Airlines 2019-03

2019 – 03

airlines.iata.org

AIRLINES.

and World Air Transport Summit Seoul, 1–3 June 2019

THE AGM ISSUE

2019 – 03

CEO Interviews Air India, Korean Air, SriLankan Airlines | Diversity Empowering women in aviation | IATA Opinion Searching for talent in the Middle East and Africa | Electric aircraft A look at the future of air transport | 60 seconds with... the CEO of Caribbean Airlines

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THE A330neo.

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FLY The A330neo shares many of the same innovations as the groundbreaking A350 XWB, delivering a 25% saving in fuel consumption compared to others in the category. Both aircraft also benefit from a common type rating, which means pilot training costs are significantly lower too.

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Innovation. We make it fly.

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Airlines.

Contents 2019 – 03

Comment

24 Connectivity for the customer

35

9 Alexandre de Juniac, Director General

Aviation must approach an exciting future with desire and purpose 19 IATA Opinion: Muhammad Ali Albakri, Regional Vice President, Africa and the Middle East

Walter Cho, Korean Air Chairman and CEO, champions the benefits of joint ventures for passengers and airlines 30 A proactive stance

Searching for talent in the region

Carriers must be prepared to adapt when tragedy strikes the nation, says SriLankan Airlines CEO Vipula Gunatilleka

Digest

Dossier

12 IATA and industry update

35 Ready for the challenge

African aviation underperforming, Cargo figures up slightly, IATA supports women in aviation, French report faces scrutiny

Developing diversity in aviation requires the industry to advocate for and instill cultural change throughout the sector

16 Data: In numbers

Features

46

Korea—An aviation story

7

46 Now for something different

Electric aircraft may sound futuristic, but adoption is closer than you think

CEO Interviews 20 Scaling new heights

Air India Chairman and Managing Director Ashwani Lohani on how people are at the forefront of the carrier’s vision

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...

50 Garvin Medera, CEO of Caribbean Airlines

24

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

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2019 – 03 Airlines

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Comment: Director General and CEO, IATA

Changing with the times Flying is freedom, but to grow responsibly the industry must address the key challenges of sustainability, capacity and staff diversity with desire and purpose

ILLUSTRATION: SAM KERR

T

his year we expect to serve 4.6 billion travelers.

On average, that means 145 people land safely somewhere in the world every second. Flying is freedom. Each person will have purpose to their journey, including educational, business, leisure or even starting a new life in a new location.

Aviation has enabled people to make connections globally.

And that adds tremendous value to the societies in which we live. So it is important that we ensure that future generations will have the same if not greater freedom to explore and contribute to the greatness of our world.

You have to be optimistic about the future of aviation. People want and need to travel. Aviation allows that. And by 2037 we expect that 8.2 billion travelers will rely on airlines to get them where they need to go. Meeting this will be challenging.

Where will we find the infrastructure needed to support operations? Our airports and air traffic management systems already struggle to accommodate demand in many key markets.

Governments must see the strategic value in developing the air transport infrastructure that can power their economies.

Will we be able to attract the talent needed to run the business? Great careers are on offer in aviation, but even today we struggle to find and train enough pilots to keep ahead of growing demand. Greater gender diversity—ensuring that men and women can equally build their future in the industry—must certainly be a major part of the solution.

Can we continue to improve safety? Air travel is the safest form of long-distance travel, with an impressive history of continuous improvement. Recent tragic accidents should cause

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us to review how we manage the complexity of new technology.

And we also need to think about how we can uphold the integrity of lengthy investigation processes and maintain public confidence in the age of instant information.

Will we be sustainable enough to earn our license to grow?

Stabilizing emissions from 2020 with carbon neutral growth is a landmark industry achievement. And our 2050 goal of reducing carbon emissions to half of 2005 levels is ambitious.

We need to communicate with even greater clarity what we are doing to achieve it. And we must find ways to get governments to share our ambition and prioritize the commercialization of sustainable aviation fuels and the delivery of modernized air traffic management.

These are big questions and the answers will not be easy. One advantage is the strength of our association. Working together through IATA, airlines have built global standards and solutions that have made aviation an integral part of modern life.

These questions about the building blocks of our future will feature prominently at the 75th IATA AGM and World Air Transport Summit in Seoul. It is an important opportunity to set out an even clearer vision for a safe, secure, efficient, diverse and sustainable future for aviation, the business of freedom.

9

Alexandre de Juniac: Director General and CEO, IATA 2019 – 03 Airlines

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Aviation is the business of freedom. In South Korea, high tech cities like Seoul (pictured) and Incheon beneďŹ t greatly from the increase in opportunities made possible through air transport.

With connectivity at an all-time high and continuing to grow, the Republic is thriving as it develops and maintains tourism, business relationships and a unique identity renowned across the globe.

The Big Picture

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Digest Kuuchi: African aviation punching below its weight Countries in Africa should implement the open skies program without worrying about what others are doing, the International Air Transport Association (IATA) has said.

Raphael Kuuchi, IATA’s Regional Vice President for Africa told delegates at the AviaDev conference in Cape Town that African aviation is at risk of falling behind if states delay the creation of open skies while waiting for others to implement the program first.

“For instance, at IATA we still believe something can be done to bring air transport in South Africa up to a higher level. We think the industry is still punching below its weight,” said Kuuchi.

IATA has plans to undertake a

instance, which operate in a single European market,” he told delegates.

Kuuchi added that for SAATM to work, the industry in Africa “must go beyond talk” and take the necessary steps to realise the program and bring it to fruition.

Necessary measures include incorporating SAATM regulations into domestic aviation regulations; informing stakeholders about SAATM; and setting up clear criteria on how airlines can access local markets.

To date, 28 countries have agreed to SAATM since it was launched in 2018, but only half have signed a Memorandum of Implementation pledging to unlock the benefits of aviation in their respective states.

IMAGES: GETTY/ISTOCK/SHUTTERSTOCK

12

perception analysis study to understand where the industry is lacking in South Africa and across the continent.

Kuuchi also spoke about the role the Single African Air Transport Market (SAATM) has to play in creating economic and social benefits in a region that only has 10% of the population using air transport.

The RVP for Africa said the SAATM’s plan to create a single unified air transport market for African airlines can boost local economies through increased intra-African trading.

“In this way, African airlines will have a bigger ‘local market’ that can keep them on a similar competitive advantage compared to European airlines, for

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Digest

AIR DOLOMITI JOINS IATA Air Dolomiti has become the latest airline to join IATA. The regional carrier has been owned by Lufthansa since 2003, and operates a 13-strong fleet of Embraer jets across 18 different destinations between Germany and Italy.

“More opportunities needed for women” – UK minister The UK government has welcomed IATA’s support for The Women in Aviation and Aerospace Charter.

IATA has become an Overseas Supporting Organization of the UK government’s charter as it continues to plot a path toward increasing the number of women in leadership roles in aviation.

“Almost a quarter of a million people work in the UK’s aviation sector, yet women account for fewer than one in ten employees. It’s clear, we have to create more opportunities for women to succeed at the highest levels,” said UK Aviation Minister, Baroness Sugg.

“A balanced workforce is good for business and it’s absolutely vital we make the best use of talent in this country, encouraging and inspiring girls into aviation-related careers.”

IATA WARNS AGAINST MALAYSIA’S “HARMFUL” DEPARTURE LEVY IATA has expressed disappointment with the passing of the Departure Levy Bill by the Lower House of the Malaysian Parliament, and is urging Malaysia to abandon its implementation.

“The Air Passenger Departure Levy has the potential to do more harm than good to the Malaysian economy,” said Conrad Clifford, IATA’s Regional Vice President for Asia-Pacific.

“While the intention is to raise revenue for the government in the short run, it needs to be recognized

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that aviation is a catalyst for economic growth, and any action that dampens the demand for travel will also hurt the industry’s economic contributions to the country.”

In 2017, Malaysia’s aviation sector supported a total of 450,000 jobs and contributed a total of US$10.1 billion to Malaysia’s Gross Domestic Product (GDP). The broader tourism sector accounted for 13.4% of total Malaysian GDP, which is significantly supported by air transport.

Signing the charter is the latest move in the organization’s bid to increase opportunities for women, having already launched a global study—due to be published this year—looking at the gender gap and how to address it.

Christine Ourmieres-Widener, IATA Board member and Flybe CEO signed the declaration alongside IATA Regional Vice President for Europe, Rafael Schvartzman.

“It is important to address the already growing shortage of pilots and engineers in order to meet the global demand,” said Ourmieres-Widener.

Echoing the thoughts of the Flybe CEO, Schvartzman said: “Enabling greater gender diversity is a cause IATA is promoting amongst its own staff and members internationally.”

