/05/2018 11:53

10

IMAGE: GETTY

In 1947, the first Kangaroo Route took four days and nine stops. In 2018, travel time has been slashed to just 17 hours non-stop with Qantas’ new service between Perth and London, which completed its inaugural flight in March. With less time in transit during the 14,498km trip, travelers can enjoy the likes of Hutt Lagoon’s spectacular ‘pink lake’ and London's Big Ben for longer.

The Big Picture

Airlines 2018 – 02

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04/05/2018 11:54

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04/05/2018 11:54

Digest Night flights vital to UK economy IATA has urged the British government to retain the current operational flexibility at London Heathrow as concerns persist about the impact of a total ban on night flights.

The UK government has published 'Beyond The Horizon', a paper outlining the steps for a future UK Aviation Strategy, but airlines believe a complete night flight ban would be inconsistent with the objectives previously outlined, which include helping the industry work for its customers and building a global, connected Britain.

half the flights lost would be from these markets – while regional connectivity and rapid freight delivery would suffer.

Air cargo is a crucial link in the transport chain, with late night departures vital to British business. 33% of UK exports by value passed through Heathrow in 2017. Any night flight ban would have a major impact.

Britain wants to promote 'Global Britain' as it prepares to leave the EU, but such a ban would weaken Britain's economic opportunities in fast-growing economies in Asia and beyond.

IMAGES: GETTY/ALAMY/ISTOCK

12

In 2015, Britain's Airports Commission suggested a total ban on flights for a six-and-a-half hour period during the night and early morning, which airlines say would seriously damage the UK's economic competitiveness and hit travellers and cargo alike.

The UK is already at a disadvantage due to its time difference against European hubs, and an IATA report has shown how a ban on night flights would further affect Heathrow.

Routes from Asia would be disproportionately affected — nearly

Airlines 2018 – 02

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airlines.iata.org

04/05/2018 12:44

Digest

“The importance of Qatar Aviation Services (QAS) to our continued growth cannot be overstated” Qatar Airways Group CEO, His Excellency Akbar Al-Baker (see story on p13, below)

Digging into data IATA’s Ground Damage Database (GDDB) is critical to improving safety in ground operations.

“It has a lot of good data and will drive positive change,” said Stuart Carmichael, Vice President, Network Health and Safety Standards, Menzies Aviation, at the Safety Performance Indicator session at the IGHC in April.

The GDDB provides numerous advantages to the industry. By integrating global data, the GDDB helps the industry to understand trends and performance and identify risks by their frequency and severity.

In turn, this will assist the creation of new policies and procedures for risk mitigation.

Approximately 120 airlines have reported damage to the GDDB to date, but the more data the GDDB has, the better it will work.

GDDB enhancements are ongoing, including the addition of new equipment. Most importantly, there is a proposal to add a cost model. This will allow a better understanding of total costs linked to ground damage.

THE PLATFORM FOR GROWTH Development: Akbar Al-Baker aims for further growth

In his keynote speech at the 31st IGHC, His Excellency, Akbar Al-Baker, Qatar Airways Group Chief Executive, highlighted the role of ground handling in driving sustainable growth in aviation.

Qatar Airways is expanding rapidly, backed by Hamad International Airport and Qatar Aviation Services (QAS). In 2017, the airline opened 11 new routes and in the 2018–2019 financial year will add a further 16 destinations to the network.

“The importance of QAS to our continued growth cannot be overstated,” said Al-Baker.

Though it enjoys a monopoly at Hamad International Airport, QAS will expand internationally, Al-Baker informed at the following press conference.

airlines.iata.org

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Summit (AVARS) 5-6 June Geneva, Switzerland Business Travel Summit 13-14 June Geneva, Switzerland Aviation Data Symposium 19-21 June Berlin, Germany

13

142nd Slot Conference 19-21 June Vancouver, Canada Frequent Flyer Fraud Prevention 26-28 June Chicago, USA

Global Fraud Prevention 17-18 September Madrid, Spain

IATA puts the spotlight on air freight as volumes expected to increase between now and 2022.

Forecasts for the 2018-2022 period, prepared by IATA Economics

June to September

Aviation Day Caribbean 29 June Barbados

Forecasting air freight demand IATA forecasts industry-wide freight tonne kilometres (FTKs) to grow by 4.9% on average over each of the next five years, helped by a stronger economic and trade backdrop.

In keeping with the performance seen since 2014, air freight is expected to continue to outperform global goods trade modestly between 2018 and 2022. This is a prime area for future research.

IATA’s baseline forecasts are one way in which freight demand could develop. IATA explored alternative scenarios to illustrate a range of outcomes in FTKs over the forecast time horizon.

Events

AirportIS Forum 19 September Guangzhou, China Digital Cargo Conference 17-18 September Geneva, Switzerland

Demanding work: air freight volumes look set to rise over the next five years

World Financial Symposium 17-20 September Madrid, Spain

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04/05/2018 12:44

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INDIA ENJOYS RAPID DOMESTIC PASSENGER LOAD GROWTH

WORKING BETTER TOGETHER

The domestic India passenger load factor exceeded 90% for the first time on record in February 2018, according to a recent report by IATA Economics.

This was an all-time high for the seven domestic markets that IATA tracks on a monthly basis and follows a sustained period of rapid growth in air passenger demand in the country.

The domestic India passenger market posted double-digit year-on-year revenue passenger kilometers (RPK) growth for the 42nd month in a row in February 2018 (22.9%). This was nearly twice the pace of the next fastest growing market (China; 11.8%). As a result, the domestic India passenger load factor has continued to trend upwards and February 2018 was notable as being the first month on record in which the domestic India load factor exceeded 90% of available seat kilometers.

Pooling ground service equipment could transform the ramp. At London Luton, Ground Support Equipment (GSE) assets doubled following a change of contract at one of the airport’s main airlines.

The success of a GSE pooling trial at five of the gateway’s busiest stands eventually led to a contract for GSE being awarded by the airport with the price of the equipment determined by the ground handlers involved.

The first piece of pooled equipment arrived at London Luton in January 2017 with the fleet completed nine months later. A second phase is now being discussed with baggage trailers likely to be an early addition, followed by pushback tugs.

London Luton has seen a 40% reduction in ramp congestion and a 95% reduction in equipment damage. Moreover, the airport now boasts modern equipment with the latest safety features while standardization ensures greater efficiency and understanding among all stakeholders.

RECORD INCREASE

India

China

22.9% 11.8%

90%

Year-on-year revenue passenger kilometers (RPQ) growth

The domestic India passenger load factor exceeded 90%

VISTARA JOINS IATA Vistara has become the third Indian carrier to be a member of IATA, which will help it provide a seamless travel experience through an extended global network to travellers to and from India.

“With IATA’s membership we are confident to showcase Vistara’s strengths on a global scale,” Vistara’s CEO Leslie Thng said.

airlines.iata.org

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Regional Vice-President for Asia Pacific, IATA, Conrad Clifford said it was looking forward to working with Vistara in shaping IATA’s priorities for India and the global aviation industry.

The airline has flown more than 8.5 million customers and serves 22 destinations, operated by a fleet of 20 Airbus A320 aircraft.

Modernized: Ramp congestion has fallen by 40% at London Luton

95%

Digest

15

London Luton has seen a 95% reduction in equipment damage.

Moreover, the airport now boasts modern equipment with the latest safety features while standardization ensures greater efficiency and understanding 2018 – 02 Airlines

04/05/2018 12:44

Data

In numbers I N D U ST RY P E R FO R M A N C E STO RY 2 0 1 7

Operating profit margin by region (% of revenues): Regional financial performance remains mixed, and wide differences remain as North America outperforms while Africa faces a tough market environment.

North America

Asia Pacific

Europe

Latin America

Middle East

Africa

12.9%

5.2%

4.5%

2.9%

0.7%

-3.6%

16

$35,400,0 The level of profits remains at near-record levels Supported by strong demand and a healthy economic backdrop, the airline industry generated an estimated net post-tax profit of $35.4 billion in 2017.

The demand for air passenger services grew strongly in 2017, with industry-wide revenue passenger kilometers (RPKs) increasing 8.1%. This is the fastest growth in more than a decade, since 2005, and is well above the long-run average of 5.5%.

Airlines 2018 – 02

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airlines.iata.org

04/05/2018 12:50

Data

Air tourist spending and value of trade carried by air

Top 10 increasing Origin-Destination markets in 2017

Air transport supports economic growth and prosperity through tourism and trade: International air tourists are estimated to have spent $711 billion in 2017. IATA estimates the value of goods carried by air in 2017 at $5.9 trillion, representing almost 7.5% of world GDP.

(Absolute increase in O-D journeys per million travelers) In 2017, the domestic China passenger market again provided the largest incremental increase globally in the number of passenger trips, adding a massive 59 million journeys compared with 2016.

750 700

Air tourist spending Value of traded goods carried by air

8,000

Domestic China Domestic US

6,000

550 5,000 500 4,000 450 400

3,000

Traded goods (US$ billion)

Air tourist spending (US$ billion)

7,000 650 600

14.6% 4.7%

Domestic India

17.6%

Domestic Japan

6.9%

Domestic Mexico

15.2%

Domestic Indonesia

5.5% % year-on-year growth rates

United Kingdom–Spain

10.6%

Domestic Spain

15.6%

Domestic Russia

9.9%

350 2,000 300 Japan–Korea

26.4%

1,000

250 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17

0

5

10

15

20

25

30

35

40

45

50

55

60

Absolute increase in O-D journeys (2017, million, year on year)

17

3.6%

9.7%

00,000 After picking up in the second half of 2016, industry-wide freight tonne kilometers (FTKs) rose to 9.7% in 2017, up from 3.6% in 2016. Air freight grew more than twice as fast as global trade volumes overall during 2017.

81.5%

2017

Passenger load factor Industry-wide increases in capacity in 2017 failed to keep pace with strong demand growth.

On the passenger side, global available seat kilometers (ASKs) increased 6.7% in 2017 compared with 2016.

For freight, available freight tonne kilometers (AFTKs) grew 4.8% year on year in 2017—the slowest full-year growth rate since 2013.

As a result, passenger and freight load factors increased in 2017. The industry-wide passenger load factor rose to a record high 81.5% for a calendar year.

2018 – 02 Airlines

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04/05/2018 12:50

IATA Opinion: Gilberto López Meyer

Safety advances have no limits Aviation safety can be taken to new levels, says Gilberto López Meyer, IATA’s Senior Vice President, Safety and Flight Operations

F

ILLUSTRATION: SAM KERR

18

ifteen years after the first IATA Operational Safety Audit (IOSA), the program has grown in scope, participation, and recognition.

