Airlines 2018-06

2018 – 06

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AIRLINES.

TRANSPARENT PERCEPTION

How an airline responds in a crisis can make a world of difference to brand perception

2018 – 06

CEO Interviews Aeroflot, TAP Air Portugal | IATA Opinion Ensuring European competitiveness | Chicago Convention A look at the historic agreement’s continuing role | 60 Seconds With... JetBlue CEO Robin Hayes

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Airlines.

Contents 2018 – 06

Comment

CEO Interviews

7 Alexandre de Juniac, Director General

As aviation continues to grow, the industry must unblock the path to meet the growing demand for connectivity

30

22 In pursuit of progress

Aeroflot Group CEO Vitaly Saveliev says Russia’s national airline continues to grow through smarter use of digitization

21 IATA Opinion: Rafael Schvartzman, Regional Vice President for Europe

26 On the same wavelength

Greater competitiveness in Europe means greater prosperity

Antonoaldo Neves, TAP Air Portgual CEO believes airlines can achieve rapid change if governments pave the way

Digest

Features

10 IATA and industry update

30 Taking responsibility

Realizing Latin America’s economic potential, Passenger numbers rise again, Colombian aviation challenges, Ancillary revenues to hit $92bn, IATA RVP retires

When a crisis hits, taking ownership of the incident is the key to survival

5

Dossier

22

33

33 Fit for purpose

A look at how the Chicago Convention has changed air travel for the better

14 Briefly Stated

A collection of quotes from airline CEOs throughout 2018

60 Seconds with...

16 Data: In numbers

38 Robin Hayes, CEO of JetBlue Airways

Air passenger forecasts—an update

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

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2018 – 06 Airlines

11/12/2018 10:33

Where are your next pilots coming from?

Right here.

Every year, we train 120,000+ pilots in our 50+ training centers worldwide. Add the 1,000 experienced pilots on assignment with airlines, placed by our aviation recruitment team, and the 1,500 new pilots graduating from our aviation academies yearly, and answering the question has never been so easy.

Follow us @CAE_Inc

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Comment: Director General and CEO, IATA

Shaping the future Aviation continues to grow at a rapid pace, but together, the industry must be committed to unblocking the path to meet the growing demand for connectivity

ILLUSTRATION: SAM KERR

T

he air transport industry will enter into 2019 with the promise of another year of solid profitability.

With expectations of a $35.5 billion profit, it will be the ninth year in a row that airlines are in the black.

More importantly, it will be the fifth consecutive year where airlines deliver a return on capital that exceeds the industry’s cost of capital, creating value for investors.

The start of a new year is also an opportunity to reflect. A decade ago we were just emerging from a global financial crisis.

It shook businesses to the core. And even though aviation’s resilience had been proven time-and-again, I am not sure many would have foreseen the strength of the recovery that followed.

In 2009 there were 2.5 billion journeys by air and in 2019 we are expecting 4.6 billion. People need and want to travel. There is no sign that this trend is about to change. And that is why we are focused as an organization on unblocking the path to meeting the growing demand for connectivity.

This “to do” list for the future has many elements. Airlines will need sufficient infrastructure, modern and harmonized regulations, more reasonable taxation, modern processes for passenger and for cargo. And this just the start.

Achieving these will marry the familiar with the new. The familiar message of the benefits of aviation as a catalyst for growth and development will continue to ring true. Global standards will certainly remain as the foundation of global connectivity—particularly in areas like sustainability, safety, distribution and operations. And we can expect the tumult of change to be super-charged by the force of digital transformation. Painting an exact picture of where aviation will airlines.iata.org

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be in a decade is difficult. But, by harnessing the potential of data, for sure it will be even more customer centric, efficient, safe and sustainable. And the pace of change to get there will be like nothing we have seen before.

Our aim is to support the industry in change. Recognizing the expanding dimensions of this challenge, IATA has sharpened and focused its strategy. Our revised vision is to “work together to shape the future growth of a safe, secure and sustainable air transport industry that connects and enriches our world.”

What’s changed? First, it is an inclusive vision that recognizes the critical importance of working in strong partnerships with our members and industry stakeholders. And second it makes it very clear that we are focused on helping the industry to grow—essential to meet the needs of people who want to fly.

You will also notice that IATA is changing the way that it presents itself to the world. Our logo stays the same. But we have adopted a bolder and more modern look and feel to better reflect the dynamic industry that we have the privilege to represent, lead and serve.

Aviation is the business of freedom. And we are absolutely dedicated to ensuring that future generations will have even greater access to its liberating powers!

7

Alexandre de Juniac: Director General and CEO, IATA 2018 – 06 Airlines

11/12/2018 07:57

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Aviation’s sustainable future. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) means from January 1 2019, airlines operating international flights must monitor and report fuel consumption and emissions. CORSIA could stimulate the production of Sustainable Aviation Fuels, such as mustard seeds, which airlines are using in the quest for a greener future.

The Big Picture

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Digest Latin America and Caribbean ‘must do more’ to realize potential Unlocking the potential of aviation in Latin America and the Caribbean can bring an increase in jobs and economic activity in the region, IATA’s CEO and Director General has said.

Improvements in competitiveness, infrastructure and harmonization will help the region to flourish, Alexandre de Juniac told the Latin American and Caribbean Air Transport Association’s (ALTA) Airline Leaders Forum in Panama City.

Aviation currently supports 7.2 million jobs and $156 billion in economic activity across the Latin

the restructurings that have taken place in Latin America,” said de Juniac.

De Juniac pointed to Brazil’s jet fuel policy—which inflates airline costs by $255 million annually—and Barbados’ recently-imposed ticket tax as negative examples.

Providing a contrasting example, de Juniac said that in Colombia, Cartagena airport reduced its airport fee from $92 to $38, producing a 38% increase in tourism arrivals.

“The additional tourist spend will do much more for the local economy than the airport fee ever could,” he said.

IMAGES: GETTY/ISTOCK/SHUTTERSTOCK

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American and Caribbean region, representing 2.8% of all employment and 3.3% of all GDP in the region.

Commenting on the need for regulatory harmonization, the IATA CEO and Director General said the full scope of potential efficiencies is not being realized, because regulations remain nationally-based in areas like training, licensing and aircraft registration.

“Far more needs to be done. It is past time for a serious discussion among regulators and stakeholders to find ways to unlock additional value from

Airlines 2018 – 06

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11/12/2018 07:58

Digest

IATA has a new visual identity. Visit www.iata.org to experience our new look and get the latest expertise in all aviation matters.

Ancillary revenues to hit $92bn Airline ancillary revenue has been projected to reach $92.9 billion worldwide for 2018.

The CarTrawler Worldwide Estimate of Ancillary Revenue represents a 312% increase from the 2010 figure of $22.6 billion, which was the first annual ancillary revenue estimate.

Online car rental distribution systems provider CarTrawler, teams up with airline ancillary revenue consultancy IdeaWorksCompany, to project the industry estimate annually.

The CarTrawler Worldwide Estimate of Ancillary Revenue marks the ninth year IdeaWorksCompany has prepared a projection of ancillary revenue activity.

Ancillary revenue is generated by activities and services that yield cashflow for airlines beyond the simple transportation of customers from A to B, such as commissions gained from hotel bookings, the sale of frequent flyer miles to partners, and the provision of a la carte

services − providing more options for consumers and more profit for airlines.

