Airlines 2020-01

2020 – 01

airlines.iata.org

AIRLINES.

REACH FOR THE STARS Reversing staffing trends is an attainable goal for ground handlers

2020 – 01

CEO Interviews WestJet, Comair, Cebu Pacific | Coronavirus All you need to know | IATA Opinion A customer focus | Cargo Audit program to add operational efficiency | Sustainability Building an innovative future

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AIRBUS SERVICES.

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Game-changing transformations in the global airline IT sector!

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Airlines.

Contents 2020 – 01

Comment

26 Open up to competition

7 Alexandre de Juniac, Director General

Glenn Orsmond, Comair Airline Division CEO, promotes open skies in Africa

The aviation industry’s resilience will help to navigate the COVID-19 crisis

Dossier 33 IATA Opinion: Aleks Popovich, Senior Vice President, Customer and Business Services

29 Set for sustainability

Governments and oil firms must match aviation’s sustainable aviation ambition

Change at IATA will benefit the customer

Features Digest

20 COVID-19: what you need to know

12 IATA and industry update

IATA Medical Advisor Dr David Powell on how to best negate the virus’ impact

Coronavirus (COVID-19) set to affect revenues, de Juniac reaffirms CORSIA commitment, Freight and passenger growth slows, Bangladesh aviation taxes

34

7

34 Reach for the stars

Reversing staffing trends at ground handling companies is an achievable goal

38

18 Data: In numbers

Airline Industry Economic Forecast 2020

38 Lightening the load

CEO Interviews

A new audit program will bring efficiency to global cargo handling operations

22 Focusing our ambitions

Westjet CEO Ed Sims says positive thinking is vital in turbulent times

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...

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

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42 Lance Gokongwei, Cebu Pacific CEO

Printed by PCP Airlines. ISSN 1360-6387 The opinions expressed in this publication are those of the individual authors or advertisers and do not necessarily reflect those of Redactive, IATA or its members. The mention of specific companies or products in articles or advertisements contained herein does not imply that they are endorsed or recommended by IATA or Redactive.

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2020 – 01 Airlines

05/03/2020 16:48

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Director General and CEO, IATA: Comment

Remaining agile in adversity COVID-19 has caused unexpected disruption to the air transport industry, but cross-sector cooperation can help airlines navigate through these difficult times

ILLUSTRATION: SAM KERR

T

he COVID-19 crisis is a health challenge for the world. And the impacts on our industry are devastating. Initially we saw a $30 billion loss of revenue for a crisis that was centered on China.

As the virus spreads, the impact grows.

Aviation is vulnerable to crises—SARS, the tragic events of 9.11, skyrocketing oil prices or the Global Financial Crisis—just to name a few events in recent memory. These all tested the mettle of our industry. And we emerged stronger.

That’s why aviation is also closely associated with the word resilience.

There is no clearly understood path or model that we can map this crisis to. There are too many unknowns. But there are at least three things that we do know. They serve as calls to action.

The first is the importance of global standards. The International Health Regulations (IHR) are a ready-made and well thought template for precisely the public health emergency in which we find ourselves today. Airlines are following them. But too many governments are imposing measures outside of the agreed system.

The World Health Organization is the keeper of the IHR. And they continuously advise against restrictions on trade and travel.

They have also endorsed the standards and best practices that we have as an industry to keep our passengers, crew and planes safe.

The second known is that governments have a role and interest in supporting connectivity. We are calling on them to suspend the 80-20 use-it-or-lose-it rule for airport slot allocation. This will enable airlines to flexibly meet demand as it evolves (and in some cases dissolves) without worrying about the damage it will do to the next year’s schedule.

As governments develop stimulus plans to combat economic airlines.iata.org

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damage, the air transport industry should not be forgotten.

Lowering airport fees, charges and taxes are well within the remit of most governments. And this critical relief can mean the difference between maintaining connectivity or abandoning a route.

And the third known is that our passengers are concerned about flying. They want reassurance. While there is no zero-risk environment, the travel experience is lower risk than most, given the temperature screening at key hubs. The air onboard the aircraft is refreshed and filtered to the level of a hospital operating theater. And if we all fly responsibly—that means not flying when sick, washing hands frequently and keeping good respiratory hygiene—an aircraft cabin is a lower risk environment than most other pubic enjoinments. We need to get this message out.