Events June to September 2019

Cabin Safety Conference 11-13 June Istanbul, Turkey 144th Slot Conference 18-20 June Cape Town, South Africa

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Business Travel Summit 19-20 June Geneva, Switzerland Aviation Data Symposium 25-27 June Athens, Greece Frequent Flyer Fraud Prevention Workshop 25-27 June Buenos Aires, Argentina Wings of Change Americas 3-4 September Chicago, USA Aviation Virtual and Augmented Reality Summit 7-9 September Crans-Montana, Switzerland Aviation Summit, Africa & the Middle East 17-18 September Nairobi, Kenya

2019 – 03 Airlines

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Digest

French air transport report “falls short”

14

France’s program to boost the competitiveness of its air transport sector has been met with mixed reaction following the publication of its findings.

The Assises du Transport Aerien, a year-long series of roundtables, debates, seminars and events, has “fallen short” of industry stakeholders’ expectations, the International Air Transport Association (IATA) said.

French Transport Minister Elisabeth Borne launched the initiative in 2018, which saw IATA give input on the Assises’ five main topics of economic, environmental, social, innovation and territories connectivity performance.

Publishing the results, Borne said the current French political climate—which has seen a wave of protests against the government in recent months— contributed to the program not meeting all of its intended goals as the crises sidetracked many political initiatives.

Although disappointment was expressed at the results, IATA noted that the program also delivered some positives for the industry such as reducing airport tax per passenger, developing plans for Sustainable Aviation Fuels and a strengthening of the airport regulator’s independence and powers.

Turbulence: France has experienced protests from the ‘Gilets Jaunes’ movement

India and China growth set to boost air travel Growth in the frequency of traveling by air over the next 20 years will be driven by the emerging markets.

IATA’s analysis shows the relationship between the average frequency of air travel (the number of flights to, from, within a country divided by its population) and living standards, measured by GDP per capita.

IATA has found that if trends continue as expected, 44% of additional air passenger trips will come from India and China over the next 20 years.

Both fast-growing states are expected to see a rise in demand to connect cities across their vast lands by air, for services including trade, investment and travel.

European and US citizens are not expected to fly more than they do at present, despite current trends showing that living standards are expected to be 20-30% higher in 2037.

Once GDP per capita reaches $20,000 in a country, the trip frequency flattens.

In addition, expected population growth—a key driver of air passenger demand— is low in developed economies such as Germany.

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Digest

“Aviation’s growth is dependent on enhancing safety, improving infrastructure and building capacity.”

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Additional jobs generated by aviation in Romania in 2037 if policies to improve competitiveness and modernize airspace are adopted.

, 23 000

Muhammad Ali Albakri, Regional Vice President for Africa and the Middle East, IATA

DE JUNIAC CALLS FOR CAUTION DESPITE IMPROVING AIR FREIGHT DEMAND IN MARCH

“PARTNERSHIPS ARE KEY” FOR MIDDLE EAST EXPANSION IATA and the Arab Civil Aviation Organization have signed a memorandum of understanding (MoU) to improve cooperation and enhance air transport in the Middle East and North Africa (MENA).

Under the terms of the MoU, the organizations will share information and expertise and work together on six key areas of aviation, including safety and flight operations, regulatory harmonization, infrastructure, environment, treaties/ICAO standards, and future trends in air transport.

Welcoming the agreement, IATA’s Regional Vice-President for Africa and Middle East Muhammad Ali Albakri (above) said the MoU would improve air transport’s reach and capability in the region.

“Aviation and related-tourism already support some 2.4 million jobs and contribute $130 billion to the MENA region’s GDP,” he said.

“For aviation’s ability to deliver growth, strong partnerships with governments will be key.”

Demand, measured in freight tonne kilometers (FTKs), rose slightly by 0.1% but was a significant improvement on February’s year-on-year results which saw a drop in demand of 4.9%.

Freight capacity, measured in available freight tonne kilometers (AFTKs), rose by 3.1% year-on-year in March 2019. Capacity growth has now outstripped demand growth for 11 out of the last 12 months.

“Year-on-year demand for air freight edged back into positive territory in March.

After four consecutive months of contraction, this is an encouraging development,” said Alexandre de Juniac, IATA’s Director General and CEO. “But the headwinds from weakening global trade,

growing trade tensions and shrinking order books have not gone away.”

Demand for air cargo continues to face significant headwinds, with global trade volumes having fallen by 1% over the past 12 months.

Compounding matters, global economic activity and consumer confidence continue to weaken, while export orders also remain on the wane according to the Purchasing Managers Index.

Despite the worries surround the outlook, industry confidence remains upbeat with only 13% of respondents from IATA’s Business Confidence Survey expecting to see a decrease in freight volumes in 2019 compared to 2018.

FREIGHT DEMAND

FREIGHT CAPACITY

15

0.1% 3.1% Increase

Increase

IATA EXPRESSES SADNESS AT KOREAN CHAIRMAN’S DEATH Korean Air Chairman and IATA board member Cho Yang-ho has died after a battle with illness.

Beginning his career at Korean Air in 1974, Cho worked his way through the ranks of the airline to

assume the role of Chairman and CEO in 1999.

“We are saddened to learn of the passing of Mr. Yang-ho Cho, and would like to express our sincere condolences to his family,

friends and colleagues at Korean Air,” said Conrad Clifford, IATA Regional Vice President for Asia Pacific. “His board contributions provided guidance and helped shape the industry’s agenda.”

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Data

In numbers R E P U B L I C O F K O R E A – A S T O R Y O F A V I AT I O N

Asia-Pacific is the largest market for passenger flows to and from the Republic of Korea, followed

by North America and Europe. Connections help tourism and business thrive, providing a pathway to the world.

North America

Latin America

Africa

Europe

Middle East

Asia-Pacific

4.6%

0.1%

0.2%

3.7%

0.3%

91.1%

Passengers: 3.1m

Passengers: 69,000

Passengers: 101,000

Passengers: 2.5m

Passengers: 237,000

Passengers: 61.9m

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Aviation provides $47.6 billion gross value added contribution to the Republic of Korea’s overall GDP. In total, 3.4% of Korea’s GDP is supported by inputs to the air transport sector and tourists arriving by air.

838,000 838,000 jobs are supported by the air transport sector in Korea.

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Airlines, airport operators, retail outlets, manufacturers and air navigation service providers employ 158,000 workers in the Republic of Korea. airlines.iata.org

13/05/2019 11:38

Data (Source: IATA)

90bn Under IATA’s “current trends” scenario from the latest 20-year passenger forecast, Korea is expected to see the air transport market grow by 89% by 2037. This would result in an additional 58.2 million passenger journeys, with the increased demand supporting around $90 billion of GDP and almost 981,500 jobs.

The business of freedom: Air transport facilitates flows of goods, investment and people to, from and within the Republic of Korea, with foreign tourist expenditure reaching $13.4 billion, foreign direct investment contributing $231 billion and exports totalling $660 billion.

$13.4bn $231bn $660bn Foreign tourist expenditure

Foreign direct investment

Foreign exports

Korea’s connectivity to regions around the world has grown to the extent that it currently has 76 airlines operating in the country, serving 176 destinations across the globe.

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378,000 Employees Tourism in Korea is the largest provider of jobs supported by air transport, contributing to 378,000 employees across a range of sub-sectors.

Top five international tourist arrivals

Top five busiest direct flights arrivals

Top five busiest air cargo routes

Rank

Country

Rank

Country

Rank

Country

1

People’s Republic of China

1

Japan

1

United States

2

Japan

2

People’s Republic of China

2

People’s Republic of China

3

Chinese Taipei

3

United States

3

Japan

4

United States

4

Vietnam

4

Vietnam

5

Hong Kong (SAR), China

5

Philippines

5

Hong Kong (SAR), China

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2019 – 03 Airlines

13/05/2019 08:00

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IATA Opinion: Muhammad Ali Albakri

In pursuit of new talent

ILLUSTRATION: SAM KERR

To grow sustainably, the Africa and the Middle East region needs to address the skills gap today, writes Muhammad Ali Albakri, Regional Vice President

A

There are good private-sector initiatives underway and IATA is committed to continuous training through IATA Training and the IATA Airline Training Fund in Africa. Already this year, 1573 people have participated in IATA Training and 400 African aviation professionals have benefited from the fund. However, to achieve the scale and sustainability required for future growth, a more collaborative and concerted effort is required.

Though the industry is best suited to addressing the current specialist knowledge and skills gaps, we are dependent on governments to put in place the right environment to create the future talent that the sector needs. Collaboration is needed to create education systems that produce significantly greater numbers of young people with the technical and IT skills the industry needs and the life skills necessary to be employable.

Today’s economies are increasingly knowledge-based and technology-driven. So, governments will benefit from working together with the industry because the jobs created will develop much-needed abilities. Moreover, the salaries these abilities command will be a huge boost to economies.

New technologies are spawning new ways of working, and we cannot easily predict what tomorrow’s jobs will entail. But preparing the next generation with the capacity for lifelong learning will allow them to adapt to a rapidly evolving economy.