“Results indicates that good merchandisers are selling products desired by a vast number of customers,” said Aileen McCormack, Chief Commercial Officer at CarTrawler. “IATA estimates more than 4.3 billion travellers will depart on flights in 2018. Most of them have the choice of paying a little extra for more comfort and convenience—thus providing airlines with a golden opportunity to build and strengthen their customer experience in the long-term.”

IATA predicts passengers will spend $871 billion worldwide on air transport for 2018.

Applying the global ancillary revenue estimate to IATA’s statistic yields a result of $21.32 per passenger. IATA also estimates the airline industry will spend $188 billion on fuel during 2018, which is up substantially from the 2017 level of $149 billion.

FREIGHT CAPACITY CONTINUES TO OUTWEIGH DEMAND In demand: Growing international e-commerce is helping support the growth

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The latest data has shown that global freight demand grew again in October but capacity still outstrips demand.

According to International Air Transport Association (IATA) analysis, demand, measured in freight tonne kilometers (FTKs), rose 3.1% in October 2018, compared to the same period the year before. This pace of growth was up from a 29-month low of 2.5% in September.

Freight capacity, measured in available freight

tonne kilometers (AFTKs), rose by 5.4% year-on-year in October 2018. This was the eighth month in a row that capacity growth outstripped demand.

However, demand continues to be negatively impacted by a contraction in export order books in all major exporting nations in October, longer supplier delivery times in Asia and Europe; and weakened consumer confidence compared to very high levels at the beginning of 2018.

Events February to June 2019

AVSEC World 26-28 February Miami, USA Legal Symposium 6-8 March Rome, Italy World Cargo Symposium 12-14 March Singapore Aircraft Receovery Forum 2-3 April Montreal, Canada

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Safety and Flight Ops Conference 2-4 April Barcelona, Spain Aviation Day Romania 12 April Bucharest, Romania Global Training Partners Conference 10-12 April New Delhi, India CNS Partnership Conference 5-7 May Miami, USA IGHC Conference 26-29 May Madrid, Spain Cabin Safety Conference 11-13 June Istanbul, Turkey

2018 – 06 Airlines

11/12/2018 11:02

Digest

Potential in the air: Africa could benefit from improved aviation infrastructure

Co-operation with governments key to Africa

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The International Air Transport Association (IATA) urged governments in Africa to maximize the positive social and economic power of aviation by working together to promote safe, sustainable and efficient air connectivity.

“African aviation supports $55.8 billion of economic activity and 6.2 million jobs. To be an even bigger driver of prosperity across Africa, we must work closely with governments,” said Alexandre de Juniac, IATA’s Director General and CEO at the Annual General Assembly meeting of the African Airline Association (AFRAA) in Morocco.

IATA said the aviation agenda should focus on improving competitiveness, developing infrastructure, modernizing the regulatory framework focusing on global standards and connectivity, and ensuring a well-trained, diverse workforce.

Passenger numbers could reach 8.2bn in 2037 The amount of air travelers could double, according to analysis from IATA. IATA’s 20-Year Air Passenger Forecast shows a growing shift Eastwards is key to the surge.

Over the next two decades, the forecast anticipates a 3.5% compound annual growth rate (CAGR), leading to a doubling in passenger numbers from present levels.

Aviation is growing, and generating huge benefits for the world. A doubling of passengers in the next 20 years could support 100 million jobs globally.

In a constant policies scenario, routes to, from and within Asia-Pacific will see an extra 2.35 billion annual passengers by 2037.

On the rise: A doubling of passengers by 2037 could see 100 million jobs supported globally

Airlines 2018 – 06

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We foresee a significant negative impact on the growth and benefits of aviation if tough and restrictive protectionist measures are implemented.”

Alexandre de Juniac, IATA Director General and CEO

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Digest

“Aviation contributes 2.1% to Colombia’s GDP, but it could increase this with a more accommodating environment.”

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African aviation supports $55.8 billion of economic activity and 6.2 million jobs across the continent.

$55.8billion

Peter Cerda, Regional Vice President, The Americas (see story p13 below)

IATA’S NORTH ASIA RVP RETIRES AFTER 24 YEARS IATA’s Regional Vice President (RVP) for North Asia has announced his retirement.

Baojian Zhang left his post in December after 24 years at IATA. Zhang joined from the Civil Aviation Administration of China (CAAC) in 1994 and founded IATA’s operations in China.

Under Zhang’s leadership, IATA membership in North Asia has grown to 36 airlines with China having the largest concentration of IATA member airlines of any country.

Over the last 24 years IATA’s China team grew from three to exceed 130 today. And IATA’s BSP in China is the largest in the world, recording nearly 190 million transactions in 2017.

Conrad Clifford, IATA’s RVP for Asia Pacific will lead IATA’s efforts in North Asia alongside his current role until a successor is named.

PASSENGER DEMAND REBOUNDS AS LOAD FACTOR REMAINS CONSTANT Passenger numbers up from 5.1% growth in bounced back in October, as September, with airlines in all IATA’s latest global passenger regions recording gains. Total traffic results show. capacity climbed 6.1%, and Demand, measured in load factor increased 0.1 revenue passenger percentage point to 79.8%. kilometers, or RPKs, rose 6.3% Domestic demand grew compared to the same month 6.4% in October compared to last year. This marked a October 2017, unchanged rebound from 5.5% growth from September, and capacity recorded in September, which rose 6.7%. Load factor slipped was an eight-month low.

0.2 percentage point to 83.3%.

Capacity also grew 6.3% and load factor International Domestic was flat at 81.1%, matching last year’s record for the month.

“October’s healthy performance is reassuring after slower demand growth in September—some of which was attributable to weather-related disruptions,” said Alexandre de Juniac, IATA’s Director General and CEO. October international passenger demand rose 6.3% compared Passenger load factor to October 2017,

79.8%

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83.3%

CERDA BACKS AVIATION’S ECONOMIC ROLE IN COLOMBIA IATA has called on the government of Colombia and aviation stakeholders to work together to grow the economic benefits that aviation delivers to the country.

Speaking at Aviation Day Colombia, organized by IATA and the Latin American and Caribbean

Air Transport Association (ALTA), Peter Cerda, IATA’s Regional Vice President, The Americas, said, “Aviation supports over 600,000 jobs and contributes 2.1% to Colombia’s GDP. “These are big numbers, but aviation could increase this contribution with a more

accommodating environment.”

He identified three key priorities—to develop airport and airspace infrastructure, reduce taxes and charges that raise the cost of air travel, and embrace smarter regulation principles—to help increase aviation’s economic benefits in Colombia.

2018 – 06 Airlines

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Quotations 2018

Kay Kratky, Austrian Airlines CEO Akbar Al-Baker, Qatar Airways Group CEO and IATA Chairman

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It is undeniable that consolidation has contributed to the overall improvement of the industry, allowing airlines to generate cost synergies and network efficiencies. In recent years, we have witnessed the emergence of joint ventures and equity partnerships among airlines serving international markets. This trend has been good for consumers as airlines’ networks and routes have become better aligned with the travel needs of passengers.

Airlines 2018 – 06

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A bottleneck is coming, [discussing] it should be a priority if Europe is to remain competitive in aviation.

His Excellency Eng. Saleh bin Nasser Al-Jasser, Director General of Saudi Arabian Airlines

The NDC Level 3 certification provides us with the ability to showcase a modern look and feel to the travel agent platform.