These three ‘knowns’ are important. But they won’t magically make passengers re-appear. It is going to be a tough year for us all. IATA is in crisis mode. And are sparing no effort in reminding governments of the importance of global standards and taking critical measures to keep economies linked.

In the long-term, there is one more ‘known” and it is probably the most important. It is that people want to travel, explore and push boundaries in ways that only air transport can enable. As an industry we will keep the planet connected. We are resilient.

And we will get through this crisis, together.

9

Alexandre de Juniac: Director General and CEO, IATA 2020 – 01 Airlines

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When you fly, fly aware. The air transport industry, facilitated by IATA, is working to help people make an informed choice about their travel options. Aviation has never been a more sustainable choice. New technology has helped reduce average passenger CO2 to half the emissions levels in 1990. And carbon offsetting projects, such as protecting rainforest, are helping aviation towards carbon-neutral growth. www.flyaware.com

The Big Picture

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03/03/2020 16:39

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03/03/2020 16:39

Digest States must remain committed to CORSIA, says de Juniac Alexandre de Juniac said governments must stay true to the principle of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) and refrain from the temptation of “inventing” environmental taxes.

In a wide-ranging speech at the CAPA Aeropolitical and Regulatory Summit in February, the IATA Director General and CEO said aviation recognised the need to address carbon emissions in 2009 and hoped that governments would stand by CORSIA, which was agreed at the ICAO Assembly in 2016.

“This was one of my first interactions with the ICAO process, I was impressed by the spirit of ambition and compromise that underpinned the global standard approach and enabling such an important result for our planet,” he told delegates in Qatar.

“Governments must now keep their

standards will serve the industry best, according to de Juniac.

Commenting on the coronavirus epidemic, IATA’s Director General and CEO reminded delegates that aviation is an industry that “rises to challenges” and hailed the role of airlines in tackling the situation.

He highlighted ongoing relief efforts in China, which have seen foreign nationals evacuated and medical supplies delivered by air, as a perfect example of air transport’s role to help governments “get through the outbreak” together.

De Juniac also discussed the continued grounding of the Boeing 737 Max and said greater alignment between regulators would improve public confidence surrounding the problems.

By Patrick Appleton

IMAGES: GETTY/ISTOCK

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commitment. Too many are inventing taxes in the name of the environment.

“These siphon money that we could invest in sustainability projects. And they undermine the effectiveness of CORSIA and the political consensus on which it was built.”

De Juniac said aviation’s contribution to manmade carbon emissions (2%) is relatively stable compared to other polluters, and praised airlines for keeping this steady while growing rapidly as a sector.

However, he added that the air transport industry has “an even tougher” goal to reduce net emissions to half 2005 levels by 2050 and called on governments to introduce regulatory and legal frameworks that will facilitate the expansion of sustainable aviation fuels.

Infrastructure was cited as another area where aligned global

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Digest

“Government-backed environmental taxes undermine the effectiveness of CORSIA and the political consensus on which it was built” Alexandre de Juniac, IATA Director General and CEO

Infrastructure needed as slots continue ‘balancing act’ The air transport industry continues to maximise capacity through slot allocation, but problems lie ahead without extra infrastructure in the future.

Lara Maughan, Head of Worldwide Airport Slots at the International Air Transport Association (IATA), commended airlines’ and airports’ slot management at IATA’s Global Media Days in Geneva in December.

Maughan added that although airlines entering new markets can “feel late to the party”, this is not the case. Indeed, the current guidelines ensure that new capacity is not allocated simply to existing users in proportion and encourage new entrants and competitiveness.

European airports are among the world’s most congested, but routes have been continually

added due to effective slot coordination. IATA warned slot allocation is not the unequivocal solution to the capacity problems worldwide.

“This process cannot generate new capacity,” said Dimiter Zahariev, Manager, Worldwide Airport Slots. “Thus, infrastructure growth remains the only long-term cure.”