This has allowed IOSA to become the perfect complement to State safety oversight programs. The IOSA standards are derived from International Civil Aviation Organization (ICAO) standards and recommended practices, but they do not necessarily conform in their entirety. States are allowed to file differences from ICAO standards, which is where IOSA comes in. Because the program addresses airlines and not the State, it has the flexibility to account for these differences while still being fully aligned with ICAO. So, for example, when there is an assessment of a State’s regulatory effectiveness under the ICAO Universal Safety Oversight Audit Program (USOAP)—which necessarily includes airlines, airports and air navigation service providers—that assessment can perhaps concentrate more on carriers that are not on the IOSA registry. Thus, ICAO provides a top-down safety process while IOSA works as a bottom up process.

It makes sense, therefore, for more regulators to look to IOSA as a critical contributor to aviation safety. The numbers make the argument compelling. In 2017, airlines on the IOSA Registry were nearly four times safer than non-IOSA airlines (0.56 vs.

2.17 jet hull losses per one million flights).

Even so, the levels of maturity and excellence that IOSA has achieved are just the beginning. There are 430 airlines (280 IATA Members, 149 non-members) from 137 different countries on the Registry with more joining every year. Importantly, close

Airlines 2018 – 02

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to 35% of IOSA-registered airlines are not IATA members.

These airlines are not obliged to be in IOSA, but nonetheless clearly find great value in the program. IOSA has become a global standard, recognized well beyond IATA membership.

However, the drive to further improve safety carries IOSA forward. Continuous improvement of the program is, and must be, the imperative. This has led to the development of the IOSA Digital Transformation project.

Each audit generates a massive amount of data, but the process of managing that data is currently being done manually.

In effect, analyses and the resultant enhancements come about through a reactive process. Under Digital Transformation, IOSA will become more proactive and predictive.

Being able to employ automated advanced business analytics will bring a wealth of benefits, including better management of resources and an enhanced level of quality assurance.

Digital Transformation will turn IOSA into a collaborative platform that concentrates its benefits and value. IOSA stakeholders and users will be able to interact with each other seamlessly on industry safety initiatives, standards and operational practices.

The audit program processes will be digitally remastered, making for a more effective overall process from start to finish.

Digital Transformation will result in drastic changes, and the collective mindset will need to change accordingly—at IATA as well as at airlines, auditors, and regulators. The trust and integrity IOSA has built up over 15 years will be the platform for that change. IOSA is a hallmark of airline safety and that will continue to be the case as the bar is pushed ever higher. airlines.iata.org

04/05/2018 11:55

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CEO Interview

20

We’re a business first and foremost.

But delivering for our customers is ultimately how we deliver for our shareholders

Airlines 2018 – 02

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airlines.iata.org

03/05/2018 16:01

CEO Interview

Making the most of opportunity Alan Joyce, Qantas Group CEO, tells Graham Newton about how the airline aims to build on recent growth, and why more female participation in technical roles is the best way to cope with air travel demand WORDS: GRAHAM NEWTON

21

I

n recent years, the Qantas Group has restructured to better serve the growing demand for air travel and as CEO Alan Joyce explains, working hard to improve the infrastructure and create successful joint ventures will further the airline’s ability to expand. However, most crucial is the need to appeal to a wider market in recruitment.

IMAGES: GETTY/ALAMY

How is 2018 shaping up for the Group?

We talk about the trifecta of delivering for our customers, our shareholders, and our people.

That’s how we judge success.

We’re still a few months away from reporting our full year financial performance, but we had a record half year. And I think one of the more interesting indicators for our shareholders is the fact we’ve bought back almost 25% of the airline, through on-market share buybacks, since 2015.

Our customer satisfaction data is positive, and we have launched our direct Perth-London service, which was a huge milestone.

New aircraft are always good news for an airline, and we’ll have eight new Boeing 787 Dreamliners in the Qantas fleet by the end of the year. Our dual brand strategy, with low fare airlines.iata.org

P20-24_IATA Airlines 2018-02_CEO Qantas_v3ghF.indd 21

In brief…

Women in technical roles Qantas' committment Qantas has committed to a 20% intake of women in its 2018 cadet program, increasing that number over the next decade to reach gender parity

carrier Jetstar and full-service carrier Qantas, continues to work extremely well. We keep tweaking that model as the market shifts and it really delivers.

Like all airlines, we’re facing pressures around rising fuel prices. And in our corner of the world, we’re still seeing quite a lot of international capacity growth.

The competition is intense, on both pricing and product.

Breaking through Qantas pilots visit schools and serve as visible role models, demonstrating that Qantas Group pilots can break the glass ceiling

Power of the mind Qantas sponsors the Power of Engineering program.

Importantly, almost 80% of the girls who started the Open Days saying “no” to a career in engineering, changed their minds by the end of it

What is the near-term strategy for the various divisions?

We’re a portfolio business, so the Group’s success ultimately comes down to each division working towards the same strategy.

This kind of approach allows us to leverage our dual brand strategy to offer customers more choices, more seamless travel, and it also helps to develop smarter ways of doing things across our operations.

With Qantas Domestic we’re seeing the benefits of investing to generate margin growth.

We’ve added free Wi-Fi and we’re continually investing in our lounges.

Lounge renovations are a bit like painting the Sydney Harbour Bridge. By the time you’ve 2018 – 02 Airlines

03/05/2018 16:01

CEO Interview

How important will the American Airlines tie-up be?

American was our first ever codeshare partner.

It’s a relationship that goes back almost 30 years. A joint business agreement allows us to evolve the partnership to better serve our customers together.

It will allow us to expand the number of codeshare routes we both operate and make available a wider range of lower fares and discounts to more customers.

Importantly, the joint business will give American and Qantas the opportunity to launch additional routes between the United States and Australia and New Zealand, including new flights to city pairs currently not served by either of us.

What do these new types of joint businesses deliver above alliances or codesharing?

Having a joint business with anti-trust immunity means a level of cooperation that Airlines 2018 – 02

P20-24_IATA Airlines 2018-02_CEO Qantas_v3ghF.indd 22

goes much deeper than a codeshare can.

That doesn’t make codeshares any less valuable. They are a very important part of our partner network. But a joint business means coordination on a range of factors, including revenue sharing and schedules.

1920

22

finished refreshing the whole network, it’s time to start at the beginning again.

Jetstar remains focused on offering low fares, which in turn stimulates demand to a growing list of domestic and international leisure destinations.

In the 2017 financial year (FY17), out of 37 million fares sold by the Jetstar Group, 24 million were under $A100 and it still manages to maintain strong margins. Jetstar will start taking delivery of 18 A321neo’s from 2020.

As for Qantas International, this is an important transitional year. It’s setting up a bright future. We’re unlocking a lot of efficiencies with the Boeing 787-9, from which I think a lot of airlines have benefited.

We’ve started new routes like Perth-London.

We’ve started flying between Singapore and London again. And we’ve extended our relationship with Emirates for another five years, which means Qantas customers can still benefit from the incredible reach that Emirates has from its Dubai hub.

Qantas was founded in Winton, Queensland on November 16, 1920 by Paul McGinness and Hudson Fysh. Both men served in World War I, and the first plane bought on behalf of Qantas was an Avro 504K for £1425

Do you think of Qantas in purely business terms—delivering value for shareholders—or, given Australia’s size and distance from other countries, is there a public service element to your strategy?

We’re a business first and foremost. But delivering for our customers is ultimately how we deliver for our shareholders. I think all airlines are acutely aware that their job is connecting people.

It’s probably more acute in Australia because of its sheer size and the remoteness of some towns. We did start life as a mail service in the outback. But it had to add up then and it has to add up now.

Being an end of the line carrier has certainly shaped the challenges we’ve taken on though.

Project Sunrise is a good example of that.

Qantas is challenging Boeing and Airbus to deliver an aircraft capable of flying regular direct services like Sydney-London, BrisbaneParis, and Melbourne-New York nonstop with a full payload by 2022.

How important is the new Sydney airport?

We are a big supporter of Western Sydney Airport for the economic opportunities it will bring and its potential to introduce some healthy competition for airport services and charges in the Sydney Basin.

But it’s important that the airport is fit for purpose, particularly given it’s likely to be used by low-cost carriers in its early life.

Regionally, what are the opportunities, trends, and challenges?

The region that Australia operates in puts us on the doorstop of incredible growth across many sectors, including aviation. We see four big airlines.iata.org

03/05/2018 16:01

NOW’S THE PERFECT TIME TO EXTEND YOUR SUCCESS

777-300ER. A BETTER WAY TO FLY. The Boeing 777-300ER’s unique combination of superior range, outstanding fuel efficiency and passenger-preferred comfort has created long-range success for carriers around the world. And with recent upgrades that further reduce costs and boost revenue, now’s the perfect time to add to that success, in the air and on the bottom line. The 777-300ER makes every fleet a more profitable fleet.

That’s a better way to fly.

boeing.com/777

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03/05/2018 15:53

CEO Interview

global forces that are going to dominate: the growth of Asia-Pacific, the digital and data revolution, meeting the needs of new generations of customers and employees, and climate change and resource constraints (see panel).

Each of these mega trends will provide both opportunities and challenges for aviation and the key is building agility into your strategy so that you make the most of opportunities and stay ahead of disruption.

What about Europe and the United States?

Are they still major markets?

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We fly to more destinations in the United States than any other country we operate in, it is a key market for us.

Our partnerships with American, WestJet, and Alaska Airlines help us offer strong behind and beyond networks for our customers.

And thanks to our partnership with Emirates, we offer customers more destinations to the United Kingdom and Europe than ever before with three ways to get to the United Kingdom (Perth, Singapore, and Dubai) and over 30 codeshare destinations in Europe on the joint network.

Before our Emirates partnership, just over 400,000 customers traveled on Qantas code to Europe each year. Under the Emirates partnership more than 1.2 million customers travel on Qantas code to Europe.

Is the Carbon Offset Reduction Scheme for International Aviation the answer to aviation’s environmental problems?

We are long past the stage where there is any doubt about the credibility of carbon offset markets. At Qantas, we have had a voluntary offset scheme for a decade now and we see the real, concrete impact that our customers’ contributions make in cutting carbon emissions.

What’s clear though is that offsetting alone isn’t going to deliver the carbon reductions we need. That comes down to advances in Airlines 2018 – 02

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technology and ultimately biofuels, and those things are going to be driven by the economics of the industry as much as anything else.

Why is the Pilot Academy important and is flying still an attractive job proposition?

Mega trends in Asia-Pacific Traffic growth Asia-Pacific will be the source of more than half the new passengers traveling over the next two decades, with IATA predicting that China will be the world’s largest aviation market by 2022 Australia’s Free Trade Agreements with a number of countries in the region, including Japan and Singapore, have opened up strong freight markets with an appetite for Australian-grown produce

Digital and data revolution The Qantas Group centralized its data to better analyze it and predict trends. That facilitates products and services designed to meet customer requirements, sophisticated disruption recovery models to help customers get on their way faster and apps, such as FlightPulse, to fly more efficiently

Climate change and resource constraints Qantas has developed the world’s largest airline carbon offset program and developed ways for Australian business to do the same through Qantas’ Future Planet initiative Over the last 10 years, Qantas has offset over 2.5 million tonnes of carbon emissions, the largest off-setter of any airline

Boeing estimates the world will need about 640,000 more pilots in the next 20 years, with 40% in the Asia-Pacific region.