If AME can meet the future demand for highly skilled aviation roles, it will benefit from increased GDP growth, investment in jobs and ultimately, enjoy the prosperity aviation can generate.

Given the demographics, there is even potential for AME to become a global aviation training center—meeting its market needs and exporting skilled labor to other regions.

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2019 – 03 Airlines

viation is a vital economic driver in Africa and the Middle East (AME), supporting more than six million jobs and over $55 billion in economic activity. And over the next 20 years, passenger demand in the region is set to double. This creates significant opportunities for aviation.

Despite these strong figures, the operating environment remains challenging. Financially, airlines in the region are seeing profits eroded and margins squeezed. The anticipated average profit per passenger globally in 2019 will reach $7.75.

In the Middle East, though, it is predicted to be just $3.30 per passenger and in Africa carriers will lose $3.51 per passenger.

To sustainably accommodate the growth in demand for air transport, the region must therefore address key challenges.

Confirming safety and security are at world-class levels is a top priority. Similarly, there is a need for better infrastructure and to drive cost efficiencies across operations. Specific to Africa, governments must be made aware of a harmonized regulatory framework to support enhanced connectivity.

One issue looms large above all. We need people with the right skills and experience across all aspects of the business—to manage the business, to fly and maintain aircraft, to operate the airport systems, and to provide air navigation services.

According to Airbus, in the next 20 years the world’s global fleet will double to 48,000 aircraft. That means more than 500,000 pilots are needed, as well as an even greater number of technicians and engineers to maintain these aircraft. Clearly, the ability of AME aviation to reach its potential will hinge on creating a professional, skilled, and sustainable workforce.

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CEO Interview

Scaling new heights Air India Chairman and Managing Director, Ashwani Lohani explains that people are the key if the airline is to deliver on its strategy for growth WORDS: GRAHAM NEWTON

W

ith the Indian aviation market set to be among the largest in the world, Air India has an extraordinary opportunity on its doorstep.

But the carrier must overcome its legacy infrastructure and debt burden to realize a nimble decision-making process.

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IMAGES: GETTY/ISTOCK

What are your plans for the airline over the next couple of years?

The aim is to make sure Air India realizes its full potential. In terms of infrastructure, fleet, routes, facilities and, above all, efficient and dedicated human resources, Air India has a tremendous inherent strength that is way ahead of most airlines. We have to make optimum use of these positives and bring the best out of every employee by inspiring him or her to adopt a disciplined work culture and walk that extra mile for the sake of the organization.

I have already identified a few areas for immediate improvements as a first step toward turning around the company through enhanced productivity. Every employee should make themselves aware of the financial targets of the company and work with a zeal to achieve the same.

We have to effect immediate improvements in the punctuality of our flights, for example. I am also taking steps to make the maximum number of aircraft available and to enhance the load factor. And I have emphasized the need for immediate improvement in every area of our service, especially inflight service and catering.

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The overall streamlining of management and enhancing productivity are the key factors. We would also like to have a planned expansion on profitable routes on the one hand with a robust linking of tier two and tier three cities in sync with the Connect India mission on the other.

Of course, we do have some critical legacy issues, the most important being the debt burden, which also needs to be addressed. All my plans are directed towards making Air India a profitable and first choice airline.

1932 Air India was founded in 1932 as Tata Airlines

How can you make the brand more attractive for domestic and international travelers?

I feel the brand is already an attractive and well-established one. We want the Air India brand to be perceived as an international brand with strong Indian roots and global scales.

We are proud of our identity and heritage.

Generations of air travelers in India and overseas have made Air India their airline of choice. The endearing Maharajah, the airline’s mascot, is symbolic of a service brand that has endured and grown. We are constantly endeavoring to make it more vibrant, highlighting our product, services and positives at every platform to further enhance our brand image.

Can a state-owned airline be nimble enough to compete in today’s dynamic aviation market?

It can be challenging at times but if we have a steady focus and work steadfastly towards achieving our goals, I have no doubt we can provide good competition and even outsmart

125 94 aircraft make up the Air India fleet

destinations served

by Air India across four continents

27th Air India became the Star Alliance’s 27th full member in July 2014

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CEO Interview

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Being a state-owned airline can be challenging at times but if we have a steady focus and work steadfastly towards achieving our goals, I have no doubt we can provide good competition and even outsmart other airlines

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2019 – 03 Airlines

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CEO Interview

An airline will have to adjust its operations and pricing in sync with the exponential growth of civil aviation in our country, but we still have to offer the finest luxuries and comfort to premium passengers

other airlines. From a leadership perspective, it means improving the decision-making process, as well as taking decisions based on gut feel at times.

From the employees’ perspective, I believe workers are true driving forces in any organization and if they are happy and the morale is high, the organization can scale new heights.

I would like to mention here about our non-stop operation from New Delhi to San Francisco, which was one of the longest flights of Air India. It was successful despite criticism and doubts.

How important are the environment and sustainable fuels to your strategy?

Environmental issues are foremost in our overall operations. We are continuously developing initiatives to increase the efficiency of our fleet and reduce fuel consumption and CO2 emissions. These green measures have significantly improved our environmental performance indicators.

The new Airbus A320neo engines burn 20% less fuel as does the Boeing 787 Dreamliners.

And we are constantly making our employees aware of the need to support the global effort to safeguard the environment and doing our best to adopt environmentally-friendly industry practices.

Are you happy with the infrastructure in India and the charges for using that infrastructure?

The government has been doing its best to strengthen and expand civil aviation infrastructure in our country.

The development and opening of functional airports, maintenance, repairs and overhaul facilities, and most importantly the emphasis on air-linking smaller cities in remote areas with metropolitan hubs has brought about a marked improvement in our aviation infrastructure.

Key amendments to aviation legislation and passenger-friendly measures without compromising on the interests of the airlines.iata.org

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organization will also be a fillip to the growth story of civil aviation in India.

What other challenges and opportunities do you see for Indian aviation?

As we have seen with the struggles of many Indian airlines, the high operational cost in India is a real challenge.

But any situation has its own share of challenges and opportunities. It depends on the airlines to accept and overcome the challenges and make maximum use of the opportunities available to boost the civil aviation sector in general.

Flying was once limited to the privileged, but it has become a part of life for the ordinary man today. The government and the industry has taken steps to make flying affordable, accessible and comfortable. With the thrust on regional connectivity, the suggested capping of fares and a slew of other pro-passenger measures, air travel is now for everybody.

An airline will have to adjust its operations and pricing in sync with the exponential growth of civil aviation in our country. At the same time, the finest luxuries and comfort will have to be offered to premium passengers.

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Do you think aviation does a good job for passengers with reduced mobility (PRMs)?

Every airline tries to improve its services for differently-abled passengers. Air India does not refuse transportation to any individual on the basis of a disability. In our commitment to make a passenger’s flight as comfortable as possible, we provide pre-travel assistance, a wheelchair or other mobility assistance to help any passenger through the airport. We also provide inflight assistance and do our best to assign a passenger with special needs a seat that is best suited to his or her needs.

If you could change one thing in aviation tomorrow, what would it be and why?

The extremely low profit margin in airline business!

2019 – 03 Airlines

13/05/2019 11:36

CEO Interview

Creating connectivity for the customer Walter Cho, Chairman and CEO of Korean Air, tells Graham Newton that airline partnerships provide value for all aviation stakeholders, including the end customer WORDS: GRAHAM NEWTON

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he history of Korean aviation is inextricably linked with Korean Air. For 50 years, the carrier has been an essential component in the country’s growth. The challenge now is to continue fulfilling its vision to support the national interest while thriving in a dynamic, competitive market.

Are you happy with the airline’s performance, financially and operationally?

In 2018, we achieved record annual passenger and revenue numbers, close to 27 million and KRW12.65 trillion respectively. Operations were very smooth, and we handled the Winter Olympic and Paralympic Games in PyeongChang very well.

Everything was made possible by the Korean Air team and I am very grateful for their efforts.But we must always challenge ourselves to do better. I think operations can be even more efficient, for example. There is no fundamental change that needs to be made, but there are always many small improvements that can add up. The sales performance outside of Korea, for example, is also something that we can improve.

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How will the airline work to develop cargo and what improvements can be made to current cargo processes?

One of the most important benefits we offer is child care. It allows us to ensure diversity within the company because we are very supportive of mothers working for Korean Air

The cargo market changes every year and it’s very hard to predict the future. There is no doubt that we are in a downturn and that will affect results.

The airline is doing what it can to mitigate the challenges. We have new, fuel-efficient aircraft and there is also a new cargo system to make reservations and operations more efficient.

But though we have been very active with IATA’s e-freight initiatives, we are not seeing many positive results yet because there is still much to be done at the industry level.

We will continue working hard with IATA to get the technology standards we need implemented more widely. Paperless cargo is an essential one, because the sector must be more efficient.

How important is the joint venture with Delta?