IATA and its industry partners continue to work on refining the process and recently announced that the Worldwide Slots Guidelines (WSG) will be updated with the help of ACI Worldwide and WWACG (WorldWide Airport Coordinators Group). The new Worldwide Airport Slots Guidelines (WASG) will aim to incorporate more airlines, promote competition and growth, and achieve fairer access to available capacity through the use of new rules.

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load factor rose 0.7% to 82.6%, a record high.

December 2019 RPKs climbed 4.5% compared to the year ago period, an improvement over the 3.3% annual growth recorded in November.

Cargo demand— measured in freight tonne kilometers (FTKs)—fell by 3.3% compared to 2018, while capacity—measured in available freight tonne kilometers (AFTKs)—rose by 2.1%. It was the first year cargo volumes had declined since 2012, and the weakest

2020

Safety and Flight Ops Conference 31 March-2 April Baku, Azerbaijan IGHC Conference 17-20 May Mexico City Sustainable Aviation Fuel Symposium 21-22 May Berlin, Germany

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Aviation Data Symposium 10-12 June San Francisco, US Cabin Safety Conference 16-18 June Macao 76th IATA AGM 22-23 June Amsterdam, Netherlands

MIXED FORTUNES FOR PASSENGER AND CARGO IN 2019 Full-year IATA analysis shows that year-on-year passenger traffic fell in 2019.

Although demand— measured in revenue passenger kilometers (RPKs)—increased by 4.2% compared to 2018, the annual growth is less than the 7.3% increase posted a year earlier.

This marks the first year passenger demand has fallen below the long-term trend (5.5%) since 2009, following the global financial crisis.

Capacity—measured in available seat kilometers (ASKs)—grew by 3.4% as

Events

World Financial Symposium 28 September -1 October Dubai, UAE

Decline: Passenger demand has fallen below the long-term trend for the first time since 2009’s financial crisis

overall annual performance since air freight markets dropped 9.7% in 2009.

December 2019 saw cargo demand decrease by 2.7% year-on-year while

capacity grew by 2.8%.

IATA said there was signs of improvement on the horizon, but the coronavirus outbreak has affected that outlook in recent weeks.

Global Airport & Passenger Symposium 13-15 October Osaka, Japan Airline Industry Retailing Symposium 27-29 October Vancouver, Canada

2020 – 01 Airlines

03/03/2020 16:50

Digest

“It is a concern that we are seeing much more political upheaval in Latin America, which is a deterrent for passengers to travel” Peter Cerda, IATA Regional Vice President, The Americas

Rail chief encourages “best of both worlds” intermodal travel Transport providers must continue to work together to give passengers “the best of both worlds” when it comes to international travel.

That is according to the International Union of Railways (UIC), following the signing of a Memorandum of Understanding (MoU) with IATA. The agreement will strengthen the bond between both parties in standard setting and interoperability initiatives.

It has a broader focus on encouraging and facilitating the highest standards of data exchange, which will support greater intermodal travel for passengers across the world.

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“This MoU confirms the desire to really promote multimodality,” said François Davenne, UIC Director General.

“Offering customers a single ticket for rail and air travel gives them the opportunity to choose the best of both

worlds by optimising their journey as well as their carbon footprint.

The MoU will look at existing processes from both parties’ viewpoint, as well as innovative solutions such as IATA’s New Distribution Capability (NDC) and ONE Order initiatives.

Both NDC and ONE Order offer “significant opportunity for value creation” within intermodal travel agreements, IATA said.

Some of the specific areas covered by the MoU are journey planning, reservations and ticketing, check-in and validation control, and accounting and settlement.

IMAGES: GETTY/ALAMY/ISTOCK

POLITICAL ISSUES HURTING LATIN AMERICAN AIR TRANSPORT, SAYS CERDA Political instability in Latin America is causing problems for air travel, IATA has said.

Speaking to reporters at IATA’s Global Media Days in Geneva, Peter Cerda, IATA Regional Vice President, The Americas said governance issues throughout the Latin America region is a concern for airlines.

Air transport contributes roughly $1 trillion to the Americas—around $844 billion in North America and $156 billion in Latin America and the Caribbean.

The latest figures from IATA show that although passenger demand increased in North

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America, the slowdown in regional cargo growth is more representative of the industry globally.