Brief ly Stated Somas Appavou, CEO of Air Mauritius

For the potential of Africa to be unlocked, Africans must have the ability to travel. It is not just about money. Solving visa issues is equally important.

Christopher Luxon, CEO, Air New Zealand

Customer service in this industry is poor compared with, for example, the hospitality sector.

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11/12/2018 07:59

Quotations 2018

Rupert Hogg, CEO, Cathay Pacific Airways

Yuji Hirako, President and CEO of All Nippon Airways

With an avatar it is possible to hear, see, and feel what is going on at the other side of the world. You will see our plans to commercialize avatars in the market early in 2019.

There can’t be a limited supply in infrastructure because that will only push up the price of using it.

Yvonne Manzi Makolo, CEO RwandAir M. İlker Aycı, Turkish Airlines’ Chairman of the Board and the Executive Committee

Personal data and its protection, which remain high on the agenda, will become even more crucial in the future.

Richard Forson, Cargolux CEO

We need to understand what is blocking women from progressing in the industry. Raising awareness alone is not enough. There has be a deliberate attempt to fix gender inequality.

We need action.

In my view, [the use of drones] will certainly develop first on the cargo side.

Doug Parker American Airlines Chairman and CEO

In general, I get worried about turning airports into moneymaking organizations.

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To the point @IATA Jan 8 Over the last decade in #Europe, passenger charges on the average one-way ticket have more than doubled— from €16 to €33. Over the same period the airfare portion of the average ticket price fell #CEOBlog: http://bit. ly/2l0jdlx @IATA Feb 26 Its 10 years since @ VirginAtlantic flew the first Sustainable Aviation Fuels (SAF) flight. The aviation industry is investing in SAF projects to help meet our target to cut our carbon emissions 50% by 2050. #ecofly http://bit.ly/2BR1qr5

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@IATA Jun 27 #DYK Each new generation of aircraft is on avg. 20% more fuel efficient than the model it replaces. And over the next decade, #airlines will invest $1.3 trillion in new planes. #ecofly http://bit.ly/2KtcufM @IATA Oct 24 IATA predicts air passengers will DOUBLE in 20 years to 8.2B; #protectionism could reduce #aviation's benefits to world economies bit.ly/2AqfXsA pic. twitter.com/ n1wkU7iXht

2018 – 06 Airlines

11/12/2018 07:59

Data

In numbers A I R P A S S E N G E R F O R E C A S T S U P D AT E

(Source: IATA)

Mexico—USA 3.0%

China—Chinese Taipei 6.4%

China—Japan 6.1%

China—Thailand 5.6%

India—UAE 7.8%

International country pairs annual % growth

India remains on track to overtake the UK as the third-largest market in the world (to, from and within) in the mid-2020s (from 7th largest at present).

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.

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annual average growth in global air passenger journeys over the next 20 years

Passenger numbers are expected to double by 2037 Overview of forecasts (change from 2017-2037 and compound annual growth rate) Constant policies scenario 2017-2037 change China

Policy stimulus and market liberalization scenario % CAGR

2017-2037 change

Globalization in reverse scenario

% CAGR

2017-2037 change

% CAGR

1,023,189

5.1%

China

2,033,685

7.7%

China

663,958

3.8%

United States

480,981

2.4%

United States

584,064

2.8%

United States

346,977

1.9%

India

414,036

6.6%

India

768,293

9.2%

India

291,386

5.4%

Indonesia

281,932

6.0%

Indonesia

535,906

8.6%

Indonesia

192,552

4.7%

Thailand

116,049

4.0%

Thailand

237,012

6.3%

Thailand

69,695

2.7%

Airlines 2018 – 06

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Data (Source: All figures taken from www.iata.org/pax-forecast)

Long-term scenerio analysis: As the chart shows, policy stimulus is key to a brighter future.

5.2%

In contrast, globalization in reverse will see passenger growth reduced.

Passengers (billion, O-D basis) 11 10 Constant policies scenario Globalization in reverse scenario Policy stimulus and market liberalization

09 08 07 06 05 04

2037

2036

2035

2034

2033

2032

2031

2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

03 2017

Passenger traffic to, from and within Nigeria is forecast to grow by 5.2% each year on average over the next 20 years—well above the global average.

Such growth will be driven by Nigeria’s large potential for catch-up in living standards over the long run as well as a young and growing population.

Market liberalization will see 3.2 billion additional passengers by 2037

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However, if negative factors such as trade wars are allowed to take shape, globalization in reverse would see 1.4 billion fewer passengers per year by 2037 than in the constant policies scenario.

Growth and change in passenger numbers by region (million and %, 2017-2037). In a constant policies scenario, Asia Pacific will see the greatest change, with an extra 2.35bn passengers per year by 2037.

4.8% Asia Pacific: 2.351bn

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4.6% Africa: 199m

4.4% Middle East: 290m

3.6% Latin

2.4% North

2.0% Europe:

America: 371m

America: 527m

611m

2018 – 06 Airlines

11/12/2018 08:00

Advertising Feature: Dataminr

Controlling Chaos: Corporate Security and Communications Over the Holidays With a huge swell in passengers, airlines should always expect the unexpected during the holiday season—using promptly delivered real-time information to prepare for those risks can help identify and reduce the possibility of negative outcomes

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For commercial airlines, the holiday season brings bigger profits, but with it comes overbooked flights, passengers anxious to get to their destinations, and increased threats to airports, companies, and customers. An estimated 51 million people traveled by plane during the 2017 holiday season, and this year is no different: airlines must maintain especially close watch on their brands and operations to ensure that they mitigate risk quickly should the unexpected happen. To do this effectively, airlines must have real-time information so that they can identify and respond to issues in their nascent stages and minimize negative outcomes.

Improving Security with a Fuller Picture The holidays require airline security teams to be on especially high alert for threats. For example, last November, the United States Department of Homeland Security warned of rising terror threats to commercial airlines.

Even airports have experienced attacks on premises, as events in Paris, Belgium, and Fort Lauderdale have demonstrated. When a threat is made—or worse, when an attack occurs—corporate security teams need to know instantly. Publicly available information

Airlines 2018 – 06

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sources, like social media, blogs, and the dark web, can surface indications long before traditional information streams. For example, during the Brussels Airport attack in 2016, public data sets contained information about the bombing 10 minutes before the first news reports were published.

These new data sets can also aid in preventing incidents because they help corporate security teams identify threats posted online. This happened in August when, amid a diplomatic disagreement between Saudi Arabia and Canada, a pro-government Saudi Twitter handle posted an image of a plane flying towards the Toronto skyline captioned, “sticking one’s nose where it doesn’t belong.” For many, the image recalled the September 11th attacks on the United States and caused global outrage and heightened security concerns for airliners operating in Toronto.

Beyond identifying threats and attacks, publicly available information can help corporate security teams gain visibility into incidents happening on their planes. Last year, a woman traveling aboard a flight from Newark to Buffalo for the holidays was sexually harassed by a male passenger. She notified airline personnel, and when they landed, the man was arrested. However, in a series of Tweets, the woman detailed what crew members could do in the future to prevent this sort of incident. Utilizing the hashtag “#dobetter,” she cited missteps like failing to move the perpetrator to a seat directly in front of the in-flight crew and continuing to keep the cabin lights off after the harassment was reported. Corporate security teams with access to this firstperson account in real time could act on this event with greater insight and improve passenger safety.