Delta Air Lines has been a very important partner for Korean Air since the 1990s. The joint venture (JV) has been approved by both governments and it is already proving to be crucial in the transpacific market. airlines.iata.org

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CEO Interview

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CEO Interview

Passenger business by route

27%

21%

19%

12%

Americas

South East Asia

Europe

China

11% Japan

6% Domestic

4%

How do you combine the airline’s public and private faces? The airline is the flag carrier and important to the country’s economy, but it is also a private concern aimed at profits.

Oceania

I believe consolidation is essential for airlines. If we go back 20 years, Korean Air basically flew anywhere in the world where it perceived there to be sufficient demand for its services. That is no longer the case. Now, when we see there might be demand for connectivity to Korea in a particular country or region, we look first to partners.

It is highly likely that a partner will be the most cost-effective way of serving a destination and that partner, in turn, benefits Airlines 2019 – 03

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KRW

2018 saw Korean Air achieve record revenues of KRW12.65 trillion

Is consolidation the only way forward for airlines in an increasingly competitive market?

12.65tr

26 Traffic and revenue in this important market segment have increased and both partners are continuing to add routes between the two countries.

It is not surprising that the JV is working well because Delta has plenty of experience in this regard. For Korean Air, we are learning as we go along but we are learning fast. Delta is a very easy airline to work with and the relationship we have with them means that both carriers are aligned on our goals and what we need to do to achieve them.

from connecting to our network. So, though merging as other industries do is prevented for international aviation, such partnerships as alliances, codeshares, and joint ventures are providing the same benefits when developing networks. It is something that I strongly believe in. It is better for the airlines, better for the passenger because of the extra connectivity, and better for the environment because of the optimized network.

Creating and maintaining partnerships with other airlines is not about limiting connectivity, it is about improving it.

It is very important that we help the national economy to grow but we can do that best by being an efficient, privatized company.

Korean Air is one of the main companies in the country. Korea’s geographical location means that air travel is essential for people and goods and, in turn, that has made aerospace a very big sector.

Of course, we will always put the national interest first but obviously it cannot interfere too much with the needs of the company. That has never been the case anyway. The needs of Korean Air are naturally associated with the country it serves.

Is diversity a key topic for the airline and how will you attract more female employees in technical and management roles?

Korean Air is one of the biggest companies in the country. We’re also one of the most popular to work for. We always have a great selection of applicants for all positions.

Even so, one of the most important benefits we offer is child care. We have a lot of initiatives in this area, especially in the area of education.

It allows us to ensure diversity within the company because we are very supportive of mothers working for Korean Air. airlines.iata.org

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CEO Interview

“We will always put the national interest first but it cannot interfere too much with the company needs” airlines.iata.org

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What will migrating your information technology services to the Cloud achieve?

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Personally, I have a lot of interest in information technology (IT) and the Cloud.

The airline has been working very hard in recent years to implement new technology throughout the company and its operations.

And the easiest way of doing that is to migrate everything to the Cloud.

It allows us to not only use new technologies, especially passenger-facing technologies, but also to analyze the data we get, which means we can make more accurate forecasts and understand our customers’ needs.

There is so much opportunity in having an up-to-date IT platform.

Korea in general has been slow to adopt the advantages of using the Cloud so the airline has had to be a leader in this field. But we’re happy to be a pioneer in this instance.

What was the situation with “no-show” passengers and why have you taken such a strong stance against them?

Simply, the airline used to be very generous in its attitude to no-show passengers and it was very easy for passengers to deliberately miss a flight without penalty.

The situation couldn’t continue so we have introduced penalty fees, or a mileage deduction if flights were booked using frequent flyer miles. There is, of course, an element of operational disturbance but really, it is not about the airline. We have taken this stance because it is rude to all the other passengers who made the effort to be on time. It is not fair to disrupt everybody. It had happened too often and had become unacceptable. We decided therefore to send a clear message in the hope that this will stop the majority of no-show passengers.

What do you see as the main challenges and opportunities on the regional level?

The main challenge is definitely the airspace.

Airlines 2019 – 03

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715m

CEO Interview

In the past 50 years, Korean Air has transported 715 million passengers, carried 40.54 million tonnes of cargo and flown over 10.187 billion kilometers, equating to over 250,000 laps around the Earth.

For flights heading westbound to Europe, it can be very difficult to get clearance for take-off. At Korean Air, we are working with the authorities to see where we can make improvements. Airspace in general has to be made more efficient.

The US-China trade conflict has also become a challenge. We all hope the situation can be resolved amicably because there is no doubt that it has begun to affect the movement of trade and people in the region. We can certainly see some reduction in traffic on some Chinese routes.

The big plus, though, is the significant growth in demand for air travel in general. And we are also seeing some very positive GDP numbers across the region. They both look set to continue.

But, of course, it follows that we will therefore need the infrastructure to handle the increase in traffic. We have an excellent airport that is often voted as the best in the world but that doesn’t mean too much if you can’t take-off. So, it comes back to the airspace challenge. That is what we have to solve to take advantage of the opportunities on offer.

Many new airline CEOs are coming from outside the industry. Does a modern airline CEO need aviation experience?

I think that CEOs coming from outside the industry is a positive development for air transport. It will be good for the industry to get different views on business models and strategies.

However, the core of aviation is safety.

That is the biggest service we provide for the passenger and a lot of specialist work goes into that. The CEO needs to know about that.

Having said that, no CEO runs the airline alone. There is usually a team of excellent, experienced people working with him or her, who can help with the technical and operational side of the business. So, overall, I welcome new perspectives. It will help the industry to innovate. airlines.iata.org

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CEO Interview

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CEO Interview

A proactive stance Vipula Gunatilleka, CEO, SriLankan Airlines, says carriers cannot be reactive, even in a crisis situation WORDS: GRAHAM NEWTON

The business plan anticipates some passenger growth but that is now in doubt because of the terrorism attacks.

So, making sure different aspects of our business are able to take up the slack will be vital

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riLankan Airlines is integral to its home country’s economy. Beyond its 7,000 employees, the carrier’s connectivity helps to support a host of tourism jobs. That support has become more important than ever following the recent bombings. The airline must help to rebuild the critical tourism sector while staying true to a detailed business plan.

How will SriLankan Airlines help to rebuild the country’s tourism efforts following the tragic bombings?

In the immediate aftermath, we worked very closely with the authorities to ensure that all our passengers were safe and secure. So, for example, our ticketing and customer information centers were open 24 hours to make sure that we were giving our customers

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CEO Interview

the best possible support—rearranging flights, securing accommodation, and so forth.

There was also close cooperation with the Sri Lankan air force to ensure the airspace was secure.

Longer term, we will sit down with the tourism board and work out the best strategy.

As it stands, the situation is still unfolding so it is very hard to say exactly what we will do right now. But the point is that we will be ready for whatever decisions we make. You want to put your airline in a position where it can adapt and thrive no matter what the circumstances.

The bombings in Sri Lanka are an extreme example of that but, even so, we stand ready to help our passengers, our people, and our country.

How important is the airline to the country’s economic growth?

32 SriLankan Airlines is a very important part of the national economy. Our contribution to GDP is in the region of $2 billion and we support many jobs, directly and indirectly.

Obviously, a major part of our role is

encouraging tourism to Sri Lanka. This is not only about promoting the airline but also about promoting the country. The right branding is essential because you are offering a package and there has to be alignment in the value proposition.

What opportunities do you see in the cargo, maintenance, repair and overhaul, and ground handling markets?

We need to diversify our revenue streams and developing these sides of the SriLankan business will be important. Cargo is performing well, and we see a real need for services in maintenance, repair and overhaul, and ground handling.Most of our revenue comes from the passenger side and we have to be more robust.

The fact is, even though the passenger demand for air transport is growing strongly in AsiaPacific, we are not seeing that in Sri Lanka. The business plan anticipates some growth but that is now in doubt because of the terrorism attacks.

So, making sure different aspects of our business are able to take up the slack will be vital.

Tell us about the airline’s overall business plan?

1998 IMAGES: GETTY/ISTOCK

SriLankan Airlines can be traced back to 1947 and the now defunct Air Ceylon, but current operations are most closely linked to the launch of Air Lanka in 1979.

After a partial acquisition by Emirates in 1998, the flag carrier of Sri Lanka was rebranded with the name it bears today.

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There is a comprehensive business plan in place that looks to both cut costs and improve revenue.

I think that the plan is realistic rather than optimistic but, of course, after recent events in our country we will have to review the plan to make sure that it is still achievable. It is always a good idea to have a plan B in any case. With a plan, you know what to do and can control the situation rather than have the situation control you.

Most of all, we need to make sure we have a good cash flow. If you have that, you always have options.

Are you happy with your home infrastructure?

Can Colombo really become a hub?

Part of our business plan is to make Bandaranaike International Airport in Colombo a hub. There is the potential there to be a world-class hub, but it all depends on what developments get built and when. At the moment, progress is slow and now the situation is such that the government airlines.iata.org

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CEO Interview

naturally has other considerations and other priorities for its money.