That level of demand makes the academy important, not just for Qantas but for Australian aviation more broadly so that all parts of the industry have access to qualified pilots in a country that relies heavily on air transport. Such demand has put added emphasis on Qantas’ Pilot Academy for the future of the company, and Australian aviation as a whole.

With a global average of 97% males in the profession, key in all of this is addressing the gender imbalance among pilots (see panel).

If we’re leaving out almost 50% of the population in our search for the next generation of pilots, we’re clearly not tapping into all the talent that’s available.

As an industry, we need to do a much better job of removing barriers and encouraging women to become pilots and have an exciting career path.

We’ll only close the gap by reinforcing the message that girls and women can excel in technical jobs and by encouraging them to study the subjects they need to take them on. That’s one of the things with which the academy will hopefully help.

Why is the IATA AGM important to the industry?

The IATA AGM is a key event on the annual calendar, bringing together the best in the industry to discuss the many opportunities ahead and to explore ways to prepare for disruption.

I know delegates are going to love spending time in Sydney. We are excited to welcome everyone here as the host airline. airlines.iata.org

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Dossier: Australia

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Going green for gold Australia faces huge challenges, but in tackling the issue of making the country's aviation environmentally and economically sustainable, industry leaders say investment in people, technology and renewables is the way forward WORDS: GRAHAM NEWTON

Australia stretches over 4,000km (2,500 miles) from east to west and is similarly distant from the nearest major economies and population centres. Connectivity—domestic and international—depends on air travel.

The main airlines are understandably healthy. The Qantas Group achieved a A$976 million record profit in the first half of the 2018 financial year. Virgin Australia, meanwhile, is also in the black.

For the first half of its 2018 financial year, airlines.iata.org

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it reported a A$60 million improvement in its underlying profit before tax over the previous corresponding period, its best result in 10 years.

Managing the growth of Australia’s aviation industry in a way which is both economically and environmentally sustainable will be of prime importance in the coming decades.

The main determinant in achieving this ambition is infrastructure—a mixed bag of opportunities and challenges. The

headline-grabber is the new Western Sydney Airport (WSA), sited at Badgerys Creek about 40km from downtown. WSA will have a single 3,700-meter runway and a 10 million passenger per annum capacity on opening in 2026.

Forced investment

Sydney Airport Group, the owner of the existing gateway, Kingsford Smith, was given the opportunity to be involved in the build, but declined. That has forced 2018 – 02 Airlines

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Dossier: Australia

Matteo Zanarini, IATA’s Area Manager, South West Pacific

Australia benefits from economic and political stability

Conrad Clifford, IATA’s Regional Vice President, Asia-Pacific

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WSA represents the largest infrastructure project for NSW

Alison Webster, Qantas International CEO

The Agrisoma deal marks a big step in Australia’s renewable jetfuel industry

the federal government to dip into its pocket to the tune of A$5.3 billion.

Many have noted that this investment doesn’t include a rail link, despite the distance from the city and congested roads. And the government’s involvement—and its probable decision to sell once the build is completed—also puts a question mark on the airport’s future. Not surprisingly, no airlines have yet committed to serve WSA. Nevertheless, the airport is a clear commitment by the federal government to safeguard the status of Sydney as the key gateway to Australia and the South West Pacific Islands.

“The new airport represents without doubt the largest infrastructure project for New South Wales and is expected to generate substantial economic growth and employment opportunities for people in the Western Sydney region,” says Conrad Clifford, IATA’s Regional Vice President, Asia-Pacific. “WSA’s projected contribution, over the 2020–2050 period, is estimated at between A$9.2 billion and A$15.6 billion for Western Sydney. The impact on the whole Sydney economy is estimated at between A$15.7 billion and A$25.6 billion.”

Air travel demand in the Sydney region is forecast to double over the next 20 years and Kingsford Smith cannot handle that growth even if the current

operational and curfew restrictions are removed. Given Sydney’s primary gateway status, WSA is essential for Australia’s aviation future as a whole.

Charges increase

The eventual ownership or management of WSA will be closely monitored though, as airport charges in Australia are high and getting higher.

Productivity Commission reviews in 2007 and 2012 both found there was no evidence of excessive profits being earned on major airports’ aeronautical activities, but Vinoop Goel, IATA’s Asia-Pacific Regional Director of Airports & External Relations, says IATA is “looking forward to the forthcoming Productivity Commission Review into the Economic Regulation of Airport Services, which is planned for the second half of 2018”.

There is a clear mismatch between the cost of infrastructure and air fares, the former increasing while the latter continues to drop in real terms. The newly-formed Airlines for Australia and New Zealand (A4ANZ) and the Board of Airline Representatives of Australia (BARA) have also made note of rising infrastructure costs.

The argument is clear. Airport development must be done in consultation with airport users to ensure timely delivery

Wanted… pilot shortage causes action

Rob Sharp, Virgin Australia’s Group Executive for Airlines

Pilot recruitment is a significant area of focus Airlines 2018 – 02

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Australia is not immune to the increasing global shortage of pilots. Both Qantas and Virgin Australia have moved quickly to address the problem.

Qantas plans to establish a pilot academy from 2019, initially for its own cadets. But assuming demand for pilots remains high, the academy could open up to other airlines and train up to 500 pilots a year.

Virgin Australia is boosting its cadet program and reaching out to schools and universities too.

In 2019 Group Executive Sharp expects the program to have a 50-50 gender split.

To ensure pilot shortages do not hurt domestic growth, the government permits foreign pilots to work in Australia. They can apply for temporary skilled worker visas, valid for two years.

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Dossier

of demand driven, functional and cost-effective infrastructure.

The light touch of the existing price monitoring regime is, in Goel’s words, “ineffective in regulating airport charges at the major airports in Australia”. Airports continue to make excessive profits at the expense of users even as airport operators diversify and grow non-aeronautical revenue streams, which should minimize the costs that users have to pay.

Indeed, according to a Grattan Institute report, Competition in Australia: Too little of a good thing? “nearly half of returns earned by airport operators are super-normal profits”.

“Lower airport and travel costs are good for users—both passengers and airlines— and can help drive up traffic,” says Goel.

“This in turn helps the country and the local communities reap the social and economic benefits of aviation through increased GDP and job opportunities.”

IMAGES: ISTOCK/VIRGIN AUSTRALIA/WOODS BAGOT

Breath of fresh air

Cost is less of an issue in air traffic management. Airservices Australia provides a welcome change, with business remodeling meaning it has not increased charges for the past two years.

It has a stated aim to maintain the status quo or even reduce pricing.

IATA has expressed concern regarding the cost of Airservices’ OneSKY project, however. The project will implement an advanced joint civil-military air traffic control system for Australia to effectively manage the continued growth of air traffic.

The procurement process has involved lengthy consultations between the Department of Defense, Airservices and the system supplier. IATA has highlighted that there should be no cross-subsidization between commercial users and the military.

Matteo Zanarini, IATA’s Area Manager, airlines.iata.org

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Discussion on… Airport development

Aside from Western Sydney Airport, there is a lot of work being done to Australian gateways to ensure they are ready for future growth. Perth, Brisbane and Melbourne will all get new runways.

Perth will also benefit from a new international terminal, following hot on the heels of a 2015 upgrade. The 20,500m2 facility will comprise retail, lounges and gates. Importantly, a rail link will connect Perth Airport to the eastern suburbs and regional centers. The investment at Perth Airport is being driven by Qantas, which, for the first time, is connecting the west coast of Australia with non-stop services to London.

Brisbane is also going for an international terminal concourse expansion, creating an extra 13,500m2 of space. Six new gates, an extended apron to allow for three more parking

stands and new taxiways are all part of the project.

Virgin Australia, meanwhile, will redevelop its domestic terminal 3 at Melbourne over the next three years. The redeveloped terminal will feature automated bag drop facilities, enhanced self-service kiosks, and service pods where Virgin Australia ground crew can assist guests with check-in.

On completion, there will also be a dedicated Premium Entry for Virgin Australia’s business class and platinum and gold frequent flyer guests.

And a new internal ramp between Terminals 3 and 4 will improve T3 security screening facilities and offer better access to the new retail offering in Terminal 4. The T3 arrivals hall will gain two baggage carousels.

“Virgin Australia runs a major operation at Melbourne

Airport, operating up to 100 return flights each day,” says Group Executive for Virgin Australia Airlines, Rob Sharp.

2029 is the year that Melbourne is expected to overtake Sydney as Australia’s largest city, according to projections by the Australian Bureau of Statistics.

At Adelaide, the airport’s original international terminal building will be demolished to make way for new development, including a taxi drop off zone and a forecourt for the Atura Hotel. It will also provide room for future proposed terminal expansion works.

For all Australian airports, automation will be the platform for seamless, efficient and secure terminal processes. The work being done will align with IATA’s future travel initiatives, such as NEXTT, One ID and Smart Security.

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is the year that Melbourne is expected to overtake Sydney as Australia’s largest city, according to projections by the Australian Bureau of Statistics

2029

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Dossier: Australia

Dossier

Benefits of Aviation

4.5% Aviation accounts for more than 600,000 Australian jobs, and 4.5% of GDP

$500 billion

Foreign direct investment stimulated by air transport has amassed over $500 billion

$300 billion

Australia exports by air goods and services are worth more than $300 billion every year

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South West Pacific, sums up: “Australia benefits from economic and political stability as well as being renowned for its perfect fatality-free safety record. Keeping air travel affordable for consumers will generate the most economic benefits for Australians as long as transport infrastructure meets the ever-growing demands in the decades to come.”

Green challenges

Financial sustainability is one vital aspect in securing aviation’s enduring positive impact on Australia. The other is environmental responsibility.

Australia is participating in the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a market-based measure to manage aviation’s emissions globally. Australian airlines are on track to commence reporting CO2 emissions from international flights from January 1 2019, as required by CORSIA. However, the continued growth of air transport means there are still many challenges ahead. Taking into account a range of environmental impacts, including noise, the economic viability of adopting new technologies in the near-to-medium term, and the need to achieve regional and global technological interoperability to realize economic, Airlines 2018 – 02

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International visitors arriving by air spend $16 billionplus annually

operational and environmental benefits are all on the agenda.

There are other positive developments too. An initiative between the Virgin Australia Group and US-based Gevo Inc will establish Brisbane as a hub for sustainable aviation fuels.

Virgin Australia Group CEO John Borghetti says the project “is critical to testing fuel supply chain infrastructure in Australia to ensure Virgin Australia and Brisbane Airport are ready for the commercial supply of the exciting fuels”.