Communications in a Crisis However, not all disruptions are tied to safety, as passengers at John F. Kennedy Airport learned this past January when, after a water main break, flights in and out of Terminal 4 were severely interrupted and forced an evacuation of the baggage claim area. Though the airport quickly addressed the issue on

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11/12/2018 08:00

Advertising Feature: Dataminr

Percentage of organizations that have integrated social media into their security operations

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65% Twitter, writing “there may be delays at #JFK. Please allow extra time and contact your airline,” they failed to update passengers as the day wore on. This led to confused and increasingly angry Tweets from stranded passengers, with one writing “what are you doing about baggage?!! We were told to leave the airport yesterday without ours.” Such widespread vitriol meant that this story was immediately picked up by media outlets and resulted in negative headlines around the world. While this issue was not tied directly to a specific carrier, had airlines been monitoring social media, they would have been able to address customers’ concerns and keep them updated on the status of their luggage.

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In contrast, proactive communication can preempt customer dissatisfaction, as was the case this past November at San Francisco International Airport. With the catastrophic wildfires raging over 200 miles away, the air quality and visibility were so bad that scores of flights were delayed or canceled in San Francisco, prompting the airport to tweet “Butte County wildfires are impacting some flights at SFO.... Please check with your airline for flight details.” This statement, echoed by airlines, ensured that passengers were informed and mitigated some of the inevitable complaints. Travelers may not intuitively think that a fire unfolding far from the airport would have an impact on their plans, which is why

proactive communication can help reduce potential passenger grievances.

The common thread through all these examples is information sharing. When customers are kept in the loop, they are more likely to react positively. The same is true for the airports and airlines themselves. Given access to real-time information, they too are kept in the loop and can respond to threats, reduce safety concerns and keep their customers apprised of any incidents that may affect their itineraries. A platform like Dataminr, that provides alerts derived from publicly available data, helps the airline industry stay informed in real time and make sharper decisions for customers and businesses.

2018 – 06 Airlines

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IATA Opinion: Rafael Schvartzman

Delivering European prosperity

ILLUSTRATION: SAM KERR

Rafael Schvartzman, IATA’s Regional Vice President for Europe reveals a competitiveness toolkit to enhance aviation’s benefits throughout the region

T

input, air navigation service providers will set out investment plans and reforms to create the efficient, safe, and cost-effective airspace capacity we need. And each NAS will put in place part of the SES jigsaw.

Poland is the first state to finalize its airspace strategy, which was published at Wings of Change, and we are well advanced with Italy, France, Spain and Bulgaria, with more states to follow.

It’s no surprise that infrastructure capacity and cost is near the top of the list for Spain, for this is something we also see consistently across Europe. IATA’s 20-year passenger forecast expects European passenger numbers to grow 50% by 2037.

That means an extra 611 million passengers that will be passing through airport infrastructure that is already bursting at the seams. Ensuring that we build sufficient capacity while keeping costs under control is one of the key challenges we face.

And with Spain investing so much in its high-speed rail network, it doesn’t make sense not to link Madrid and Barcelona’s airports to this network, to promote intermodal connectivity.

Wings of Change Europe gave us a fantastic platform to get these messages and more across to our most important industry partners and political stakeholders. And in 2019 we will further sharpen our focus on helping governments improve the competitiveness of their aviation sector.

We’re determined to ensure that every European nation has a clear roadmap to increase the benefits aviation brings to their citizens.

airlines.iata.org

2018 – 06 Airlines

he competitiveness of the European economy is a topic that is rising fast up the agenda in our region, and creating a competitive environment for aviation to flourish is essential to the future prosperity of Europe.

To assist governments to take the right decisions, IATA is undertaking an important project to provide a competitiveness toolkit to governments.

The toolkit provides national-level analysis focusing on four key elements of competitiveness: infrastructure, costs, smart regulation, and border processes.

The creation of the first Competitiveness Analysis, for Spain, was well timed to fit with our first ever Wings of Change Europe conference, which we held in Madrid in November.

For Spain, the key issues are air traffic management, airport capacity and cost, and fostering intermodal connectivity.

Air traffic management delays are not just a problem in Spain.

Across Europe, in 2018 they have doubled compared with the previous year.

And they are set to multiply unless we take urgent action.

Staffing issues in France and Germany, and bottlenecks in the system, have caused misery for passengers, tremendous problems for airlines, and have a direct negative impact on Europe’s economy.

Progress on the Single European Sky (SES) remains negligible, which is why IATA has been working with a number of European nations on a bottom-up approach to airspace optimization. Through the development of National Airspace Strategies (NAS), created with airline and other key stakeholder

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CEO Interview

In pursuit of progress Vitaly Saveliev, Aeroflot Group CEO, has steered the airline back to its former glory, but says there is still much to be achieved WORDS: GRAHAM NEWTON

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eroflot once operated the world’s largest fleet as the monopoly supplier of air transport to the USSR. Today, it is focused on competitiveness. As CEO Vitaly Saveliev explains, the establishment of a low-cost subsidiary and a relentless drive towards digitization point to a positive future.

Are you happy with the performance of the airline and did the soccer World Cup meet your expectations?

In 2018, the Group continued to grow its network, adding new destinations and increasing capacity on the most popular routes. Our results clearly illustrate that this approach has been effective.

In the first half of the year, the Aeroflot Group carried 24.9 million passengers, which is 8.2% more than in the same period last year. Group revenue totaled 265.8 billion rubles, an increase of 13.2%. Like most airlines around the world, profitability is under pressure from fuel prices.

To offset increased fuel costs, in addition to on-going cost control programs, we launched a number of new cost initiatives.

As for the World Cup, which Russia hosted this summer, we are more than happy with the results. In addition to contributing to operational and financial results, the Airlines 2018 – 06

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8.2% In the first half of the year, Aeroflot Group carried 24.9 million passengers, which is 8.2% more than in the same period last year

tournament proved an excellent opportunity to demonstrate our product to foreign visitors. We saw strong demand on the majority of domestic and international routes. In Russia, in addition to our high-frequency network which allowed us to meet this increased demand, we developed and launched a special program of direct flights between the World Cup host cities.

So, the overall outcome was positive, although it wasn’t without difficulty. The share of transit passengers decreased on certain routes because of the high demand for direct flights. For the most effective use of our resources, flight schedule optimization was implemented, which meant reducing the capacities on routes to Asian destinations and increasing them on routes to Europe and the United States.

How do you want to position the Aeroflot brand? Do you want to be seen as a Russian or international brand?

We are a leading global airline with an international outlook, though we embrace the Russian character of our brand wholeheartedly.

We want the Aeroflot brand to be perceived as an international brand with Russian roots and global scales. When I became CEO in 2009 and brought in new management with the aim of thoroughly modernizing Aeroflot, many people airlines.iata.org

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CEO Interview

In recent years, Aeroflot has undergone significant changes in terms of digitization

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suggested that we drop Aeroflot’s longstanding logo. Instead, we kept it because we are proud of our Russian identity and heritage, and embrace our history.

We celebrate our 95th anniversary this year, making us the third-oldest airline in the world.

During World War II, Aeroflot played a crucial role supporting our forces that freed Europe and the rest of the world from the Nazis. By 1990, Aeroflot had entered the Guinness Book of World Records as the world’s largest airline by passengers carried. This is quite a legacy and one that we are very proud of.