Still, there are a couple of projects that should be ready in 2020 and there is a good longer-term plan as well.

My main point is that even though we are in a “wait and see” situation concerning the ramifications of the bombings in Sri Lanka, it is necessary to be proactive rather than reactive.

After all, this is a dynamic industry. In one sense, all airlines are always in a “wait and see” situation. Clearly, though, we all have our visions and strategies for achieving those visions.

Broadly speaking, there are many things that can be developed to put the airline, the airport, and the Sri Lankan economy in a better position.

5.5m

In 2018, SriLankan Airlines served more than 5.5 million passengers

109 27

109 destinations are served by SriLankan Airlines across 48 countries, including codeshare agreements

27 aircraft make up the SriLankan Airlines fleet, all manufactured

by Airbus

You recently had an all-female crew flight. How important is diversity to aviation’s future?

33

$2 billion

At SriLankan, we really do welcome everybody.

We are seeing more and more females joining the company in a variety of roles, including pilots and engineers. We even see some in cargo handling.

I don’t believe the industry does discriminate but the proof will be in the numbers as we go forward.

Our contribution to GDP is in the region of $2 billion and we support many jobs, directly and indirectly

Is technology the answer to better customer service?

Introducing technology into customer service is not just about improving the travel experience and giving customers new choices and greater transparency. It is also about doing the basics more efficiently and cost effectively.

Technology should enable you to provide value—value for the customer and value for the business. It is not about implementing cuttingedge systems for the sake of it.

What skills does a modern airline CEO need?

Is it important to have aviation experience or do you see running the airline the same as running any other business?

I think aviation experience is important. A CEO needs to understand the fundamental of the business and in aviation there are airlines.iata.org

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It is always a good idea to have a plan B. Most of all, we need to make sure we have a good cash flow. If you have that, you always have options

complex elements, such as engineering and distribution, that are not the same as you find in most other businesses.

My background is in finance so, for me, the numbers are vital too. Knowing about the cash flow, about where your costs are, and about your revenue potential, is crucial. As I mentioned earlier, this is how you ensure flexibility in your business plan. It gives you the power to make the correct decisions and be able to act on them.

And these days it helps to know about marketing and information technology too.

But most of all, any CEO needs excellent interpersonal skills. You have to be able to manage the expectations of shareholders, of unions, of staff, and of customers. Everybody needs to understand and be committed to the vision of the business.

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Dossier: Diversity

Dossier 35

Ready for the challenge Fostering diversity in aviation requires more than a simple shift in the recruitment numbers. The industry must instill a cultural change WORDS: DEEDEE DOKE

Alina Nassar, President of the Board of Directors, International Aviation Womens Association (IAWA) believes that, despite progress, aviation is still far from achieving ICAO’s or the United Nation’s gender parity goals.

“Women are still underrepresented at board and executive levels; the gender pay gap is still an issue; and unconscious airlines.iata.org

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bias affects the progression of women in the industry.”

Globally, barriers to women’s advancement in the industry may be similar. But in Nassar’s opinion, “how much they impact may differ by region or industry arm.”

Strong views

From recalibrating recruitment

processes to increasing the visibility of women in key roles and creating more female-friendly networking opportunities at the highest levels, women who have reached the top in aviation have strong views on barriers that must be eliminated to improve the representation of women in the industry.

As CEO of Flybe and a member of IATA’s Board of Governors, Christine 2019 – 03 Airlines

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5% 36

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Women account for fewer than 5% of airline CEOs around the world.

Dossier: Diversity

Ourmieres-Widener is one such leader. A former engineer on Concorde, Ourmieres-Widener started as a technical specialist, a field where skills are highly valued, and women are in short supply.

Her own career progression, Ourmieres-Widener acknowledges, has not been “a bed of roses.” She says people were not used to being managed by a woman or not prepared to see a woman at the table. “Maybe they are not able to tell the same jokes, or to talk about inappropriate subjects.”

However, she accepts that the world is changing and generally speaking, people aren’t shocked to see a woman in the boardroom any more. “Nobody is asking me to serve the coffee during meetings,” she deadpans.

To make meaningful improvements in aviation, however, Ourmieres-Widener believes that the industry must develop fact-based objectives for increasing diversity.

“If you don’t give yourself objectives, it’s difficult to think you will ever reach them,” she says. “If we want to change, we have to define what [diversity] would look like, and we have to design how we will achieve it, what are the ways, what are the resources and projects we want to launch to deliver it,” she said.

She emphasizes that recruiting greater numbers of women at entry level and removing barriers to their career advancement must be about the recognition of their skills and equal consideration, not tokenism.

“I don’t want to be the CEO of an airline because I am a woman,” she says.

“I want to be CEO of an airline because I’m the best person for the job. I want to be a CEO around the table like all the others.”

Personal development

Brussels Airlines CEO, Christina Foerster, agrees that “fortunately, we live in an age where chances for women are getting better.”

Foerster launched her management career in the hotel and consulting industries, moving to aviation via the Lufthansa Group where she has held a series of increasingly senior positions.

She was the first woman to be appointed the CEO of a Lufthansa-owned airline.

“The Lufthansa Group has always supported me in my personal development,” she says. “I think without personal development, you may be promoted but the likelihood you will succeed in the new position is not so high.”

Discussion on… ICAO Gender Equality At ICAO’s 39th Assembly in 2016, a resolution was adopted promoting female participation in aviation. Accordingly, a Gender Equality Program has been developed together with a Gender Equality Implementation Plan. ICAO proposes to work in partnership with ICAO Member States, organizations of the

United Nations, such as UNESCO, and other industry partners.

“The industry has not been very successful at providing an open, inclusive working environment for women,” says Dr. Fang Liu, ICAO Secretary General. “Gender parity is not only an ethical proposition but also a profitable one. These

types of initiatives must be driven from the very top to succeed.”

In 2017, ICAO also mapped how its 2017-2019 Business Plan is contributing towards 15 of the 17 UN Sustainable Development Goals (SDG), including SDG 5, which aims to end all forms of gender inequality and empower women and girls globally.

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Dossier

Discussion on… Diversity standard

Alina Nassar, President of the Board of Directors, International Aviation Womens Association

“Women are still underrepresented at board and executive levels, and unconscious bias affects the progression of women” 37

Christina Foerster, CEO, Brussels Airlines

“Acknowledging that everybody’s different but you still have to be on the same team is what we’re working on at the moment”

IMAGES: GETTY/ISTOCK/IMAGE SOURCE

Christine Ourmieres-Widener, CEO, Flybe

“Females will not apply if they don’t see someone who is an inspiration for them— young girls cannot be what they cannot see” airlines.iata.org

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The International Standards Organization is two years into the development of a diversity and inclusion (D&I) standard.

Lorelei Carobolante, President and CEO of G2nd Systems, a global HR research and development consultancy, is leading the international subject matter expert group undertaking the project.

Carobolante outlines the greatest challenges in working with D&I topics to produce manageable standards as: Shifting from an event-based or reaction-based approach to a systemic, proactive change approach. Gaining recognition of relevance and meaningful commitment from organizational senior leadership.

Developing capacity and capabilities to manage the process as a continuous progression, which can apply

to a multi-year change effort.

Recognizing and responding to polarized opinions and perspectives, especially when fluctuating market conditions impact individual and group reactions, which consequently also influence actions and sometimes strategic organizational direction.

Addressing implicit or unconscious biases held by some leaders or other stakeholders about roles of women and gender influences or perceptions in the workplace.

Asked what is key to addressing those perceptions and changing a culture, Carobolante says, “Realistically, standards can help people perceive things differently and foster recognition that some of their perspectives may not be as appropriate as they may intuitively believe. Also, since

standards are developed by consensus…they include a multitude of perspectives.”

Elaborating, Carobolante notes: “By not being prescriptive, organizations can develop internal processes that would naturally integrate into their cultures and strengthen them.”

Also, she says that by developing a commitment to leveraging diversity through inclusion, “senior leaders can foster influencing development of a more inclusive culture at work.”

Focusing on success factors and outcomes, activities to reach those outcomes, metrics to measure whether they have been reached or not, and assignment of roles, responsibilities and relationships so that activities actually get done are the best means to meet the challenges, Carobolante says.

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Dossier: Diversity

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Foerster is pleased that the profile of the diversity debate is on the rise, not only for gender diversity but for all facets, from sexual orientation to age and ethnicity. “Acknowledging that everybody’s different but you still have to be on the same team is what we’re working on at the moment,” she says.

Like Ourmieres-Widener, though, Foerster is clear that there is room for improvement throughout aviation because of a variety of factors, such as the need to boost women’s confidence to apply for roles, how job descriptions are written, and intrinsic bias in assessment.

“I believed in the past that you could use the same process to recruit a man and a woman,” Foster explains.

“Now, I’m really doubting that because of experiences I’ve had in the last few years.”