Meanwhile, in January 2018, Qantas operated a trans-Pacific 15-hour flight between Melbourne and Los Angeles, that used approximately 24,000kg of

Safety oversight The IATA Operational Safety Audit (IOSA) is part of Australia’s safety oversight of airlines.

Australia’s Civil Aviation Safety Authority (CASA) uses IOSA as a tool to complement their oversight of non-Australian registered airlines operating to and from Australia.

CASA uses information from IOSA reports as part of its authorization procedure for foreign-registered aircraft operating into, out of and within Australia. This reduces the number of audits foreign airlines need, while maintaining a high level of safety oversight.

blended biofuel, saving 18,000kg in carbon emissions.

Qantas used biofuel processed from Brassica carinata, a non-food, industrial type of mustard seed, developed by Canadian-based agricultural-technology company, Agrisoma Biosciences.

The flight is part of the partnership announced in 2017 that will also see the companies work with Australian farmers to grow the country’s first commercial aviation biofuel seed crop by 2020.

Qantas International CEO Alison Webster said that the airline’s partnership with Agrisoma “marks a big step in the development of a renewable jetfuel industry in Australia”.

18,000kg In January 2018, Qantas operated a trans-Pacific 15-hour flight between Melbourne and Los Angeles, that used approximately 24,000kg of blended biofuel, saving 18,000kg in carbon emissions airlines.iata.org

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AeroNexus Delivering Efficiency Through Connectivity • 9.5 hours to 90% of the modern world • Maximize payload (fly more cargo in lieu of more fuel) • Unique, flexible air cargo transfer rights • 40+ airlines serving 40+ destinations worldwide • World’s 6th busiest cargo airport • Fast, efficient hydrant fueling • Full service any aircraft, anytime • Open 24/7, no curfews or closures

www.AnchorageAirport.com IATA.AGM18.031.indd 31

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CEO Interview

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Full speed ahead M. İlker Aycı, Turkish Airlines’ Chairman of the Board and the Executive Committee says the airline’s balanced growth trend will further continue WORDS: GRAHAM NEWTON

Airlines 2018 – 02

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urkish Airlines continues to grow.

A new hub airport in Istanbul, new aircraft, and a booming cargo business all point to a bright future for the expanding company.

Are you happy with the performance of the airline so far in 2018 and do you expect to meet your targets?

In 2018, we are breaking the records we broke in 2017. We are continuing to benefit from the steps we took in 2017 and the strict fiscal discipline that we have been pursuing.

We are targeting to reach 74 million passengers this year, increase our capacity 5%-6% to reach 183 billion Available Seat Kilometers (ASKs) and load factor is expected to be close to 80%. Our cargo target is 1.3 million tonnes. So, we are airlines.iata.org

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CEO Interview

already experiencing the excitement of taking a major step forward in 2018, to further our success in 2017.

Our transition to the new Istanbul Airport in 2018 (due to open in October) will be another important milestone for both Turkey and Turkish Airlines. I am pleased with our performance so far and I believe we can achieve a performance above our 2018 targets in the light of these indicators.

What is the strategy for the next couple of years?

The upcoming period can be considered a period of renewal. We would like to be the best by further enhancing our efficiency, performance and productivity in all areas that we are able to touch.

One of the key elements in our short-term goals is moving to our new hub at Istanbul’s new airport. Istanbul New Airport will become a touchstone for increasing our service quality and growth to achieve our long-term strategic goals.

When the third runway goes into service, our growth will increase, and our costs will be minimized by improving the parameters derived from capacity limitation.

And with the recent orders for new generation aircraft, that we announced last March— a total of 30 B787-9 aircraft, of which 25 firm and 5 optional, will be purchased from Boeing, and a total of 30 A350-900 aircraft, of which 25 firm and 5 optional will be purchased from Airbus—we will focus on the markets we have not been able to enter before.

We will continue to grow not only the number of destinations, but also the frequencies and connection quality. We will have reached 120 million passengers and 500-plus aircraft in our fleet by 2023. Reaching the top 10 in terms of ASKs by 2023 is another target.

Of course, we will continue to grow in cargo.

The new airport will allow us to move 2 million tonnes by 2023 and it is one of our strategic goals to be one of top five air cargo companies in the years ahead. airlines.iata.org

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How important is the new Istanbul Airport to your overall strategy?

302 85

destinations served by Turkish Airlines across five continents

destinations are served by the airline’s cargo division – Turkish Cargo – with a dedicated cargo fleet of 18 aircraft

326 18 aircraft make up Turkish Airlines fleet

Turkish Airlines is part of the Star Alliance, becoming the 18th global member in April 2008

An airline needs infrastructure that supports its fleet size and service quality. For that reason, Istanbul New Airport will be one of the most important factors in Turkish Airlines reaching its targets.

The existing airport has been a bottleneck in runway and slot availability for us. The new airport will be able to provide, in the first phase, capacity for 90 million passengers and 10% more slots per hour compared with the existing facility.

When the third runway is put into service, we can increase market share in markets where that has not been possible before.

The Istanbul New Airport also aims to improve cargo. In the first phase, cargo capacity will be 2.5 million tonnes. On full completion, Istanbul will have 1.4 million m2 of cargo space handling 5.5 million tonnes of cargo capacity.

Additionally, Istanbul New Airport will be the largest maintenance and repair center in the world with a 700,000 m2 maintenance and repair space. Turkish Technic, a prominent subsidiary of Turkish Airlines, is one of the best maintenance and repair centers in the world at present. However, it will have the ability to increase the capacity and improve the quality with the Istanbul New Airport project.

In short, the airport will add an utterly different dimension to Turkish Airlines.

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Will you alter your marketing or partnerships?

We will further our brand positioning through innovation of our marketing mix. To bring our customer satisfaction and product quality to a higher level, we plan to increase and standardize the quality of products/services offered. To this end, we are prioritizing cabin quality and airport operations.

Business partnerships and joint ventures agreements will continue at full speed, as we will partner with companies in North America, Central, and South America, and especially in the Far East. Our new hub will provide an effective competitive advantage in establishing 2018 – 02 Airlines

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CEO Interview

new agreements. Also, in an era where low-cost carriers have been increasing market share every year, we will develop our AnadoluJet strategy. We plan to rebrand our subsidiary in every aspect, including its destinations.

How important is cargo to your financial performance?

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In the last 10 years, we have increased cargo carried more than fivefold whereas passenger numbers tripled. In 2017, cargo revenue grew 32.2% to $1.3 billion. Thus, the share of cargo revenue to total revenue—which was 6% in 2008—increased to 12% in 2017.

Cargo’s importance will grow in 2018. We are increasing our investment in new cargo aircraft.

Our first B777F freighter aircraft joined the fleet in 2017. There will be five B777Fs in our fleet at the end of 2018. The long range and high tonnage capacity of the aircraft has increased our operational capability. We will strengthen our cargo network and we will be stronger in transit cargo.

Additionally, we are going to improve belly cargo capacity with the recently-ordered widebody passenger aircraft that will start to join our fleet in 2019.

Is aviation still an attractive career and can you recruit enough staff to sustain your growth plans?

We plan to employ a sufficient number of pilots, cabin crew, technicians and other staff in line with our 2023 strategic goals. For pilots, we meet half of our annual need with Turkish Airlines Flight Training and Airport Operations Co., which was established two years ago and has become a fully-owned subsidiary of Turkish Airlines.

This year, we will increase pilot training capacity by 30%. Additionally, we are further increasing our capacity through agreements with various flight schools in Turkey.

We work with several universities on projects that will provide prospective employment for technicians. Both universities and students are increasingly interested in the aviation sector.

Airlines 2018 – 02

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Opportunity: Istanbul New Airport will bring future growth

How do you plan, given geopolitical uncertainty in some key markets?

9.3% In 2017, Turkish Airlines grew passenger numbers 9.3% to 68.6 million and improved load factor to 79.1%

Turkish Airlines has the fourth largest destination network in the world. It is first in many regions when the number of origin and destination pairs is taken into account. In 2017, the ratio of transit passengers to total international passengers carried was about 60%.

In addition, 40% of world international traffic and more than 60 capitals are located in our narrowbody aircrafts' range. We are currently serving more than 165 international destinations with narrowbodies from Istanbul.

Our crisis management experience allows us to produce agile solutions in such situations.

We work on various capacity analyses and different strategies to set and direct our plans in the markets that face geopolitical uncertainty.

This extensive flight network, coupled with geographical location advantages provide us with dynamic capacity management strategies to optimize the network in every possible case.

What does it mean for Turkey to have a strong national airline that is now a global brand?

The power of countries comes from the power of their companies. Turkish Airlines offers unique value to Turkey as the power of the airline airlines.iata.org

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strengthens the power of our country day by day. Moreover, Turkish Airlines directly serves Turkey’s open door policies. About 70% of inbound tourists travel by air and a large part of that is carried out by Turkish Airlines. We make a huge contribution to Turkey’s tourism potential and continue to promote the country through high-end commercial films. And we also perform successfully in the business market, too. So, we are essential to Turkey’s global representation and promotion.

In terms of contribution to Turkey's economy, we are a unique service exporter for our country. That is, we provide a significant currency input to our country.

Increasing the number of destinations and frequencies also brings about the development of commercial relations between our country and other countries. Mutual import and export increases are observed at the destinations in Turkish Airlines’ network.

Together with our affiliates, we employ more than 50,000 people. We also guide our national technology. For example, seat manufacturing and galley manufacturing is done by our local manufacturing and exporting companies, TSI (Turkish Seat Industries), and TCI (Turkish Cabin Interiors). And as the largest buyer of products, we consistently support other business fields in Turkey.

Do you think ICAO’s Carbon Offset Reduction Scheme for International Aviation (CORSIA) will play an important role in managing aviation’s climate change impact?

As the aviation sector grows, its environmental impact is increasing accordingly. Besides significant technological advances, infrastructure and operational improvements, alternative fuel developments are having an impact. Even though today's aircraft consume about 80% less fuel per passenger kilometer compared with the 1960s, we absolutely need a large-scale solution for aviation today and in the future.

CORSIA will encourage airline operators to reduce their emissions by purchasing airlines.iata.org

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environmentally-friendly aircraft, seeking sustainable alternative fuels, and using fuel-saving applications.

What is the best way to improve security?

Research indicates that passengers require simple, fast and less intrusive security screening.

I believe the way to enhance the security level and improve the customer experience is to improve the use of technology.

Security must be seen as a whole. There should be improvements from the entrance of the airport to the end of the journey. For security reasons, we should focus on well-supported, reliable and reasonable solutions rather than restrictions and prohibitions. Promoting the use of automated systems, effective use of big data, biometric passports, new generation x-ray machines, and new generation security checkpoints will all be useful.

Airlines and other shareholders in the airline industry, through their customer-focused point of view, can lead the technology companies and the authorities in developing more efficient and customer-focused security systems.