What can you tell us about Aeroflot’s fleet strategy?

The cornerstone is an extremely young and modern fleet. Our fleet is made up of Airbus A320s, A330s, Boeing 737s, Boeing 777s and Superjet 100s (SSJ). The average age of our fleet is four years. In the near future, we plan to introduce the long-haul Airbus A350 aircraft.

Aeroflot is a Russian national champion, and as such one of our additional aims is to support Russian manufacturers to strengthen the country’s position in the global aviation industry by purchasing innovative Russian-built aircraft.

We are the leading operator of the Russian-built, short-haul narrowbody Superjet 100, with 50 SSJs in our fleet. In September 2018, Aeroflot and United Aircraft Corporation signed an agreement for the delivery of another 100 Superjet 100 aircraft. On top of that, we are expecting delivery of 50 Russian medium-haul MC-21 aircraft.

In total, our company will receive 200 domestic aircraft by 2026. Aeroflot has always played an important role in the manufacture of Russian aircraft. It has helped to perfect all Soviet and Russian aircraft.

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Does the government understand the value of aviation and are there regulations that need updating or changing?

The government understands the importance of civil aviation for the development of Russian regions and national economy.

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1923

CEO Interview

Aeroflot was founded in 1923 as Dobrolet and during the Soviet era, was the national airline and the largest in the world. After the USSR broke up, Aeroflot became a joint stock company, and is still 51%-owned by the Russian state

In recent years, Russia has adopted largescale amendments to aviation legislation.

Russian airlines now have the right to sell non-refundable tickets and basic fares as well as to hire foreign pilots; measures that laid the foundation for low-cost domestic flights.

The successful introduction of a mechanism to blacklist highly disruptive passengers means we have been able to significantly increase levels of safety on-board and strengthen measures against hooliganism. Aeroflot has actively supported these changes. This has made it possible to increase the competitiveness of Russian airlines in the global market and integrate Russian aviation legislation with international legislation.

Work is underway to develop the national aviation industry and to increase the appeal of Russian aircraft manufacturing. A lot is being done to change legislation across various legal areas; civil law, taxation, and customs. It will be necessary to develop new laws and adjust existing aviation laws and regulations to ensure that civil aircraft are maintained to the highest international standards.

Aeroflot Group launched a low-cost subsidiary in 2014. Could you tell us how the airline is faring?

From a standing start, Pobeda has expanded to fly to 30 destinations outside Russia and is on track to carry more than 7 million passengers this year, a 50% increase year-on-year. This will allow Pobeda to take its place among Russia’s five largest airlines by passenger numbers.

The launch and build-out of Pobeda is one of the biggest accomplishments in Russian business in the last decade. We built a completely new company from scratch. In fact, we brought a segment of the aviation industry— the low-cost sector—to Russia for the first time.

Pobeda’s operational efficiency has been confirmed by Boeing. According to the manufacturer, Pobeda has the highest flight time on Boeing 737NG among all airlines that operate the aircraft globally.

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CEO Interview

to Russian society, improving mobility from the Russian regions, generating high-quality jobs and allowing millions of lower-to-middle income Russians to fly for the first time.

at management level and at the level of the cabin crew and pilots who now use iPads to access flight documentation. The company’s senior executives use the Manager’s Monitor system, specially designed for the needs of Aeroflot, with online access to more than 500 indicators of the company’s activities and performance.

Technology is such an important part of the airline business. How does Aeroflot leverage technology?

In recent years, Aeroflot has undergone significant changes in terms of digitization.

The main priority is our passenger and their satisfaction, so we do our best to make the passenger’s digital experience as easy and enjoyable as the physical experience. Aeroflot’s website is Russia’s biggest online store, and our mobile app has become a fully-fledged passenger companion and was recently recognized as the best app of the year.

Passengers are increasingly expecting Internet service on-board. Our response to customers’ wishes is the gradual roll-out of wireless Internet access on all aircraft across our fleet. Today, all Aeroflot long-haul aircraft are equipped with Wi-Fi access and we are installing Wi-Fi on our medium-haul aircraft.

In addition to the digitization of the customer experience, we are actively working on the digitization of our internal procedures, from office work to aircraft maintenance. Thanks to the use of advanced industry solutions, Aeroflot has managed to automate 100% of business procedures.

One key area of development is the use of Big Data. We are successfully leveraging Big Data in digital marke ting and we’re confident that these technologies will allow radical change in other areas of Aeroflot’s activities.

An important milestone in Aeroflot’s digitization process was the introduction of NDC standards. This year, we received a level 3 certificate, and we hope that Aeroflot will be able to improve the efficiency of the agency channel due to this technology.

We pay special attention to digitizing how Aeroflot employees work. For example, we discontinued use of paper documentation, both airlines.iata.org

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298 361 4.1

destinations served by Aeroflot Group across three continents

aircraft make up Aeroflot Group fleet

years is the average age of the Aeroflot fleet

10th

Aeroflot is part of the SkyTeam Alliance, joining as the 10th member of the alliance in April 2006

Next year will mark your 10th anniversary as CEO of Aeroflot. What do you consider your biggest accomplishments?

In 2010, the President [Vladimir Putin, then Prime Minister] set Aeroflot management the task of creating a fully-fledged aviation holding.

At the start, our core assets were limited to a number of weak, disparate regional airlines that the state transferred to Aeroflot’s control. In parallel, we launched Russia’s first low-cost airline from scratch.

As a result of focused efforts and several strategic transformations, today, in addition to Aeroflot, the Group includes Rossiya, one of the largest Russian airlines; Pobeda, an efficient low-cost carrier; and Aurora, a far Eastern airline. In 2016, for the first time in Russia, an aviation holding was created.

A real breakthrough was the creation of Pobeda Airlines. Pobeda has had a huge impact on the accessibility of air travel for Russian people. For the first two years of its existence, more than a million people were able to afford air travel for the first time. Since its creation, Pobeda has carried more than 15 million passengers. And ahead of schedule, Aeroflot once again became one of the largest airlines in the world. In 2017, Aeroflot officially joined the global top 20 and European top five (among legacy carriers). Aeroflot’s passenger traffic has increased from 8.6 million in 2009 to 32.8 million in 2017. On an Aeroflot Group level, we transported 50.1 million passengers over the past year, a record figure for modern times.

We are optimistic about our future and we do our best to make sure that the passenger experience with us is always convenient and comfortable.

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CEO Interview

On the same wavelength TAP Air Portugal CEO, Antonoaldo Neves, tells Graham Newton that the airline’s transformation program is on track but changes in airspace and airports must keep pace WORDS: GRAHAM NEWTON

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nsuring an airline operates efficiently with high quality customer services is never easy. But as Antonoaldo Neves explains, it is especially difficult when the huge effort and investment is not matched by partners in the aviation value chain.

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Has the “new TAP” performed as expected in 2018?

The new TAP Air Portugal performed well in 2018 but has still to improve a lot. Between April and October, 3.6% of flights were cancelled for reasons attributable to TAP, but this has been Airlines 2018 – 06

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reduced to just 0.7%. We have also reduced delays caused by lack of crew about 60% and there are now no cancellations of flights for this reason. This year alone, we hired more than 340 pilots and 600 cabin crew.

Since the beginning of July 2018, we put new procedures in place. We have built an Integrated Operational Control Center, which brings together operational functions in a single space, we have created new teams for the management of each flight, and we have strengthened dedicated handling teams and support equipment. And for the first time in the history of TAP Air Portugal, we introduced three reserve aircraft into the fleet.