In Foerster’s view, improving the environment for diversity must involve cultural change at the highest corporate levels. “People talk more often about what women leaders wear than what they do, which I think is an interesting bias.

Also, somebody said to me that women

Discussion on… Soaring Through the Glass Ceiling The industry is working on a report on diversity in the industry. Soaring Through the Glass Ceiling is a partnership of five organizations: IATA Aerospace Industries Association (AIA) Airports Council International (ACI) World International Aviation Women’s Association KornFerry – Civil Aviation Practice The study will include a global survey of, and interviews with, women and leaders in human resources (HR), organizations,

and education; case studies of success stories within the industry; and a review of prior studies and literature on the advancement of women, both within and outside the industry.

According to Jane Hoskisson, Director, Learning and Development, IATA, says the

fail more in corporate tests than men, but I would have to say that probably the whole environment is made by men for men,” she says.

“From my history,” Foerster goes on to say, “as a woman in a senior position, you always feel like everybody is watching you, and any mistake you make will be

survey “has been embraced by people globally.” This has been followed up by a number of qualitative interviews. The interviews, Hoskisson says, “gave us really clear indications of what might be done to unblock some of the issues surrounding gender parity in the industry.”

magnified under a lens. It takes a lot of resilience and courage to still go for it.”

Increasing visibility

At their respective airlines, OurmieresWidener and Foerster are ensuring that there are channels to increase the visibility of women in aviation careers

“As a woman in a senior position, you always feel like everybody is watching you, and any mistake you make will be magnified under a lens. It takes a lot of resilience and courage to still go for it” Airlines 2019 – 03

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partner of choice to streamline your supply chain.

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Dossier: Diversity

6% 40

According to the Federal Aviation Authority’s 2017 Aeronautical Center report, of the 98,161 commercial pilots working in the United States just 6% are female and to build confidence and inclusiveness—Ourmieres-Widener, for instance, through the FlyShe ongoing initiative and Foerster by launching summits once or twice a year for the Lufthansa Group’s female leaders, featuring external speakers and discussions around questions such as “How can I be seen?”

Apprenticeships have been in place at Flybe for a decade, but OurmieresWidener says the airline “started to focus even more on girls’ awareness last year Airlines 2019 – 03

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before we launched FlyShe. We did surveys,” she continues. “We asked little girls to draw a pilot and they all decided to draw a male pilot. That’s not a surprise, but it is a disappointment.”

It exemplifies why the visibility of women in aviation roles must increase to demonstrate that careers in the field are open to them as well, OurmieresWidener points out. “Females will not apply if they don’t see someone who is an inspiration for them,” she says. “Young girls cannot be what they cannot see.”

Ourmieres-Widener and Foerster also agree on what they want to emerge from the diversity debate.

“I would like to see it acknowledged that diversity doesn’t happen by itself in a system that is not diverse enough already,” says Foerster. “I think diversity

breeds diversity. Because of that, I would like to see commitment measures.”

Ourmieres-Widener believes the industry must be more creative and innovative in addressing the balance of diversity. “I think that we need to see changes, and we need to have the ambition to change this quickly or more quickly than people think we can change it,” she says.

“I’m not convinced that the only initiative we have to put on the table is to recruit more female pilots or more female engineers,” she continues. “For me, that’s too easy. That’s the pipeline for the future, but I think this industry needs to decide, and make changes now because there are many women who could be appointed in senior positions.

And they are ready to take the challenge.”

Discussion on… Practical solutions Women account for fewer than 5% of airline CEOs around the globe and the overall representation of women in airline leadership roles remains woefully inadequate, write Michael Bell, Senior Client Partner, Civil Aviation Practice, Korn Ferry and Mariah Suarez, Senior Associate, Civil Aviation Practice, Korn Ferry.

Curiously, some of the airline industry’s most successful women CEOs came to the CEO role from outside the industry and, not being home grown, they don’t define themselves as airline executives nor their careers as airline-limited.

Without doubt, the global aviation and aerospace industry can and should do more to enable the advancement of women to the top of its organizations. To that end, in launching Soaring Through the Glass Ceiling, the partner

organizations do not aim to report troublesome demographic statistics.

They are instead focused on identifying the root causes—the actual barriers—to advancement that may have hindered progress to date. And, of greater importance, the study will illuminate practices and policies which have been proven

to enable gender diversity in leadership, in aviation/aerospace and related fields.

Perhaps, with a newfound focus on practical solutions, the global aviation and aerospace sector can ensure that women will be “soaring through the glass ceiling” and to significant heights well beyond for generations to come.

airlines.iata.org

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Advertising Feature: Datalex

Travel Retail and the Platform Business—A Vision of the Future The transformation of the retail business model is well underway. As more and more airlines adopt the platform model, the digital ecosystem will become unrecognizable, as it rapidly expands using AI digital commerce.

Today we are in the midst of a seismic shift in retail business models. Platform businesses with technology at their core, such as AirBnB, Uber and Amazon, deliver products and services with exceptional precision.

They optimize their operations while engaging directly with the customer to leverage the digital network effect—that is, the more participants on the platform, the greater the exchange of value produced.

These market forces are driving a rapidly evolving digital marketplace that will drive a future vision for retail, and airlines are no different.

Airlines are investing in systems, people and the processes required to adopt the platform model. They are doing so to foster better exchange of value across the supply chain as they compete for revenue and profit sources in an increasingly multi-sided and complex digital marketplace. It is this shift, already evident today, that will shape the future of travel retail.

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The digital ecosystem of channels and enterprise systems is rapidly evolving.

The diffusion of innovation theory best represents the pace at which industry adoption is moving. Early adopters represented by 15% of the industry are driving a shift to the platform business model. They are cautiously using a bi-modal model whereby legacy systems and processes continue to operate for predictable business outcomes.

Meanwhile new retail systems and processes are implemented to disrupt the status quo and demonstrate increased value and returns for others to follow.

Business model innovation dictates that any model will continue to evolve over time, so how will the platform model evolve over the next 20 years?

As more airlines transition to become a platform business, they will support a rapidly expanding digital ecosystem of consumer and partner channels across global markets.

Soon an early majority will differentiate and compete using AI digital commerce to deliver products and services with exceptional precision for purchase, promotion and reward. Systems and operations will ensure that the airline has one view of the customer offer and order at all times and can engage directly with the customer to leverage the digital network effect.

To read more about leveraging your digital commerce platform for the future, visit www.datalex.com

2019 – 03 Airlines

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Advertising Feature: MTU Maintenance

There is no typical engine Martin Friis-Petersen, Senior Vice President MRO Programs at MTU Aero Engines, on why customers need MTU Maintenance’s new customized MRO solutions.

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Let’s be honest, B2B product marketing can be boring. Why should people read on from here?

Martin Friis-Petersen: Well, product marketing might not always be exciting, but engines are!

When my marketing team came to me and said they wanted to make a short film about a typical engine as part of the launch, my first thought was skepticism, because it doesn’t exist. But then I realized that is the point. At MTU we don’t deal in typical.

What then?

Each engine is flown in a different manner, in a different environment and by a different operator. So, of course, it has individual needs. It is about serving those needs in the best possible way and without any waste.

More of what you need, less of what you don’t.

Exactly! Take our product SAVEPlus, for instance. This is a customized solution for mature engines. And it focuses solely on reducing cost for the remaining service life of the engine. Sometimes that is a customer saying, ‘I need 7,000 more cycles. Can you build me an engine to fly that, or provide an exchange engine that suits my operational requirements?’ And other times it is us saying to the customer, ‘a full overhaul is an unnecessary cost. How about a lease engine?’

Do you see market demand for mature engine concepts?

Certainly! We’re currently offering these kinds of services, for example CF6-80C2

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engines, but as the V2500-A5 and CFM56-7 engine fleets age, this will become extremely relevant. The installed fleet is large and the engines are starting to age. As they do so, MRO costs will increase due to the need for heavier shop visits and material replacement.

What else have you got in the goody bag?

Personally, I have a soft spot for MOVEPlus.

This is a solution for lessors that mitigates risk and generates more revenue through portable MRO. We’ve noticed lessors are taking an increased interest in MRO decisions and want to be involved in transitions between lessees, managing and optimizing maintenance reserves and choosing the timing of shop visits. We give them that and a whole lot more, such as faster remarketability of assets through easy transfers and

predictable costs. And of course, access to the MTU brain.

The brain was chosen as the symbol for the new portfolio. Why? We are extremely dedicated at MTU too, so we could have also chosen the symbol of the heart. But when it comes down to it, this is where we make the difference: our collective brain. MTU is full of experts.

Why do you think the new portfolio will surprise the market?

If I’m brutally honest, no one in the market place has been losing sleep wondering when the next MTU Maintenance product will be released. But, it is our job to spot market trends and ensure our portfolio is meeting the customer requirements of tomorrow.