What other challenges do you see ahead for the industry?

The world is constantly changing and as time progresses, the speed of change increases. That being the case, effective management of customer expectations and technological developments are becoming even more important.

The spread of new business and new transportation models are issues to be considered in the aviation sector. I also want to mention information security. Personal data and its protection, which remain high on the agenda, will become even more crucial in the future.

Energy policies and progress in politics and geopolitics will be other issues that directly affect the aviation industry.

Fuel, for example, will be one of the major costs of airlines in the future as it was in the past.

Fuel prices and fuel economy will maintain their current significance from the airlines’ perspective.

$1.3bn

CEO Interview

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In 2017, cargo revenue grew 32.2% to $1.3 billion. Thus, the share of cargo revenue to total revenue—which was 6% in 2008— increased to 12% in 2017 2018 – 02 Airlines

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Technology

The ramp will look a lot different in the years to come thanks to a host of autonomous operations

Ramping it up WORDS: GRAHAM NEWTON

T

he airfield is an ideal environment for autonomous vehicles (AV).

Its highly structured nature means navigation and decision-making are that much simpler. It is also ripe for the greater efficiency that synchronization between AVs would bring.

The benefits of AVs are hard to quantify in the initial stages. But anecdotal evidence from the various trials and implementations in specific areas—such as the docking of passenger boarding bridges and aircraft pushback—has exceeded expectations.

In partnership with Heathrow, British Airways introduced AVs to push back aircraft for its short-haul operation, part of its strategy to further improve punctuality for its customers.

Five emission-free Mototok tugs are deployed across 25 aircraft stands, replacing traditional diesel tugs on Airbus aircraft.

The tug’s electric battery holds a charge for up to three days and there are charging points at every Terminal 5 stand. A single ramp agent can push an aircraft backwards from the gate

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remotely. According to Klaus Goersch, British Airways’ Chief Operating Officer, the introduction of the Mototok will help keep BA flights departing on time. “This major step to modernize our operation is a first in the airline industry, and part of wider investment in new technology that will enhance the experience our customers have,” he says.

Heathrow’s Director of Sustainability, Matt Gorman, says that the Mototok technology is an essential part of the airport’s sustainability strategy, Heathrow 2.0, and its goals to reduce emissions from Heathrow’s airside activities.

“Together with innovative partners like British Airways we are bringing new electric and hybrid vehicles and charging points to the airport to make a tangible, positive difference in our local environment,” he says.

In time, one ramp agent might be able to oversee several tugs. Connecting tugs to the

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Technology

aircraft without human intervention is an area that will develop over time. One idea is to put pilots in control using the aircraft’s auxiliary power unit to drive an electric motor that would be fixed to an aircraft’s landing gear.

Virtuous circle

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In general, AVs will improve operations in two ways.

Greater accuracy is one. AVs perform repetitive tasks outstandingly well and typically reduce or eliminate the need for repositioning. This precision cuts the time and money wasted dealing with damage.Aircraft are expensive machines and damage reduction is a key driver for AVs. “High levels of synchronization also produce greater operational efficiency and effectiveness,” says Anne Carnall, IATA’s Program Manager, Future Airports. “Coordination will drive improvements in turnaround times.”

In the longer term, AVs will create a virtuous circle of improvement. Operational data will be readily recorded, collected, and analyzed, leading to better real-time decision- making, further optimizing processes and resources.

In short, AVs will use less energy, ease congestion, and enhance safety and efficiency.

Importantly, in an age when airports are finding it increasingly difficult to increase their footprint

High levels of synchronization also produce greater operational efficiency and effectiveness

to deal with extra demand for air travel, AVs will need less space for transit and parking.

Aside from tugs for taxiing aircraft, docking for boarding bridges and driverless buses for staff and passengers are likely to be at the forefront of the AV revolution.

At the moment, boarding bridges are operated manually using a joystick. But manufacturers are developing the technology that will lead to autonomous operations in the near term. Manual override will feature to begin with, but in the longer term one individual will oversee several bridges. That means no more waiting for a driver to arrive at the gate.

What is an AV? An autonomous vehicle has the intelligence to operate safely and efficiently in the environment for which it is designed.

It can make decisions within its operating and design parameters, but must communicate with other vehicles and its environment.

Level 0: Automated system issues warnings and may momentarily intervene but has no sustained vehicle control.

Level 1: The driver and the automated system share control of the vehicle, such as Parking Assistance, where steering is automated, but speed is manual.

Airlines 2018 – 02

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Level 2: The automated system takes full control of the vehicle (accelerating, braking, and steering).

The driver supervises and must be ready to act if the automated system fails.

Level 3: No manual driving required. The automated system will act when an immediate response is needed, such as emergency braking, but the driver must still be ready to intervene at times, specified by the manufacturer.

Level 4: As level 3, but no driver attention is ever required for safety. The driver may safely go to sleep or leave the driver's seat.

Level 5: No human intervention is required. An example would be a robotic taxi.

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Technology

Top 5 damage caused by equipment Number of reports 0

20

40

60

Cargo loader (Main/lower deck loader)

Meanwhile, pilot projects for driverless buses are already happening at several airports, although these tend to be airport-led trials with minimal airline involvement.

Baggage is another area that could benefit from AVs. Sortation systems are already automatic and there are even robotic loaders and unloaders. But a driver is always needed to take bags to and from the aircraft. It is thought that autonomous baggage tugs that easily connect up with a loading system could be operating within a decade. Real visionaries even see drones that could take transfer baggage.

ULD(All types)

Passenger stairs/steps

Belt loader

Loading bridge

High severity damage Medium severity damage Low severity damage

IMAGES: GETTY/MOTOTOK INTERNATIONAL

Defining needs

Of course, having AVs operating in a highly safety-conscious environment like an airfield needs detailed planning as well as the right standards and regulations. It also needs global coordination, so airport operations continue being standardized, benefiting all members of the aviation value chain, including passengers and cargo.

“There is a perception that regulation prevents the use of AVs at airports,” says Carnall. “This is not the case. IATA is working with airlines, airports, and the ground handling community to support more trials, which further demonstrate the value of AVs. Through trials and actual deployments, we are better defining the elements that require standardization and the details of regulatory concerns.”

Chapter 9 of IATA’s Aircraft Handling Manual airlines.iata.org

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Source: IATA Ground Damage Database – Winter 2016-17 Analysis

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already includes requirements for proximity sensing and warning systems on ground support equipment (GSE) that dock at aircraft.

This is not full AV, but it is a step towards that.

“We worked with the Society of Automotive Engineers on drafting standards for aircraft alignment markings at aircraft doors, which can be read and used by GSE when approaching and docking at aircraft,” informs Carnall.

The growing innovation means a number of challenges remain. The business case is proving to be more compelling than initially thought, but it will be unique to each airline and even each station.

It will also be different for cargo facility operations. Cargo facility throughput could increase massively, and the AVs being examined can even handle more than one process. But the nature of the business means there are likely to be many exceptions; passengers and suitcases don’t vary as much as shipments.

Labor issues will be a critical discussion point with all AV deployment. This is not unique to aviation, of course. Automation is driving the reskilling of labor in a number of industries.

Most likely, AVs will be in place for the majority of normal situations, freeing up staff to focus on operations that require their skills, expertise, and decision-making abilities.

“It will be a transitional process, both in terms of proving the capabilities of the vehicles and reassigning and adjusting the work of staff on the ground,” says Steven Savage, IATA’s Senior Analyst, Ground Operations.

Other considerations include cybersecurity and the legal framework, as the risks and liabilities of AVs must be properly understood.

“There is no doubt AVs have transformative potential,” concludes Savage. “The next steps will be more trials, the creation of optimal standards, and ultimately widespread adoption.

Right now, we are looking to establish a portfolio of projects rather than one-offs. That establishes the right culture for standard setting and fosters speedier deployment across the industry for the benefit of all.”

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2018 – 02 Airlines

04/05/2018 11:56

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23/04/2018 12:54

CEO Interview

42

Welcoming the world Yuji Hirako, President and CEO of All Nippon Airways says attracting tourists to Japan will be vital to the carrier’s business INTERVIEW BY: TONY CONCIL

Airlines 2018 – 02

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airlines.iata.org

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CEO Interview

V

isitors to Japan are set to increase as the government pushes tourism ahead of the 2020 Olympic and Paralympic Games. CEO Yuji Hirako says All Nippon Airways is preparing to benefit by refining its dual hub strategy in Tokyo and employing the latest technology.

There are ambitious targets for Japan’s tourism arrivals in connection with the 2020 Tokyo Olympic and Paralympic Games. What impact do you see the Olympics having?

The government has set a target of attracting 40 million visitors annually by 2020. In 2017, the total number of overseas visitors to Japan reached 28.7 million. Effort will be needed to cover the gap.

The increase of 80,000 more slots at Haneda and Narita by 2020 will help. The full utilization of these slots will surely make a big contribution towards the 2020 target.

And where there is already unused capacity— as we have in Osaka, Nagoya, Sendai, Fukuoka, and Sapporo—there is big potential for LCCs to increase tourist arrivals. We are integrating our two subsidiary LCCs (Peach and Vanilla) and their combined strength will surely contribute to this.

IMAGES: GETTY/ISTOCK

The government recently announced a new tourism tax. Are you concerned that it could be counter-productive to the development of tourism?

Of course, any tax is a burden. At ¥1,000 per passenger I think that in comparison, it will have a greater impact on the LCC sector than on the full-service airlines.

When we attract 40 million travelers, the tax will collect roughly ¥40 billion. How this amount is used is vitally important. If it improves the tourism infrastructure of Japan, it could be a good investment.

For example, investments in smart airport technology could alleviate crowding in customs, immigration, and security areas. That would make Japan a more welcoming country for tourists. Similarly, investments to improve airlines.iata.org

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In brief…

Yuji Hirako

1981

signage, preserve monuments, and make our destinations more accessible to foreign tourists would be positive. It is important that the tax payers can directly feel the benefit.

Are you concerned that the tax could rise?

Joined ANA, where he has held a variety of positions in Japan and abroad, including Director of Passenger services at Tokyo Airport Office and Senior Vice President for the Americas

The tax level is set in law and difficult to change.

We urge the government to continue to focus on increasing the number of tourist arrivals— then their revenues will rise automatically. At ¥1,000 per passenger, I think we are at the limit for now. Any increase would create a risk to dampen demand.

1999

How difficult is it to operate two hubs— Haneda and Narita?

Hirako is Executive Assistant to President and CEO Kichisaburo Nomura as he decides to take ANA into the Star Alliance

2017 After two years on the board as Executive Vice President, Hirako succeeds Osamu Shinobe as President and CEO of ANA

It is important for us to be at both airports— hence our dual hub strategy. This might look like it would raise efficiency concerns, but, so far, we have been doing well by separating functions. Depending on where you live in Tokyo, you may find Haneda or Narita to be the most convenient. For people not residing in Japan, Haneda offers easy connections to the Japan domestic network and convenient access to the city center of Tokyo. Narita is focused on international connecting traffic from North America to various points in Asia and China, and to Japan domestic LCC operations.