October’s analysis shows that in Latin America both passenger and cargo markets suffered a decline in volumes, created in part by the region’s volatility.

“Politically, instability has had a significant impact on air travel,” said Cerda. “That is one of the concerns, that we are seeing much more upheaval in the region, which is a deterrent for passengers to travel.”

Infrastructure continues to dominate the aviation landscape

across the Americas too, with Mexico City a key focus for IATA following the cancellation of the planned Texcoco Airport.

Although issues remain in Mexico, and airports in Bogota and Lima, Cerda said the need for infrastructure development is “a good problem to have” as it is a product of an increase in demand.

He urged governments across Latin America to rethink their taxation strategies and warned that air transport cannot continue to be regarded as the “Golden Goose” to generate funding for state finances.

By Patrick Appleton

Slump: Aviation’s positive impact on Mexico City has been disrupted by the cancellation of the planned Texcoco Airport

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03/03/2020 16:51

Digest

FINANCIAL MONITOR: FUEL PRICE VOLITILITY EXPECTED IN 2020

$70/bbl

IATA has said it expects “high volatility” in oil and jet fuel prices to continue in 2020.

Brent crude oil and jet fuel prices rose to $70/bbl and $84/bbl, respectively, during an increased period of tension between the US and Iran in early January.

Although the impact from that was short-lived—with Brent crude currently priced at around $54.07/bbl (Feb 26) due to fears over the ongoing coronavirus crisis—IATA’s latest Financial Monitor said prices remain “vulnerable to intensified geopolitical risks.”

The Financial Monitor detailing final financial results from Q3 2019 showed that overall, operating profitability among the world’s airlines improved compared to the year ago period.

However, airline share prices suffered as the global airline equity index increased by only 1.2% in December. That was in part due to the extended grounding period of the Boeing Max 737, which significantly affected North American airline operations.

Despite the disruption, North American airlines delivered a solid operating profitability performance overall year-on-year, which IATA said was driven by strong travel demand and better yields.

In Europe, rising operating expenses weakened EBIT margins while yields in Asia-Pacific suffered from “intense competition” and protests in Hong Kong.

IATA’s Q32019 Financial Monitor found BRENT that passenger and CRUDE OIL freight load factors AND JET remained steady, FUEL PRICES although trade tensions ROSE TO continue to have a $70/BBL negative impact.

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Historic: The financial estimates are based on SARS’ impact, which caused a 5.1% drop in RPKs for Asia-Pacific airlines in 2003

COVID-19 set to cost airlines minimum $30bn in revenue Airlines in Asia-Pacific could suffer a potential 13% full-year loss in passenger demand as a result of the coronavirus (COVID-19) outbreak.

That is according to the latest analysis from the International Air Transport Association (IATA), which has revised its forecast figures for the region from an expected 4.8% growth increase to an 8.2% full-year contraction, compared to 2019 figures.

Such a scenario would result in a $27.8 billion revenue loss for Asia-Pacific carriers in 2020. The majority of that would be carried by airlines registered in China, with $12.8 billion lost in that domestic market alone.

IATA analysis predicts that in the same instance, carriers outside Asia-Pacific would lose $1.5 billion in revenue if the fall in demand is limited to markets linked to China.

That would bring total global lost revenue to $29.3 billion (5% lower passenger revenues compared to

15

IATA’s forecast in December) and represent a 4.7% hit to global demand.

In December, IATA forecast global RPK growth of 4.1%, meaning the loss would eliminate expected growth this year, resulting in a 0.6% global contraction in passenger demand for 2020.

“These are challenging times for the global air transport industry. Stopping the spread of the virus is the top priority,” said Alexandre de Juniac, IATA’s Director General and CEO. “Airlines are making difficult decisions to cut capacity and in some cases routes.

Lower fuel costs will help offset some of the lost revenue, but this will be a very tough year for airlines.”

IATA’s estimates are based on COVID-19 having a similar impact on demand to that of the SARS virus in 2003, which saw a 5.1% fall in RPKs for Asia-Pacific carriers.

However, IATA added it is “premature” to estimate what possible revenue losses would mean for global profitability.