We have also invested in customer service.

We recently launched TAP Miles & Go, a new loyalty program that is now more international with plenty of advantages.

Customer satisfaction with arrival and departure times has increased 10% and 15% respectively, compared with the same period of last year and the number of lost bags has been reduced by two thirds by changing processes.

We also reduced the waiting time for service in our Contact Center from seven minutes to two minutes and there is a plan to respond to all outstanding claims.

The service on board has been vastly improved too. In the first week after the launch of the new menus for economy class, we registered an increase of almost 30 points in a rating scheme we provide to our customers, known as the Net Promoter Score. We offer the possibility to book the meal in business class before the flight. It is airlines.iata.org

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CEO Interview

“Lisbon is probably the best and definitely the closest gateway between the Americas, Africa and Europe”

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very rewarding to see that our customers satisfaction index in 2018 grew about 40% globally over the previous year. We thank our employees for their commitment and our customers for their trust. Without them, it wouldn’t be possible to achieve these good results.

How does TAP Express fit into your business model?

TAP Express has played a key role in feeding our long-haul routes. The airline was equipped with new jet aircraft, Embraer 190s and 195s, which replaced the old Fokker 100, Embraer 145 and Beechcraft 1900D aircraft. These provide better service and expand the capacity of TAP Express.

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Why is establishing low fare brands as subsidiaries now working when about a decade ago legacy carrier attempts to build low-cost models failed?

Low fare carriers have accelerated the change in customer needs and in customer acceptance of the model within the short-haul market but also across all customer segments. This change has influenced the success of low fare brand subsidiaries in recent years compared with a decade ago.

Is Star Alliance still relevant and do you see a future for alliances in general?

Star Alliance is relevant to TAP Air Portugal today and it will continue to be relevant in the future. Alliances are especially important for those carriers that are not part of a major airline grouping as they enable them to offer their customers a seamless interline service within the alliance network. And, of course, that network is considerably expanded. An airline can offer flights to destinations where it does not operate.

What is your view of Portuguese airport operator, ANA and the rising airport charges?

What must be done?

This is a growing concern as ANA’s airport charges continue to increase. At the same time, our concern is amplified by the poor service levels Airlines 2018 – 06

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940

CEO Interview

This year alone, TAP Air Portugal has hired more than 340 pilots and 600 cabin crew

at the airports and by the lack of investment that is critical to mitigate airport congestion. These are important areas that need to be addressed.

ANA must enable TAP Air Portugal to deliver the service level that our customers deserve.

Where do you see your network growth coming from? You have opened new routes or frequencies in Europe and the United States, but the airline has strong ties in Africa too.

Our strongest growth, in terms of passenger numbers, is still in Europe. But it is true that we are launching new destinations and more frequencies in the United States and Canada, and we will keep on doing that for the next few years. In the United States, TAP plans to launch several new routes.

It’s a strategic market for TAP. Lisbon, due to its geographical situation, is probably the best and definitely the closest gateway between the Americas, Africa and Europe. So, the idea is for TAP to offer the best connections between these markets.

TAP continues to be very strong in Brazil, of course, where we fly to 10 different major cities, mostly with daily flights for each city.

But we decided not to depend on only one market, even if it’s as important and strong as the Brazilian market.

What are the main challenges for European carriers in 2019?

Air traffic control issues in Europe are a major concern. We look forward to the European single sky as it cannot come soon enough.

Another related challenge is the limitations imposed on airlines by the lack of airport infrastructure. There is no doubt that it is reducing the ability of some airlines to grow as quickly as they would want. That is surely the case for TAP at our Lisbon hub.

Is the Industry doing enough for the environment? What more can be done?

TAP Air Portugal continues to develop a set of initiatives aimed at modernizing the fleet. This airlines.iata.org

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CEO Interview

will not only increase efficiency but also reduce fuel consumption and CO2 emissions. These initiatives have significantly and consistently improved our environmental performance indicators. The new Airbus A320neo engines burn 20% less fuel than our older models. And by the end of 2019, 78% of our widebody block hours will be flown on our Airbus A330neos.

We also provide our clients with the possibility of offsetting the carbon dioxide emissions associated with their travels. As a voluntary program, it is the passenger who decides, at the time of booking at www.flytap. com, whether to participate in the global effort to combat climate change. This should remain an important feature of the industry’s environmental efforts.

In addition to this, TAP Air Portugal continues to focus on a program in partnership with IATA, where the calculation of emissions is determined by a methodology developed by ICAO. The methodology is customized for the type of aircraft operating a given route, and through the program TAP supports projects certified by the United Nations in developing countries.

Is aviation progressive enough or is the industry still too cautious when it comes to adopting new technologies, particularly customer-facing concepts?

I think that the aviation industry is extremely progressive in adopting new technologies, particularly customer-facing concepts.

But some airlines can often be prevented from moving forward fast enough due to legacy systems, which have to be interfaced to new technologies used in customer-facing systems.

The problem is that these legacy systems have to remain in use by network carriers in some airport environments to complete all the tasks required. There is the standardization of information exchanged between airlines to consider and the seamless provision of data requested by governments and authorities in various countries around the world.

The challenge for legacy airlines is that other airlines.iata.org

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20% The new Airbus A320neo engines burn 20% less fuel than our older models. And by the end of 2019, 78% of our widebody block hours will be flown on our Airbus A330neos

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In terms of the growth of TAP, it would be good to serve about 25 more destinations compared with today

20m I want us to be flying 20 million passengers annually compared with the 14 millionplus we have flown last year 29

carriers are moving rapidly and using more and more technology to develop and implement customer-facing technologies to support their customer handling concepts.

Where would you like to see TAP Air Portugal in five years’ time? Have you specific targets?

Customer satisfaction with arrival and departure times has increased 10% and 15% and the number of lost bags has been reduced by two-thirds by changing processes

I want us to be flying 20 million passengers annually compared with the 14 million-plus we have flown last year and for our customer service to be of the highest standards. In terms of the growth of TAP’s network and capacity, it would be good to serve about 25 more destinations compared with today. We’ll need more aircraft to do that and so I would like to see some more than 100 state-of-the-art aircraft in the fleet with the older models having been replaced. There must be changes at our Lisbon hub too if passengers are to enjoy a seamless transfer process and our punctuality rate is to attain somewhere in the high 80%-range.

Finally, and most importantly, we will need engaged and dedicated employees. I expect TAP to have more than 12,000 direct employees in five years’ time.

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Crisis Communications

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15 minutes Best practice suggests that airlines should issue a first acknowledgement of an incident within 15 minutes of notification

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Crisis Communications

Taking responsibility Taking ownership of a crisis response is crucial, no matter what the cause of the incident WORDS: GRAHAM NEWTON

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rotecting your reputation after an incident is the ultimate challenge for any airline. If done right, the company’s reputation could emerge even stronger.

Talking about the cause of the incident is not possible until a thorough investigation is complete. But the airline must cooperate with the authorities and help victims and their families. Taking ownership of the response by acknowledging the incident and talking about what the airline is doing in these areas should therefore be the prime focus.

“Legal liability or blame can wait,” insists John Bailey, Partner and Managing Director, Ketchum Singapore. “What matters most is who will step up and try to make a bad situation better? Companies that don’t take responsibility—like BP after the infamous Deepwater Horizon oil spill—will find it hard to gain forgiveness or avoid reputational damage.”