Our presence at both airports will grow with available capacity. Right now, there is an afternoon connecting bank at Narita. And Haneda has both early morning and late-night connections. Our dual hub strategy involves strengthening both airports to become even more convenient for our passengers, no matter where they are from.

43

What are the key issues for Japanese airports?

Access. Haneda is a 24-hour airport, but access late at night or early in the morning is a problem.

We appreciate efforts to reduce curfew hours at Narita, but the cost and convenience of early morning/late night access must improve.

A second issue for utilizing Haneda’s eventual capacity expansion is being able to overfly 2018 – 02 Airlines

04/05/2018 12:45

central Tokyo during the afternoon period.

It is very important. With a lot of community relations work, I am confident that a positive conclusion will be achieved.

How do you feel about airport privatization?

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We are watching this very carefully. Sendai and Kansai airports have been privatized. It is still too early to make a definite conclusion. But we have seen several interesting proposals from the management of these airports demonstrating their focus on improving efficiency.

It is important to think of which structure can drive the most effective incentives to improve efficiency. I don’t care if the owner is the government or a private corporation. What I want to see is an airport that meets our needs for sufficient capacity, efficient operations, and affordable costs for us to satisfy our customers.

You are making investments in the cargo business with new dedicated freighters. What is fueling your cargo optimism?

Air cargo is a network business. If your network is too small you won’t get the efficiencies of scale needed to fill your planes. You also need the right aircraft. Most of our cargo freighter operation is with 767 aircraft, but they are not large enough to handle shipments of cars, or aircraft engines. We chose to purchase two 777 freighters to help us address these issues. And by combining the all-cargo fleet with the belly opportunities from our passenger network our competitiveness in the market will improve.

What will guide your investment in ANA’s medium-term strategic plan?

Two-thirds of our annual ¥300 billion strategic investment is for aircraft. Fleet renewal is a very important part of our strategy as it allows us to manage maintenance costs, improve fuel efficiency, and lower our emissions. It also helps us to introduce cabin improvements, such as new seats to meet passenger expectations for comfort and service.

The remaining annual ¥100 billion is largely Airlines 2018 – 02

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¥40bn

CEO Interview

spent on IT and training. Investing in our people is a key concept for ANA. For example, we are developing a new training facility near Haneda airport.

Our IT investments are also related to people.

We have a project called Society 5.0 that uses open technology platforms to look for ways to improve our business. Technology can free-up our people so that they can pay even more attention to our customers. We are looking at things like drones and avatars—trying to understand how these new technologies can best fit into our business. Our intention is to be at the leading edge of this thinking.

How can avatars help your business?

With an avatar—essentially a robot—it is possible to hear, see, and feel what is going on at the other side of the world. Potential visitors to Japan could get a really good feel of what it is like to be in Japan except for senses like smell and taste. And the experience is also live, very different from virtual reality. The closer the experience gets to reality, the more you will be tempted to actually travel, and that experience would encourage you to travel in person on ANA. So, we expect avatars to shake-up the market and create some new demand. You will see our plans to commercialize avatars in the market early in 2019.

When Japan attracts 40 million travelers the tax will collect ¥40 billion. How this money is used is vitally important.

If it improves the tourism infrastructure of Japan, it could be a good investment

ANA has a traditional legacy carrier and low-cost short-haul airline. What about low-cost long-haul?

People consider trans-Atlantic as a low-cost long-haul activity, but for us, that’s a medium-haul market considering the flight hours. I have not yet seen indications of success on flights of ten hours or more—which is what we call long-haul.

From Japan, the number of potential new international destinations within 4,000km is rather limited. But Southeast Asia, China and India are within the medium-haul range of 7,000km. As income levels rise, these areas and countries might be the fertile ground for mid-haul, single aisle LCC operations. airlines.iata.org

04/05/2018 12:45

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CEO Interview

How do you see technology improving airport operations?

Airports are extremely labor-intensive workplaces. Handling passengers or handling cargo takes a lot of people. All the ground vehicles are driven by people, as are the cargo loaders.

With an aging and declining population in Japan, finding people to do these jobs is challenging.

Robots, artificial intelligence, and self-driving vehicles could form a solution that would also allow us to create better quality jobs and focus more on the customer.

Will airport processes change?

We may find completely new ways of getting people and bags onto aircraft. For example, think of the hassle it can be to get your luggage to the airport. Some people would value a service that collected your luggage at home and delivered it to your hotel—particularly as people live longer and travel later in their lives. This is just one idea.

46

What more could we do with big data?

Robots, artificial intelligence, and selfdriving vehicles could form a solution that would also allow us to create better quality jobs and focus more on the customer Airlines 2018 – 02

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Big data has huge potential. We have lots of data sources—the airline, our trading company, ANA branded credit cards, hotels, and so forth. An ANA subsidiary is focused on analyzing the data that these sources generate. Guided by data, our goal is to present options that will fit exactly the travel patterns and the purchasing behavior of our customers. And new distribution capability (NDC) will be the essential link to distribute these product innovations. We are watching very carefully how the standard deploys.

Is ANA ready for the Carbon Offset Reductions Scheme for International Aviation (CORSIA)?

We are managing our carbon emissions with investments in fuel efficient aircraft, more efficient operations, and implementing best practices like frequent engine washing.

CORSIA will start from 2020 as a means of capping global emissions from airlines. From 2020, we will need to weigh buying carbon credits against investments in other options to minimize emissions.

One of those options could be biofuels. But it will take some effort to get over the challenge of finding enough supply at reasonable prices.

Biofuels are promising, but I don’t see them being a practical alternative to jet fuel in the near future.

What is the biggest challenge facing the industry?

An immediate concern is anti-globalization.

It could negatively impact the fortunes of our industry, and the global economy.

In the longer-term, and assuming that globalization will prevail, we will see a sharp increase in demand as developing nations’ economies grow. But will we have the resources to accommodate the demand? By resources, I mean airport infrastructure, slots, airspace capacity, and skilled labor.

I also think that severe weather brought on by climate change will be a challenge as well.

This is a broad challenge for human society in many ways and might have a big impact on airline operations.

What will ANA look like in five years?

Japan’s declining population will have an impact on ANA. Outbound growth potential will be limited, so we will need to stimulate inbound demand. You will see ANA becoming increasingly global in our outlook and our focus will be on quality. Receiving Airline of the Year 2018 from Air Transport World, and also receiving the 5-star rating, the highest of its kind, for six consecutive years partly recognizes our success so far. We want to do even more.

Our five-year strategic plan aims at a global market position of “unchallenged quality.”

How would ANA staff describe you?

They would likely say that I am demanding.

I really value flexibility—it is the key to success.

I don’t like people to think in set patterns. Each of our customers is an individual. And if we are going to deliver “unchallenged quality” we need to be flexible enough to recognize and meet individual needs. airlines.iata.org

04/05/2018 12:45

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Sustainable aviation fuels

Sustaining progress A decade on from the first test flight, Mark Chivers reports on how sustainable aviation fuels need supportive government policies to become commonplace WORDS: MARK CHIVERS

I 48

n February 2008, a Virgin Atlantic Boeing 747 embarked on a test flight using a blend of jet fuel and sustainable fuel. The demonstration was a technical success and proved that sustainable aviation fuels (SAF) were safe.

Three years later, commercial flights began with KLM. Since then, over 100,000 SAF flights have taken to the skies, and deals have been struck that will see more than 5 billion liters of SAF used in the years ahead.

Increased uptake of SAF is being driven by the airline industry’s commitment to achieve carbon-neutral growth from 2020 and to cut net carbon emissions 50% compared with 2005.

It is also being pushed by the lack of electric options available to to commercial aircraft. Best estimates suggest aviation will require liquid fuel—especially for long-haul—for another 50 years. SAF diversity, in makeup and location, moreover, brings the promise of a secure fuel supply chain, a significant consideration.

Despite this, more is needed if SAF are to reach a significant percentage of total aviation fuel and contribute to aviation’s environmental targets.

Sustainability for the International Airlines Group, pointed out at the Global Sustainable Aviation Summit: “Airlines can’t pay a premium.

They can’t pay 30%-40% more for sustainable fuels when airlines have averaged little more than 1% profitability over history.”

The main challenge for SAF deployment, therefore, is to ensure sufficient production and thereby a competitive end-user price.

At IATA’s 73rd Annual General Meeting in June 2017 in Cancun, member airlines approved a resolution calling for government policies to accelerate SAF uptake. It called for governments to guarantee that SAF can, at a minimum, compete at the same level as automotive biofuel.

Furthermore, effective policies must reduce SAF production risk and enable access to more competitive debt and equity capital. Userfriendly SAF accounting methods; a global, mutual recognition of sustainability standards; and effective recognition within the ICAO Carbon Offset Reduction Scheme for International Aviation (CORSIA) are equally important policy enablers.

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Big boost

Challenges exist in making SAF more widely available, from refinery capacity to the length of the certification process. Undoubtedly, however, the main component necessary for widespread SAF take-up is supportive policy frameworks.

Simply, alternative jet fuel production pathways are more expensive than fossil Jet A/ A1. As Jonathon Counsell, Group Head of

Momentum is starting to build in this regard thanks largely to an intensive lobbying campaign by a range of actors across the industry.

In early January 2018, the European Parliament moved to ensure that SAF is a key component of the future of air transport through a revision of the EU Renewable Energy Directive (REDII). This significant boost for SAF calls for

Airlines 2018 – 02

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SUSTAINABLE AVIATION FUEL USERS GROUP MEMBERS Air China Aero Mexico Air France Air New Zealand Alaska Air ANA AviancaTaca British Airways Cargolux Cathay Pacific Etihad Airways GOL Airlines Gulf Air JAL jetBlue KLM Lufthansa Qantas Qatar Airways Scandinavian Airlines Singapore Airlines South African Airways TAM Tui Group United Airlines Virgin America Virgin Atlantic Virgin Australia

airlines.iata.org

03/05/2018 16:16

Sustainable aviation fuels

49

1bn “We want one billion passengers to have flown on a SAF-blend flight by 2025” Alexandre de Juniac, IATA’s Director General and CEO

airlines.iata.org

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2018 – 02 Airlines

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Sustainable aviation fuels

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any sustainable fuel supplied to aviation to count twice toward reaching the EU target for renewable energy use across the region.

Michael Gill, Executive Director of the cross-industry Air Transport Action Group (ATAG), says the proposal from the European Parliament ensures not only that sustainable aviation fuels are part of the renewable transport energy mix of the future but also identifies aviation as a priority for deployment.

“We thank the Parliament and urge member states to support this proposal in the final negotiations as well as to increase their support for sustainable aviation fuel rollout,” he says.