2020 – 01 Airlines

05/03/2020 16:49

Digest

IATA warns against Bangladesh VAT plans for aeronautical services The International Air Transport Association (IATA) has urged Bangladesh’s government to reconsider a decision to impose Value Added Tax (VAT) on aeronautical services for airlines operating in the country.

A directive from Bangladesh’s National Board of Revenue in November announced that VAT on services provided by the Civil Aviation Authority of Bangladesh (CAAB) would be subject to a rate of 15%.

Those services include landing, parking, route navigation, security, boarding bridge facilities and port services.

In a letter addressed to Bangladeshi Prime Minister Sheikh Hasina, IATA Director General and

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CEO Alexandre de Juniac said such taxes harm the development of both air transport and local economies.

“We respectfully request you to direct the National Board of Revenue to rescind its decision to subject to VAT the various aeronautical and non-aeronautical charges levied by the CAAB on international air transport,” wrote de Juniac.

IATA contends that imposition of the charges contradicts accepted policies and guidelines on taxation published by the International Civil Aviation Organization, the Organization for Economic Co-operation and Development, and the World Trade Organization.

“This is because such services are directly related to, and necessary for,

the operation of aircraft in international traffic and should not be considered as ancillary transport services,” added de Juniac.

Urging caution against the implementation of such taxes, de Juniac said that air transport is “a key contributor and enabler” to the Bangladeshi economy.

IATA statistics show that aviation generates $769 million in GDP and provides 129,000 jobs at present in Bangladesh, which could rise to $2.1 billion GDP and 140,000 jobs by 2038.

Many jurisdictions, including Saudi Arabia, the EU, and Canada, do not subject most aeronautical charges and related charges on international air transport to VAT.

By Patrick Appleton

DIGITIZATION COMES WITH CYBER THREAT WARNING, SAYS CAREEN

IMAGES: ISTOCK/SHUTTERSTOCK/GETTY/ALAMY

As digitization and connectivity continue to play a key role in airline operations, carriers must be robust in dealing with the risks that come attached with both.

Such developments have increased efficiency across the board, but it has also opened up airlines and their aircraft to vulnerabilities such as cyber attacks.

At IATA’s Global Media Day in December, Nick Careen, IATA Senior Vice President, Airport, Passenger, Cargo,

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Security addressed the importance of understanding the cyber threat.

“These technological advancements are creating tremendous opportunities for flight efficiency, customer service, security, and operations,” said Careen.

“However, as a result new levels of vulnerability also arise from this progress as airlines today face an ever-changing field of cyber attacks.”

He added that the connectivity of aircraft

systems has extended the potential attack surface to the aircraft itself, but denied claims from some hackers that they have the ability to access critical flight systems by hacking passengers’ personal devices in flight.

“This is not the case,” he said. “That’s not to rule out the danger, as no threat can ever be ruled out 100%, but so far manufacturers have confirmed that no critical flight systems have ever been at risk from such a threat.”

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Digest

MANAGEMENT RESHUFFLE IN FDS

Cyber security is a key priority for aviation, demonstrated by a resolution at the 40th ICAO Assembly which committed to address cyber security issues through a “cross-cutting” functional approach.

IATA has welcomed the resolution, which urges states to implement the ICAO Cybersecurity Strategy and ensure civil aviation remains safe, trusted and resilient to cyber attacks while continuing to prosper.

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CASS CELEBRATES ITS 40TH BIRTHDAY

In 2018, the billing settlement system processed $37.2 billion and had an on-time settlement rate of 99.996%.

Restricting: Imports at Hazrat Shahjalal International would be affected by the regulations

President for Aviation Solutions after 16 years of service. The Marketing and Commercial Services division which Hubble led will be incorporated into the CBS function. Financial, Distribution and Data Services (FDDS) will replace the former FDS division.

99.996%

IATA has announced a number of developments across its management teams, with Aleks Popovich leading a newly formed Customer and Business Services (CBS) division. The move comes following the retirement of Mark Hubble, IATA Senior Vice

IATA’s Cargo Account Settlement System (CASS) celebrated 40 years of operation on 1 December 2019.

The first CASS was launched in Japan in 1979, just as the air cargo industry was beginning to take shape.