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Advertising Feature: MTU Maintenance

This was one of the reasons behind redefining our product and services portfolio.

We have a lot to offer. We’ve been doing MRO for nearly 40 years, and to be frank, we’re really good at it. As an independent service provider, our focus is on giving the customer that little bit more so they come to us. We have to go the extra mile, otherwise we won’t survive.

Usually, that means cost savings. For instance, PERFORMPlus is about generating more flight hours at lower cost with customized MRO. We use customized workscoping, alternative repairs, engine trend monitoring, and on-site services to optimize on-wing times.

What is it when it isn’t cost savings?

Generating income, which is what we do with VALUEPlus. This is a solution for asset owners to help them get the most out of their assets at end-of-life. It could be anything from a direct sale to teardown or prolonged lease-out, for instance.

Martin Friis-Petersen is Senior Vice President MRO Programs at MTU Aero Engines and is responsible for Sales, Customer Support and Marketing across the MTU Maintenance network.

Prior to this role, he was Managing Director of MTU Maintenance Lease Services B.V., which he developed from a start-up to a key player for engine leasing and asset management.

Buzzword bingo MTU Maintenance has designed its own buzzword bingo game specifically for the maintenance, repair and overhaul world. If you get five in a row during a meeting, feel free to call us out on it!

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Real humans

Over and above

Residual value

Best TAT

LLP shortage

Oktoberfest

High-cost item

Green-time

ASAP

Everchanging

Discount

COP stock

End-of-life

Free of charge

Dock engine

Quick turn

Lease return conditions

German quality

Surgical strike

Included

Cost-effective

Value-added services

Key customer

Maschseefest

Predictive maintenance

Contact: mro.marketing@mtu.de for your engine solution.

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2019 – 03 Airlines

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Advertising Feature: MTU Maintenance

Asiana accelerates The dynamic airline player in Korea on strategy, fleet growth, and reliable maintenance providers.

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Which is the world’s busiest air route?

Surprisingly, it is actually a domestic route in South Korea: from Gimpo, Seoul’s domestic airport, to the popular resort island of Jeju—about an hour’s flight from the capital. According to statistics from travel data provider OAG, almost 14 million passengers make this short hop every year, roughly double the number who fly the most popular domestic routes within Japan.

According to analysts at the Centre for Aviation (CAPA), South Korea has a thriving domestic aviation market that served 65 million passengers in 2017. This is largely attributable to the country’s topography as the many mountains and stretches of water restrict overland travel, although there are competitive high-speed trains that run on trunk routes. As the country’s flag carrier and largest airline, Korean Air has long dominated the domestic market. But when the Kumho Asiana Group—a multi-industry conglomerate—launched Asiana Airlines in 1988, a second player arrived on the scene, and has since grown into a well-respected, mid-size global carrier.

Fleet growth In 2014, Asiana introduced the flagship Airbus A380 to its fleet and now operates six of the 495-seat aircraft on routes to six international destinations. Asiana also welcomed its first A350-900 to the fleet in 2017, of which it now operates six and has 15 more on order alongside nine A350-1000 jets.

On regional routes, Asiana and its subsidiaries operate 55 Airbus A320 family

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jets powered by V2500 engines. This is where MTU Maintenance comes in, supporting Asiana’s V2500 fleet to ensure smooth operations. In 2018, the partners signed a new contract covering maintenance for 40% of the airline’s V2500s and engine trend monitoring for Asiana’s whole V2500 inventory. “We signed our first maintenance contract with MTU back in 2011 for CF6 engines and we’ve been extremely happy with their outstanding service and expertise ever since,” says E-Bae Kim, Executive Vice President, Corporate Support at Asiana. “In 2018, we embarked on another long-term journey with MTU for our V2500 engines.

Our A320 family aircraft form the backbone of our regional business, so ensuring their reliable operation is essential to our success.”

On hand to help One important advantage MTU offers in South Korea is the presence of a local representative. “We recognize that close customer proximity is extremely important

here, which is why I moved out to Seoul in 2017,” says Wolfgang Neumann, Director Sales, Far East Asia at MTU Maintenance.

“This way, I have direct contact with Asiana and other local customers on a daily basis.

Before, when I was flying in from Germany for just a few days at a time, I always had a fixed agenda. Now I’m flexible and my customers can reach me at practically any time—and that really makes a difference.”

This setup also helps MTU get to grips with how a South Korean company ticks— something that’s not always easy for Westerners. “My impression from the time I’ve spent here in Seoul is that Asiana is quite a lean organization and somewhat less hierarchical than its competitors,” says Neumann. And this proximity is something the customer appreciates too. “We know we can count on MTU to provide the best level of service for our commercial operations and that our successful partnership will continue to grow,” says E-Bae Kim. “And I’m very proud to be part of it.”

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Advertising Feature: MTU Maintenance

In numbers MTU Maintenance credentials.

In 2018, MTU 2018 Maintenance’s worldwide facilities were operating at full capacity and the company completed well over 1,000 repair and overhaul shop visits.

Within the network, around a third of all visits were for the V2500 engine.

Furthermore, MTU Maintenance lease services completed over 230 engine lease transactions and 600 engine evaluations in 2018.

40 MTU Maintenance turns 40 in 2019. It is the third largest MRO provider worldwide.

MTU Maintenance and its 5,000strong workforce currently perform shop visits

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for more than 200 airline customers and close to 30 engine types.

US$4.4bn in contract wins were amassed in 2018, of which 1/3 for CFM56 engines.

Over 300 contracts were signed, including 46 with new customers.

A record nearly US$400 million was won by MTU Maintenance in third party repair deals, including parts, accessory and teardown services last year. More than 200 third party repair customers were served and 20,000 orders placed.

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2019 – 03 Airlines

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Aircraft design

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80% The most optimistic scenario in the International Energy Agency’s World Energy Outlook foresees over 80% of CO2-free electricity after 2040

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Aircraft design

Now for something completely different Airlines and aviation stakeholders must engage in the development of new aircraft that will contribute to the industry’s climate action goals WORDS: GRAHAM NEWTON

A

ir transport ensures global connectivity, supporting social reach, job creation, and economic growth. To deliver these benefits in a sustainable manner that will also allow aviation to attain its environmental goals will take the combined efforts of all stakeholders, including governments, aircraft and engine manufacturers, airlines, airports, and air navigation service providers.

To date, aviation has exceeded its target of a 1.5% annual fuel efficiency gain. And, looking ahead, the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will enable the industry to grow without adding to its net carbon footprint.

Even as CORSIA makes its impact felt, evolutionary technologies will continue to deliver an improved environmental performance. Since the beginning of the jet age, lighter materials, better engine performance, and aerodynamic improvements have reduced aircraft fuel consumption per passengerkilometer over 70%.

And up to 2035, it is expected that other improvements such as natural and hybrid laminar

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flow control, high-bypass engine architectures, electric landing gear drives, and fuel cells for onboard power generation will all deliver notable efficiency gains. Sustainable aviation fuels, of course, will be another major component in reducing aviation’s carbon footprint.

“By applying combinations of evolutionary technologies, fuel efficiency improvements of roughly 25% to 30% compared with today’s aircraft still appear possible,” agrees Thomas Roetger, IATA’s Assistant Director, Aviation Environment.

“However, further significant improvements of the classic tube-and-wing configuration powered by turbofans are becoming more and more difficult to envisage after 2035 or so.”

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Revolutionary design

The manufacturers are considering future options, forming partnerships with research establishments and start-up companies and are behind many of the new aircraft design ideas.

The strut-braced wing, box-wing, and “doublebubble”—two side-by-side fuselages blended together—are all on the drawing board.

The strut-braced wing allows for a larger wing span, reducing drag and, therefore, the thrust required. This means smaller, more

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Aircraft design

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efficient engines. Folding wingtips avoid infrastructure adjustments to accommodate the larger wing span.

The Subsonic Ultra Green Aircraft Research (SUGAR) studies conducted by Boeing and NASA found that a 150-seat strut-braced wing aircraft entering into service by 2040 could be about 30% more fuel-efficient than, for example, today’s Boeing 737-800.

The most hyped design, however, is the blended wing body. Essentially, this is a large flying wing with the passenger cabin or cargo storage area within its center section. The aerodynamic shape generates greater lift, which means the benefits are most obvious in cruise flight.

The blended wing has generally been proposed as an aircraft for several hundred passengers.

However, it has recently looked like a realistic possibility to optimize smaller versions of the design for the larger market segment of around 100 passengers. Estimated fuel efficiency gains for larger blended wing aircraft vary between 27% and 50% compared with current aircraft of similar size and range. For the smaller version, the estimate is around 30%.

Electric aircraft

The real game-changer, though, promises to be electric aircraft. Electric power generation is not emissions-free today, but it can be expected that the related emissions will go down considerably between now and 2050, thanks to the strong worldwide trend toward renewable energies.