That support is also gathering pace at the global level. An ICAO Vision for Sustainable Aviation Fuels was agreed by government, aviation industry and civil society participants at the second Conference on Aviation Alternative Fuels.

“Most importantly, delegates confirmed that any alternative fuel deployment should follow sustainability criteria currently being developed by a task force at ICAO, including representatives of environmental groups,” says Gill. “Aviation industry representatives strongly supported this, as sustainability should be a central component of any deployment of these new fuels. The Vision will need to be developed further over time, but it also sets industry and governments a challenge we must meet together.”

Kick start

In fact, the industry has already gone some way to meeting the challenge, committing many millions of dollars and significant resources to help kick-start the commercialization of sustainable aviation fuel.

Virgin Atlantic, pioneer of that first SAF test flight, partners with LanzaTech to turn industrial waste gases and other plentiful waste streams into sustainable jet fuel.

The partnership reports it is on the verge of creating commercially viable SAF and is calling for UK Government support. Access to existing low-carbon fuel incentives and de-risking a worldwide, first-of-a-kind, commercial plant Airlines 2018 – 02

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What governments should do: Adopt globally-recognized sustainability standards and work to harmonize global standards Allow sustainable aviation fuel to compete on an equal basis with ground transport through equivalent public incentives Encourage user-friendly sustainable aviation fuel accounting methods and work to harmonize global standards Support sustainable aviation fuel research and development and demonstration plants Implement effective policy to de-risk investments into sustainable aviation fuel production plants Engage in public-private partnerships for sustainable aviation fuel production and supply Commit to policy certainty or, at a minimum, policy timeframes that match investment timeframes

50yrs Best estimates suggest aviation will require liquid fuel— especially for long-haul— for another 50 years

in the United Kingdom will mean LanzaTech can quickly bring the product to market, at a price on a par with traditional jet fuels, the partnership claims.

Virgin Atlantic hopes to be flying LanzaTech’s waste-derived ethanol-to-jet fuel later this year.

“Since 2011, we’ve partnered closely with LanzaTech to pursue the world’s first low carbon fuel derived from waste products to the market at a commercially viable price,” says Craig Kreeger, CEO of Virgin Atlantic. “The project is now tantalizingly close to becoming a reality—with the potential to deliver massive carbon savings as well as economic and technological benefits to the United Kingdom.

Many other airlines and airports are driving SAF adoption. Cathay Pacific, FedEx Express, JetBlue, Lufthansa, Qantas, and United, are among the airlines that have agreed to buy SAF. Brisbane, Los Angeles, Oslo, and Stockholm are among the airports mixing SAF with the general jet fuel supply.

One billion

IATA’s aim is to have one billion passengers fly on flights powered by a mix of jet fuel and SAF by 2025. The current trajectory suggests half a billion passengers will have flown on a SAF-blend powered flight by this time, but if governments listen to industry calls for effective policy, doubling the number is possible.

“The momentum for sustainable aviation fuels is now unstoppable,” says Alexandre de Juniac, IATA’s Director General and CEO. “From one flight in 2008, we passed the threshold of 100,000 flights in 2017, and we expect to hit one million flights during 2020.

But that is still just a drop in the ocean compared with what we want to achieve. We want one billion passengers to have flown on a SAF-blend flight by 2025. That won’t be easy to achieve. We need governments to set a framework to incentivize production of SAF and ensure it is as attractive to produce as automotive biofuels.” airlines.iata.org

03/05/2018 16:16

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CEO Interview

Doing the right thing 52

Perry Flint talks to American Airlines Chairman and CEO Doug Parker about the US industry’s transformation and the need to keep unnecessary regulations at bay WORDS: PERRY FLINT

A

merican Airlines has proposed a joint venture with Qantas as it looks to take advantage of international opportunities.

Domestically, despite a strong market, increasing regulation and the lack of ATM modernization threaten to curtail efficiencies, as Chairman and CEO Doug Parker explains how the company plans to address this.

Are you happy with the airline’s performance so far in 2018?

The year is off to a good start. We seem to be firing on all cylinders. One of the good things about being profitable is the amount of investment you can make in your product and in the team and we continue to do that.

Since the merger [between American Airlines and US Airways], the average American Airlines 2018 – 02

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Airlines team member’s pay is up 43%. We’ve added 15,000 net new jobs. I attended a flight attendant graduation recently and it was great to see the energy and enthusiasm about the future. My job is to try to ensure they still have a healthy airline 30 or 40 years from now, even better than the one we have now. airlines.iata.org

04/05/2018 11:57

CEO Interview

IMAGES: GETTY

“In general, I get worried about turning airports into money-making organizations” Some $20 billion has been invested in 496 new aircraft, and we have retired 469 since the merger. We will operate the youngest fleet by far of any large US network carrier. And we have put a lot of money into our product. There are a lot of things that US customers are not used to seeing, such as our Flagship [airport] Lounges airlines.iata.org

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53

serving meals for international customers much like you see in other parts of the world and satellite Wi-Fi for all mainline aircraft by 2019 so that everybody can stream at the same time.

At the same time, we’re also taking care of our shareholders. Even while those investments were being made, we’ve been able to return $11 2018 – 02 Airlines

04/05/2018 11:57

CEO Interview

Getting partner approval In February, American Airlines and Qantas filed a new application with the US Department of Transportation (USDOT) seeking approval to form a joint business to better serve customers flying between North America and Australia and New Zealand.

According to both airlines, the proposed joint business will significantly improve service, stimulate demand and unlock more than $USD 300 million annually in consumer benefits that are not

achievable through any other form of cooperation.

That figure includes up to $221 million in value from expanding codesharing between the two—opening more connections to more destinations— and up to $89 million in value by offering a wider range of fare classes across each other’s networks, including lower fares and discounts.

An expanded relationship will encourage significant improvements in the overall customer experience, with these benefits expected to

stimulate significant demand for new travel – generating up to 180,000 new trips between the US and Australia and New Zealand every year.

Without USDOT approval, American and Qantas will have no choice but to further reduce codesharing on their networks, which the airlines say will jeopardize the number of services and routes each carrier flies between the US and Australia and New Zealand.

54 billion to our shareholders through dividends and share repurchases.

What is your strategy for the next few years, domestically and internationally?

Domestically, the market has matured and is finally allowing the airline to make a profit.

Clearly, as the US economy expands, there will be increasing demand for domestic travel.

But we expect growth to be in line with the economy, so 2%-3% per year.

Internationally, growth should be a little more than that. There are bigger opportunities.

We have announced new services to Prague and Budapest from Philadelphia and there is a new service to Reykjavik from Dallas Fort Worth.

Both domestically and internationally, we expect to be growing for years to come.

Will the proposed joint venture with Qantas make a difference to your business?

We feel very good about the application we have put forward [to the US Department of Transportation]. Both airlines have worked hard to ensure the benefits are laid out clearly.

It is a very compelling case. Our ability to work together will enable us to improve service and Airlines 2018 – 02

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American Airlines has over $30 billion of airport capital improvement projects in our hub cities that are approved, funded, and underway

stimulate demand. We estimate $300 million in customer benefits compared to if we didn’t have this cooperation. There will be additional frequencies to Australia and New Zealand and new city pairs. It’s a good thing for the airlines but, most importantly, for the consumer.

Do you have concerns about the increasing regulation of airlines in the United States?

If the airline business isn’t the most regulated industry in the United States, it has got be close to the top. We work well with regulators in a number of areas, such as safety.

But we don’t need regulations in areas where an airline should be taking care of itself, such as customer service. Unnecessary regulation can have unintended consequences. Look at the proposal [in Congress] for so-called fair fees, which includes changing tickets. When a customer buys a ticket, that gives an airline a degree of certainty. If an airline can’t charge when a customer has a change of mind, then the reality is the fare will have to be different initially.

Airlines should be allowed to deliver a product that attracts the customers they want to attract. An airline cares as much about taking care of its customers as any business and if you look at the investments being made in recent years, then, if we give it time, I am sure we will see quality products that cover all aspects of customer service.

We’re hopeful that as these quality products come online, it will be recognized that there is no need for legislation.

Aviation was deregulated 40 years ago but some still view airlines as a public utility. It is obvious that those airlines that aren’t serving their customers well will pay for it in the marketplace.

It looks as if the restructuring of the Air Traffic Control (ATC) system in the United States is off the table for now. What are the implications for American and the airline industry?

It’s concerning. This was all about modernizing air traffic control. Our view was that this was not going to be able to happen under the airlines.iata.org

04/05/2018 11:57

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Together for better aviation

03/05/2018 15:57

CEO Interview

Proponents of raising the Passenger Facility Charge claim there is an airport funding crisis.

Do you agree?

There is no airport funding crisis. American Airlines has over $30 billion of airport capital improvement projects in our hub cities that are approved, funded, and underway. And that’s just American’s hubs. Everyone knows there are some airports that need capital improvements.

One of the great things about having profitable airlines is now we can do that work.

Airports must work with the airlines to agree on projects that make sense. And we agree all the time. There is about $100 billion in airport projects going on right now in the United States.

There has never been this much activity.

What necessary airport projects haven’t been approved or haven’t received funding? That list doesn’t seem to exist!

Do you have any thoughts on turning airports into for profit companies?

In general, I get worried about turning airports into money-making organizations. It could be a not-for-profit privatization, of course. But if you Airlines 2018 – 02

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get monopolies determined to maximize profits, you’re in trouble. We’re certainly not in favor of that.

Has the industry finally moved beyond the boom-and-bust cycle?

$20bn

56

existing governance structure and therefore we should move ATC into a not-for-profit corporate structure that can do things the government can’t do—or doesn’t do well—such as raising a lot of money well in advance of the benefits, and getting bond financing. It could also provide certainty in leadership rather than major board changes every couple of years that forces a different strategic direction.

Now Congress has told us, “We don’t want to do that.” Fair enough. But that means we now have to work within that existing governance structure to figure out how to modernize ATC. Because let’s be clear: nobody in this process has ever said the current ATC system is okay.

So, we’ve got to figure out how to modernize it under the current structure, because the status quo isn’t acceptable.

There is a $7 billion surplus in the aviation trust fund, so maybe that would be a start.

$20 billion has been invested in 496 new aircraft

Traditionally, the airline industry has made a little money then lost a little money and the investors never saw a return on their money.

That basic up and down won’t change. Aviation is absolutely a cyclical business, and earnings will peak and dip. But the point is that the absolute earnings of the US carriers now is at such a level that when the dips come, earnings won’t fall below zero.

We have made more in the four years since the merger with US Airways than both airlines made in the 35 years before that. The industry has changed.

It would be doing our customers, our employees and our shareholders a disservice if we didn’t acknowledge that fact and make investments in our product rather than sitting on cash waiting for something bad to happen.

How important is new distribution capability?