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Quick response

Leading the response after an incident—be it a delay, cancellation, or something more serious—is easier said than done.

In July 2018, for example, Aeroméxico Connect 2431 departing from Durango for Mexico City crashed on takeoff, with all 103 passengers surviving. The State Governor’s tweet beat Aeroméxico’s response by one minute and the carrier had to work hard to regain control of the situation.

It is not uncommon for a third party to be the initial source of information. Best practice suggests that airlines issue a first acknowledgement of an incident within 15 minutes of notification. But reporters of all types on social media—including politicians— have many potential sources of information other than the airline.

There are passengers, other social media users, general news websites, aviation-specific

“It is very important to be honest and transparent with both the news media and general public”

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Crisis Communications

websites that track flights, and even other airlines and stakeholders.

Passengers, however, have a contract with the airline. They, and their relatives, expect timely, accurate information and to know from the airline what their options are in the event of an incident, delay or cancellation. And the pressure for information becomes even more intense and spreads to family members if there are injuries or loss of life.

For communicators, this means there is a tension between speed, accuracy and completeness, particularly in a developing crisis.

“That tension has increased exponentially now that the first indication of an incident or disruption may be via a tweet, photo or live-streamed images from people on the scene,” Bailey says.

32 Honest response For Bailey, this is why taking ownership is so important. And it can be done without necessarily being the font of all knowledge.

Crucially, an acknowledgement of an incident is often response enough in the first instance. It may just say that a further statement will be issued as soon as possible.

In other words, from the airline perspective, any operational time gap is acceptable if that gap is filled with communication. In this way expectations can be managed. Generally, people understand that information may be scant initially, but a proactive airline is a reassuring sign that the airline is working toward providing further details as soon as possible.

“It is very important to be honest and transparent with both the news media and general public,” says Ross Feinstein, Senior Manager, Corporate Communications, American Airlines. “But it is also important to not speculate and provide inaccurate information either. The news media is monitoring social media 24/7, and most media use social metric monitoring tools, such as Dataminr, to alert them of any issues involving aviation. When an incident occurs, the media will be calling instantly.”

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Do’s and Don’ts To best protect an airline reputation in a crisis: Do be prepared be quick to let everyone know what you are doing be empathetic and caring focus first on people—those affected and their loved ones ensure the CEO is visible at the center of the response take responsibility—but only for the things for which the airline actually is responsible ensure complete alignment between words and actions

Don’t allow a lack of information to delay your response. You can always say something avoid responsibility or try to blame others make empty promises use corporate speak or legalistic language keep the CEO out of view

2018. A Dataminr email alert was sent to media outlets around the world and just two minutes later the first call came in to the Corporate Communications department from CNN. “While speed is important, we want to be accurate,” says Feinstein. “Media outlets and the general public understand if you respond and say that we are aware of the issue and looking into it. It is much worse to provide inaccurate information, then have to retract that information later on.”

To deliver on this strategy, American has a flexible crisis communications plan. In an IT disruption, for example, there is a member of the Corporate Communications staff that regularly works with the Chief Information Officer and the IT team to help provide real-time information.

Different members of the Corporate Communications team are assigned to different workgroups. This structure has the added benefit of promoting message consistency. When American releases a statement publicly, it disseminates that same information internally as well.

“Each year, we drill multiple times corporatewide, and we also drill with our nine regional carriers that fly under the American Eagle brand,” Feinstein informs.

Professional response

Every crisis is different, and the speed of response and a well-structured communications strategy are vital for every airline. Any response must be fluid and able to divert to the areas of most concern. Done successfully, this can underpin an airline’s reputation. After all, it is not just how well an airline performs when operations are running perfectly, it is how well it performs when things go wrong.

For Bailey, the crux of successfully handling any crisis is understanding passenger needs at any given point.

“People will generally accept that delays or disruptions are often beyond the airline’s control,” he concludes. “But they won’t accept an unprofessional or uncaring response.” airlines.iata.org

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Dossier: Chicago Convention

Dossier 33

Fit for purpose The Chicago Convention has allowed air transport to increase global connectivity and boost economies and job creation. But as it turns 75, there are challenges

IMAGES: GETTY

WORDS: GRAHAM NEWTON

The Chicago Convention celebrates its 75th anniversary in 2019 and remains the essential framework for the industry.

“The Chicago Convention has proven to be extremely resilient, being subject to very few substantive amendments since its adoption,” says Olumuyiwa Benard Aliu, ICAO Council President.

“A unique feature of this agreement is airlines.iata.org

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that it provides for the adoption and amendment of standards and recommended practices (SARPs), and in its role as a rulemaking body, ICAO has developed over 12,000 of these provisions for aviation safety, security, facilitation and environment protection.

“These standards permit civil aviation to respond and adapt to new and emerging opportunities and challenges,

including changes in technology, increases in global air transport demand and capacity, as well as new and evolving threats to air safety and security.”

Jeff Shane, IATA’s General Counsel agrees that the Convention should be applauded for what it achieved (see boxout p36), especially “the establishment of an institution—ICAO —that has facilitated the global standard2018 – 06 Airlines

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Dossier: Chicago Convention

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setting essential to the stunning expansion of aviation in the years since.

“ICAO has facilitated vitally important coordination among States that has enabled civil aviation to become an essential driver of global economic growth,” he adds. “Whether we’re talking about the licensing of aircraft and crew members, or the framework for global air traffic management, or the regulation of safety, ICAO has been the beacon.”

Global standards, facilitated by ICAO, are the Chicago Convention’s most important gift to the world. While every State retains the authority to regulate airlines based in its territory, each signatory to the Chicago Convention has agreed to adhere to the standards and recommended practices adopted pursuant to the Convention.

In other words, the great achievement of the Chicago Convention is that States have agreed to exercise their sovereignty in keeping with a single, global system of aviation regulation.

Difference of opinion

There have been changes to the Convention’s Articles over the years.

Eight revisions have been ratified

What might have been The UK delegation to Chicago in 1944 proposed the creation of a new “International Air Authority”—a kind of global civil aviation authority—that would serve as the world’s air transport regulator. Initial capacity on international routes was to be negotiated multilaterally, based on a strict mathematical formula. New Zealand proposed that the new international authority should own all aircraft and facilities and be responsible for the actual operation of commercial air services on prescribed international trunk routes.

since its inception. Article 3 bis is perhaps the most significant amendment in recent years. It states: Every other State must refrain from resorting to the use of weapons against civil aircraft in flight. In short, civil aircraft must not be shot down.

The language in the original Convention wasn’t so specific. But the 1983 shooting down of Korean Air Lines 007 by Russian fighter jets at a time of cold war tension forced the international community into action. Yet, despite the relatively rapid adoption of the Article, 15 years passed before the requisite ratification was obtained.

“This was a straightforward amendment,” says Shane. “That so much time elapsed between adoption and its coming into force shows that tinkering with the Chicago Convention is tough and there has to be a really compelling reason to do so. It is not something to do lightly.”

Nevertheless, the next 75 years may well see significant changes in civil aviation that will force further revisions.

Drones and commercial space travel are two obvious areas that may need to be addressed. There was a provision for

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120

The United States today has more than 120 open skies agreements with trading partners globally

Questions have surrounded the Chicago Convention’s suitability since its inception. Most notable, perhaps, is why there isn’t a commitment to open skies.