In fact, the most optimistic scenario in the International Energy Agency’s World Energy Outlook foresees over 80% of CO2-free electricity after 2040. And an all-electric aircraft would produce no emissions in its operation.

Furthermore, other aspects beyond environmental concerns improve the business case since an electric motor needs less maintenance than conventional gas turbine engines and that is a value that can be put into dollar terms. In short, the numbers are starting to fall on the side of electric aircraft development.

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Norway goes electric Connecting communities Some proactive governments are joining aviation’s call for environmentally-friendly aircraft.

By 2040, Norway hopes all short-haul flights leaving its airports will use electric aircraft.

Norway wants the first 25-to-30-seat aircraft powered by electric motors to be introduced into service as early as 2025. The country is ideally suited to be a pioneer in the field given its reliance on short-haul flights to remote communities, especially when winter blocks roads and rail tracks.

“A lot of the flights here are only 15 to 30 minutes,” says Dag Falk-Petersen, CEO of the country’s airport company, Avinor.

Small progress The argument is that most of the aircraft flying short-haul routes today are really designed to fly longer routes. That means they are larger and heavier than necessary. So, for much shorter routes, a smaller aircraft will be much easier to power with electricity. Smaller aircraft means smaller airports and runways. And they will be much quieter too.

Potentially, they will be cheaper to operate as well, making it possible for airlines to continue the trend in offering lower fares in real terms.

“As a revolutionary technology, electric aircraft are also an opportunity for new entrants,” says Roetger. “And the other positive is that it is a scalable technology. Implementation is already happening step-by-step starting with light, one-seater aircraft before moving into the commercial arena. This not only makes the certification process manageable but will also help the industry gain confidence in this radically new technology. With electric aircraft, there is the chance to prove safety and reliability on a small scale first. Scalability mitigates much of the development risk.”

Wright Electric is working on a design based on distributed propulsion with electric fans integrated in the wings, and on batteries that can be easily exchanged during airport turnaround. The company is working with easyJet on an aircraft that would accommodate 150 passengers and be able to fly up to 540 kilometers covering over 20% of easyJet’s route network. The announced plans suggest an entry into market by 2035.

“The technological advancements in electric flying are truly exciting and it is moving fast,” says Johan Lundgren, easyJet CEO. “Electric flying is becoming a reality and we can now foresee a future that is not exclusively dependent on jet fuel.

“The target range of the electric plane is around 500 km which, within our current route portfolio, would mean a route like Amsterdam to London could become the first ‘electric flyway.’ And as it is currently Europe’s second busiest route, this could in turn offer significant reductions in noise and carbon emissions, with multiple take-offs and landings every day.”

Hybrid electric aircraft

Battery performance will be critical to electric aircraft, and, at the moment, a battery-powered 100-seat aircraft is still a long way off. Simply put, jet fuel has a high energy density and getting the equivalent ability in batteries makes them too heavy for use.

“Jet fuel has been an ideal energy carrier and airlines.iata.org

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Aircraft design

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2040 The Subsonic Ultra Green Aircraft Research (SUGAR) studies conducted by Boeing and NASA found that a 150-seat strut-braced wing aircraft entering into service by 2040 could be about 30% more fuelefficient than, for example, today’s Boeing 737-800.

IMAGE: BOEING/NASA

the alternatives have issues in terms of weight or volume,” says Roetger.

But, as work on fully electric aircraft continues, hybrid-electric aircraft should be taking to the skies. A hybrid-electric aircraft would use jet fuel as the primary energy source but could then switch to electric motors for propulsion during several phases of flight.

There is a host of hybrid-electric aircraft designs from all the major aerospace manufacturers.

These all combine innovative electric motors and combustion engines. An Airbus, Rolls-Royce and Siemens partnership hopes to fly a hybrid-electric demonstrator aircraft, the E-Fan X—based on a BAe 146—in 2020.

NASA, meanwhile, is combining the blended wing design with turbo-electric propulsion—a particular form of hybrid-electric propulsion.

The electric blended wing body could provide 70% fuel savings. As smaller aircraft using the blended wing design become possible, the potential for the introduction of such an aircraft increases enormously as it is likely to have a huge market demand, speeding up innovation.

Conservative views predict electric aircraft in the 15-20 seat category will arrive about 2030.

Larger aircraft carrying 50-100 passengers would enter into service about 2050. This view suggests more time is needed for battery technology development. Optimistic views take 5-10 years off those estimates, based on interest and public funding of climate change-related technologies. Moreover, a possible alternative to heavy batteries could be hydrogen fuel cells, especially if a worldwide hydrogen supply network becomes a reality in the next 20 years.

“We must encourage the seamless integration of radically new aircraft by making infrastructural adaptations such as high-power electricity supply to airports,” concludes Roetger. “All aviation stakeholders have a vested interest, and all will benefit from their introduction because handling the increasing demand for air travel in a sustainable manner requires these new technologies. The biggest winner of all will be the environment.”

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Engines roaring on Engines are the key component in the industry’s incremental improvements in fuel efficiency. Most new engines have higher bypass ratios (BPRs) than older models.

Basically, the higher the BPR, the greater the improvement in fuel efficiency.

Fuel friendly

“Electric flying is becoming a reality and we can now foresee a future that is not exclusively dependent on jet fuel” Johan Lundgren, easyJet CEO

Rolls-Royce is working on two new designs planned for launch in 2020 and 2025. The Advance engine is expected to achieve at least a 20% reduction in fuel burn and CO2 emissions relative to the Trent 800 and the Ultrafan engine will develop that to an expected minimum 25% improvement in fuel burn and CO2 emissions relative to the Trent 800.

Innovative technology Safran is also working on Ultra-High-Bypass Ratio (UHBR) turbofan engines and other manufacturers have similar innovative designs. In addition, Safran is looking at open-rotor technology. The open rotor—which uses two counter-rotating, unshrouded fans and is a combination of propeller and turbofan technology—is actually an old design but was not pursued as it was too noisy. But work on reducing the noise has made open rotor viable with an expected entry into service around 2030. A reduction of fuel burn and CO2 emissions of about 30% compared with conventional turbofan engines is possible.

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60 seconds with...

Garvin Medera CEO, Caribbean Airlines

“As an airline we reflect the identity of the Caribbean in our service” Tell us about your strategy for the airline?

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The headline commercial priority was to move into operating profitability. That has now been achieved.

Alongside this, we’ve been improving the reach and efficiency of our network, and working to improve both the employee and customer experience. We also invested considerably in new technology to improve our use of market data and offer new capabilities to customers, such as the Caribbean Airlines App. From a brand perspective, we have been building on our Caribbean heritage to highlight the aspects of our service and corporate personality that other airlines cannot match.

What is the ‘Caribbean Identity’?

The ‘Caribbean Identity’ is the theme of our 2019 brand and marketing campaign. It represents the culture and spirit of our many diverse nations, united by a shared sea and our similar and powerful heritage. It is an affirmation of what makes the Caribbean people and region unique. As an airline we reflect this identity in our people, in our network, and in the service we provide to our customers, as well as in our external appearance and the events and community activities that we support.

How does the regulatory framework in the Caribbean need to change to help airlines do business?

The regulatory framework in the Caribbean has traditionally been restrictive. The ability for airlines to make a difference in the region in our view calls for a more liberated approach.

Airlines must be afforded the opportunity to carry out their businesses in a commercially viable manner. This is limited in some instances by smaller/or underdeveloped markets and access. There isn’t a level playing field as it relates to markets, Airlines 2019 – 02

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In brief… Caribbean

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destinations across As the flag carrier of Trinidad & Tobago, the airline currently operates more than 600 weekly flights in the Americas and Caribbean countries Headquartered at Piarco, Caribbean Airlines has a fleet of 17 aircraft, comprising Boeing 737-800 and ATR 72-600 models Caribbean Airlines was founded in 2006, with the first flight on 1 January 2007.

priorities, and infrastructure to support business expansion.

We applaud the approach and commitment of the 15 Caribbean Community (CARICOM) heads of state to support a new Multilateral Air Services Agreement promoting a more liberal access in the region. This is integral to Caribbean growth.

What other challenges do you see ahead in the region?

CARICOM governments and their tourism ministries need to work actively with governments of larger economies such as North America, Europe and Asia. Anything that can support tourism—a vital industry for the Caribbean—is essential when we are competing on a global basis.

What is your favorite aspect of running an airline?

Working with so many brilliant, committed people every day, who are all truly committed to maximizing passenger care, comfort and safety. And the chance to help sell the Caribbean to the wider world, whether that’s our places, our people, our food or our rich culture and genuine personalities. airlines.iata.org

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EMPOWER AIRLINES. WE CARE FOR YOUR CREWS. UNIFORM DESIGN - PRODUCTION - LOGISTICS - DIGITAL WWW.WEARSKYPRO.COM/CORPORATE

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Where are your next pilots coming from?

Right here.

Every year, we train 135,000+ pilots in our 50+ training centers worldwide. Add the 1,200 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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