We are pleased with the progress so far. We are working with our global distribution system partners to ensure we can provide rich NDC content to our customers. American has introduced an innovative program where travel agents get paid $2 for every booking they put through the American application interface. A lot of agencies are looking to integrate with us following the announcement.

Is there anything that keeps you up at night?

I don’t worry about too much as we’re in a good place. But the cultural transformation since the merger is still ongoing. There is a lot of history to overcome and there is some mistrust. That trust must be restored. We are making great progress, but we continue to put pressure on ourselves to do the right things to keep moving forward. You can never think you’ve arrived at the right spot. airlines.iata.org

04/05/2018 11:57

BORN LEADERS FLYE2 Congratulations Widerøe Airlines on taking delivery of the E190-E2 aircraft.

From unsurpassed passenger comfort and state-of-the-art connectivity to delivering the world’s best performance and fuel efficiency in the single-aisle segment, the E2 ‘Profit Hunter’ is the aircraft everyone’s looking up to.

#FlyWiderøeE2 embraercommercialaviation.com

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ArtiďŹ cial Intelligence

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Airlines 2018 â&#x20AC;&#x201C; 02

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airlines.iata.org

03/05/2018 16:17

Artificial Intelligence

Revolutionizing the airline Artificial intelligence has the potential to change air transport in innovative ways and make each journey completely unique WORDS: GRAHAM NEWTON

AI in finance AI could have a direct influence on an airline’s bottom line through its involvement in revenue management, a complex area that relies on refined and detailed modelling.

An AI could decide in real time what prices should be placed on flights by observing external market forces.

It will orient itself by reviewing jet fuel prices, news feeds, and passenger demand and, in real time, make a decision as to what price to assign to a particular seat. It can then adjust that pricing as variables change over time.

IATA, moreover, is working on AI in fraud prevention. “It is about making the unpredictable predictable and, if that fails, then acting quickly to stop the fraud,” says Juan Ivan Martin, IATA’s Head of Innovation.

A

rtificial intelligence (AI) has been part of aviation for decades through such developments as automatic pilot. But the concept has begun to move far beyond the “if-then” reasoning typified by early chess programs.

Nowadays, AI is an umbrella term that captures a plethora of disruptive technologies, but generally refers to computer programs that exhibit such human-like intelligence as logical deduction, problem solving, and learning.

Over half of airlines are planning major AI programs over the next three years, according to SITA’s Air Transport IT Trends Insights 2017.

Jim Peters, Chief Technology Officer, SITA, says that “airlines and airports are investing in AI and mobile programs to make services even better for the passenger, supporting sales and providing customer support, particularly during times of disruption.”

According to MarketsandMarkets, a B2B research firm, aviation’s AI market was valued at $112.3 million in 2017 but will grow to $2.2 billion by 2025. A number of factors are driving this growth, including the use of big data and the increasing adoption of cloud-based applications and services.

Another factor in AI’s upsurge is its relatively low cost compared with other technological

airlines.iata.org

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offerings. In many cases the implementation of AI is low risk, mainly due to the availability of open source solutions and a competitive market with many solution providers.

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Innovations in customer service

A forthcoming IATA white paper, AI in Aviation, lists the following innovations in customer service AI: Intelligent Bots will make the search and booking experience as easy as having a conversation; Dynamic Resource Allocation will minimize queues through predictive analytics, dynamic resource allocation, and passenger notification; Personalized Fulfillment will leverage data and machine learning to better serve the customer during the fulfillment phase; Disruption Damage Control will propose the best option once countless factors involved in a disruptive incident are taken into account; Complaints and Claims will allow an AI to autonomously handle customer requests, complaints and claims, while optimizing airline resources. AI will ensure compliance to such regulations as EU261 and minimize manual efforts, compensation costs, and loss of customer loyalty.

2018 – 02 Airlines

03/05/2018 16:17

Artificial Intelligence

IMAGES: SCIENCE PHOTO LIBRARY/ISTOCK

60

An early AI-driven solution that is catching industry attention is chatbots—a digital assistant able to conduct a convincing natural language conversation or respond to text.

Chatbots can be consolidated to respond to general travel enquiries or can be bespoke, hosted on an individual airline’s website, for example. Crucially for customer service, they are never busy, tired, or in a bad mood.

The SITA Air Transport IT Trends Insights 2017 reports 14% of airlines and 9% of airports use chatbots. But by 2020, 68% of airlines and 42% of airports plan to adopt chatbot services.

The boom in chatbots is largely due to massive business to consumer (B2C) solutions from Apple, Amazon, Microsoft, which have introduced Siri, Alexa, and Cortana respectively.

Chatbot use will be accelerated by the proliferation of travel queries from a mobile device, signifying a clear demand from travelers for digital assistance at every step of their journey. Chatbots are a way of answering this need while deepening customer relationships.

United Airlines is an early mover. In September 2017, it announced a collaboration with Amazon Alexa that allows Alexa users to get responses to such common requests as: “Alexa, ask United to check me in.”

An industry Smart Customer Service Chatbot project, meanwhile, is being tested. During the pilot, AI chatbot technology will be leveraged to enhance the work of customer service representatives, proposing suggested answers to customer queries and assigning and creating tickets.

Chatbots will upgrade in the years ahead to detailed search requests. Computer vision will help people discover comparable trips at equally appealing destinations. If a traveler selects a picture of a beach, then the AI can analyze the image and display a variety of similar travel destinations.

Understanding needs

AI could have an immediate and far-reaching impact on many other areas of customer service as Airlines 2018 – 02

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AI in operations AI can assist airlines operationally through lowering resource requirements and increasing efficiency Work on the ground AI-driven robotics in ground handling processes is an example of how AI will help in a practical way, bringing greater safety, efficiency, and speed. Examples of potential AI use in ground handling include safety checks and pushback operations

Accurate decisions AI will also help with operational decision making, making accurate predictions of the outcome and impact of any decision. AI takes unstructured data and finds patterns that inform improved decisions in the future. In theory, operations can be planned to perfection, but should disruptions occur, AI can quickly re-plan taking data into account

Customer solutions One interesting development runs parallel to the chatbot idea in customer service. IATA is exploring whether AI question answering platforms could be used to read and learn vital publications and be able to answer questions. The aim is to have an AI-driven computer agent answering questions on a topic 24/7, in any language IATA’s white paper, AI in Aviation, will be released at the Aviation Data Symposium, 19-21 June in Berlin, and will be available online following the event.

machines manipulate the wealth of available data to create a truly personalized travel experience.

Social media sentiment analytics, for example, is a methodology that uses social media data to better understand the needs of customers.

“Rather than rely on traditional surveys which always suffer from low participation and are hard to implement, social media data is captured and turned into insights,” explains Houman Goudarzi, IATA’s Manager, Innovation. “AI searches keyword patterns and posts and updates across all channels.”

This ability to use online activity is also being seen in website designs where AI can play with text, icons, images or button colors to improve search-to-booking conversion rates.

This can be combined with social media insights through correlative analytics. This blends different data sources to search for patterns and predict future behavior.

Rodrigo Acuna Agost, Head of AI Research, Amadeus, says improving conversions is a prime focus for AI. “The industry conversion rate is low compared with retail because retail has expertise in this area,” he notes. “We are working with AI to improve conversion rates in the travel industry.”

Amadeus has more than 20 projects underway with AI components. “And there are more than 50 ideas under investigation,” Acuna adds.

One possibility running alongside the efforts to improve conversion is increasing ancillary product take-up. An AI is able to determine that people do not always act rationally and can adjust offerings accordingly.

Delta Air Lines, meanwhile, has gone down a different customer service path to facilitate identity checkpoints. It is using AI-driven self-service kiosks with facial recognition technology to verify customer identity by matching customer faces to passport photos.

Whatever the application, experts agree that data is the key element in artificial intelligence.

It must be analyzed thoroughly to fully understand the customer and aligned with an appetite for innovation. airlines.iata.org

03/05/2018 16:17

See the future from here.

Keeping passengers connected and comfortable A great fl ight experience starts when people are connected and comfortable.

That’s why we’re helping airlines keep passengers connected throughout their journeys, simply and seamlessly, via global broadband connectivity and future-focused IFE systems. And our world-class interior solutions – including cabin seating, lighting, oxygen systems, galleys, inserts and lavatories – blend comfort and award-winning innovation to enhance every passenger’s experience.

At Rockwell Collins, we are transforming the future passenger experience – every day.

rockwellcollins.com/see-the-future © 2018 Rockwell Collins. All rights reserved.

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03/05/2018 15:58

60 seconds with...

Goh Choon Phong CEO, Singapore Airlines

“New technology will enable us... potentially to open up new lines of business” 62

The arrival of the Airbus A350 is a game-changer for us. It is very fuel efficient for long-haul operations. It is the right size and allows us to serve key secondary long-haul destinations that we were previously unable to tap. It has allowed us to serve San Francisco direct from Singapore, for example.

Similarly, the Boeing 787-10 is a game-changer for medium-haul operations. The business class is redefining what travel is like.

With these new aircraft, Singapore Airlines will be more effective in tapping into growth.

Why are we seeing so many different airline business models in the market?

Different airlines will look at their respective environments and choose what they need to do.

For us, we wanted to participate in the growth of the low-cost sector. In southeast Asia, low cost has more than a 50% market share. With full service and low-cost carriers (LCC) within the Group, we can serve 26 cities in China and 15 in India. That makes us one of the biggest carriers in those countries. Without the LCC, we wouldn’t have been able to do that.

Are Asia-Pacific carriers now playing a leadership role in global aviation?

In brief…

Singapore Airlines As the flag-carrier of Singapore, including subsidiaries SilkAir and Scoot, the SIA Group flies to 136 destinations on five continents Operating out of Singapore, it aims to provide an unrivalled customer experience The SIA Group fleet comprises more than 180 passenger aircraft

136 5

destinations across

continents

growing rapidly in China and India. But it is not just about our geographical location. New technology will enable us to serve our customers better, to generate more revenue, and, potentially, to open up new lines of business.

Are you happy with progress during your term as IATA Chairman?

Many areas saw progress during my time as Chairman, including safety and the governance changes within IATA. How do you pass the time when flying?

The size of the Asia-Pacific market and its growth means that the region’s carriers will play an increasingly important leadership role. It is something that we can expect to happen over the next decade or so.

Most of the time, long-haul is an overnight flight for me. So, I will have a good night’s sleep, and, with Wi-Fi, I can clear some work too. I also enjoy interacting directly with the crew to understand what they are going through and to get feedback on where we can improve.

What is the biggest opportunity for Singapore Airlines?

Window or aisle?

We see many opportunities. I have mentioned, for example,

Both are fine. Our product makes either choice very comfortable.

Airlines 2018 – 02

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IMAGES: GETTY/ISTOCK

How will the arrival of new aircraft refine your strategy?

airlines.iata.org

04/05/2018 11:57

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