Franklin D. Roosevelt, the US President in 1944, sent a message to the Chicago gathering to specifically warn against “great blocs of closed air” and yet that is precisely what happened.

Article 6 of the Convention says a country can’t operate scheduled international air service into the territory of another contracting State without its permission.

This, of course, runs contrary to accepted trading wisdom where liberalization has brought the greatest benefits to consumers and the economy.

But Jeff Shane, IATA’s General Counsel points out that any agreement that facilitated global open access for commercial flights was simply inconceivable at the time.

Proof is in the restrictive 1946

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Bermuda Agreement between the United Kingdom and the United States, arguably the two most advanced countries at the time in terms of commercial fleet, and so the two countries that stood to gain most from a liberalized market.

The fact that these two giants of the fledgling aviation world were cautious “tells you everything you need to know,” says Shane.

The Bermuda Agreement set the precedent for the many bilaterals that followed. More than 3,500 are now in place and for years most were carefully calibrated—through enabling the strict regulation of entry, capacity, routes, and fares—to protect the interests of each country’s airlines.

This restrictive approach proved a stumbling block to aviation growth for decades as it artificially limited competition.

In a breakthrough development, the United States

and the Netherlands forged the first Open Skies agreement in 1992. This was an accord that eliminated most of the regulatory constraints on air services between the two countries and created a wholly new model for international aviation.

The United States today has more than 120 open skies agreements with trading partners around the world, and the liberalized approach is finding its way into many other markets as well.

Shane isn’t convinced that an open skies approach to international market access for airlines will ever find its way into the Chicago Convention, however.

“There would be more than 190 opinions on what a commercial agreement should look like,” he suggests.

“The debate would be a huge distraction from ICAO’s core responsibilities—ensuring the predictability, safety, and stability of global air transport.”

1944

Dossier

Discussion on… The search for open skies

The Chicago Convention agreement was signed on December 7, 1944, in Chicago by 52 signatory states.

It was ratified on March 5, 1947 and went into effect on April 4, 1947, the same date that ICAO was established

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Dossier: Chicago Convention

Dossier

The main Articles… The Chicago Convention was signed on 7 December 1944, by 52 signatory States. It was ratified in March 1947 and went into effect in April of that year.

However, the State may require the aircraft to make a landing.

Article 6: No scheduled international air service may be operated over or into the territory of a contracting State, except with the special permission or other authorization of that State.

Article 12: A State shall keep its own rules of the air as uniform as possible with those established under the convention. Duty to ensure compliance with these rules rests with the contracting State.

Article 1: Every State has complete and exclusive sovereignty over airspace above its territory.

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IMAGES: ICAO

Article 3 bis: Every other State must refrain from resorting to the use of weapons against civil aircraft in flight.

Article 13: A State’s laws and regulations regarding the admission and departure of passengers, crew or cargo from aircraft shall be complied with on arrival, upon departure and whilst within the territory of that State.

Article 5: The aircraft of States, other than scheduled international air services, have the right to make flights across State’s territories and to make stops without obtaining prior permission.

Article 24: Aircraft flying to, from or across, the territory of a State shall be admitted temporarily free of duty. Fuel, oil, spare parts, regular equipment and aircraft stores retained on board are also exempted from customs duty, inspection fees or similar charges.

unmanned aircraft in the Convention, but this undoubtedly was addressed to rockets and missiles and not the proliferation of small drones.

“Many new advances have occurred in aviation since 1944, but fortunately and quite presciently the drafters of the Convention had considered and made allowance for them within its provisions,” believes Dr. Fang Liu, ICAO Secretary General.

She continues: “Today we continue to benefit from their original vision by being guided cooperatively by a broad and flexible multilateral agreement, which can accommodate not only new technological developments, such as unmanned aircraft, but also

collaborative global policy approaches to challenges such as our current environmental and security priorities.

“There will always be new territory for aviation, but because of the level of consensus that the Convention has fostered across our sector, there are also opportunities to provide leadership and a true example to the world of what effective international cooperation can really achieve.”

Shane agrees that this work is adaptation rather than replacement of the Chicago Convention established in 1944. “I am sure there are some dramatic changes ahead but the rules for commercial aviation are still relevant and are likely to remain so for the foreseeable future,” Shane concludes.

Airlines 2018 – 06

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Olumuyiwa Benard Aliu, ICAO Council President

“The Convention has proven to be extremely resilient, being subject to few amendments since its adoption”

Jeff Shane, IATA’s General Counsel

“ICAO has facilitated vitally important coordination among states that enabled civil aviation to become a driver of global economic growth”

Dr. Fang Liu, ICAO Secretary General

“The Convention provided a true example to the world of what effective international cooperation can really achieve” airlines.iata.org

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60 seconds with...

Robin Hayes CEO, JetBlue

“We believe that technology is critical to JetBlue’s future success” What are your plans for the airline in 2019?

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We’re focused on keeping JetBlue the best airline to work at, offering an incredible experience to our customers, and delivering solid financial returns for our owners, which allows us to continue growing our brand.

As we approach our 20th anniversary, we know we can’t afford to stand still, and we never have. In 2019, we’ll have new neo aircraft joining our fleet and will be preparing for our A220s that begin arriving in 2020. We’re also excited to be working in partnership with the Port Authority towards an expanded terminal complex at JFK that would pave the way for future growth.

In brief… JetBlue As a low-cost airline in the United States, JetBlue serves more than 100 destinations across the Americas Operating out of six focus cities including New York JFK, JetBlue advocates digital transformation JetBlue was founded in 1999 by David Neeleman, with the mission to ‘bring humanity back to air travel’

100+ 2

destinations across

continents

How important is gender diversity to the industry?

Is technology the key to differentiation in the modern market?

It’s certainly up there. Throughout our history, we’ve always been a disrupter and an innovator. We believe technology is so critical to our future success that we created our very own corporate venture capital subsidiary called JetBlue Technology Ventures. It’s intentionally based in Silicon Valley so we have a front-row seat of new tech that’s in its early stages.

When we see something we like, we work with start-ups to help them develop their businesses and explore how their ideas could benefit JetBlue.

Is US aviation regulation becoming too onerous?

We have to be careful it doesn’t get that way. I’d prefer government to stick to regulating the essentials of travel, like keeping us safe and secure. I worry that any move to regulate elements of the customer experience, like seat size, will push us back to the pre-deregulation days of 40 years ago, when only the wealthy in the United States could afford to fly.

Airlines 2018 – 06

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It’s critical. Especially with the industry on the cusp of a large number of retirements among pilots and aircraft technicians, we need to ensure aviation is an attractive option for women and other under-represented groups. We created the JetBlue Foundation to address this and to ignite a passion for aviation in groups that might not see it as a natural career choice.

How do you like to spend time when flying?

I spend most of my time speaking with our crews in the galleys or the cockpit. This one-on-one time is incredibly valuable to me because I get to make personal connections and really dig into the challenges our teams face on the front lines.

Window or aisle seat?

I prefer the aisle because it lets me get started with the “Blue Turn” as soon as we land. This is when all JetBlue crewmembers on a flight pitch in to help clean the aircraft, helping us keep our costs low and turn the aircraft quickly. airlines.iata.org

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* Skytrax World Airline Awards

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embraercommercialaviation.com #FlyAirAstana

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