CASS simplifies the billing and settling of accounts between airlines and freight forwarders. It operates through CASSlink, an advanced, global, web-enabled e-billing solution.

Brian Barrow, Cargo Agency Commissioner, said that the success of IATA’s Billing Settlement Plan (BSP) helped those in the freight industry envisage the role CASS could play in simplifying the business.

“Air freight was big business for Japan Airlines, it was as easy as that. The economic arguments began to convince people,” said Barrow.

In 2018, the billing settlement system processed $37.2 billion and had an on-time settlement rate of 99.996%.

CASS featured 92 operations serving 235 airlines, general sales and service agents (GSSA), and ground handling companies at year-end 2018.

“If you think of the world and what it would look like without CASS, you’d have 100 airlines in a particular country sending invoices to perhaps five or six hundred freight forwarders,” said Glyn Hughes, Global Head of Cargo at IATA. “It would just be costly, for effectively what is just a back-office function. CASS has a tremendous role to play today and we hope for the future for bringing efficiency to the industry.”

By Patrick Appleton

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2020 – 01 Airlines

03/03/2020 16:52

Data

In numbers ECONOMIC PERFORMANCE 2019

Global GDP is expected to improve moderately with the support of accomdative fiscal policies.

This economic development is stimulated by the doubling of city pairs to 23,000 in 2020. In addition, air transport costs have halved over the past 20 years.

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$7,1 ,000, Forecast value of international trade shipped by air next year will be $7.1 trillion.

Tourists traveling by air in 2020 are forecast to spend $968 billion.

Aircraft fleet creation Commercial airlines are scheduled to take delivery of over 2,206 new aircraft, an investment of around $123 billion.

By the end of 2020 there will be 4.7 million available seats.

Aircraft fleet Available seats, million

2019E

2020F

29,805

31,375

4.5

4.7

39.0

40.3

Passenger load factor, %ASK

82.4%

82.0%

Freight load factor, %AFTK

46.7%

46.3%

Breakeven load factor, %ATK

65.9%

65.0%

Scheduled flights, million

Note: ASK = Available Seat Kilometers, AFTK = Available Freight Tonne Kilometers, ATK = Available Tonne Kilometers. Sources Ascend, ICAO, IATA

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908 billion

We expect 1% of world GDP to be spent on air transport in 2020, totaling $908 billion.

64%

The average return fare (before surcharges and tax) of $293 in 2020 is forecast to be 64% lower than in 1998, after adjusting for inflation.

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03/03/2020 16:52

Data (Source: IATA)

COVID-19 could severely impact the December forecast Impact of past disease outbreaks on aviation:

COVID-19 ‘SARS-shaped’ scenario

Previous outbreaks have peaked after 1-3 months and recovered to pre-outbreak levels in 6-7 months. SARS had wider impacts but so far COVID-19 has 99% of its cases in China.

Regional impacts outside Asia Pacific are based on direct exposure to Chinese markets. No additional or second round weakness of Asia Pacific markets are included. Revenue impacts are estimated based on the 2020 RPK impact (with no change in yields).

Index (crisis month-100) 120 110 100

Region of airline registration

90

Estimated RPK impact

Estimated passenger revenue impact

80 SARS (2003) North American Airlines RPKs Avian Flu (2003) RPKs to, from and within South-East Asia SARS (2003) Asia Pacific Airlines RPKs SARS (2003) China Domestic Market RPKs Avian Flu (2015) Asia Pacific Airlines RPKs MERS Flu (2015) RPKs to, from and within South Korea

70 60 50 40 30 20

Months before and after the start of the crisis 10 -3

-2

-1

0

1

2

3

4

5

6

7

8

9

10

11

Asia Pacific

-13.0%

$-27.8

North America

-0.4%

$-0.7

Europe

-0.4%

$-0.6

Middle East

-0.2%

$-0.1

Africa

-0.4%

$-0.04

Latin America

-0.1%

$-0.03

Industry

-4.7%

$-29.3

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0 0,000 We estimate that total employment by airlines will reach close to 3 million in 2020, a gain of 1.6% compared to 2019.

Worldwide airline industry economic performance forecast 2020 by post-tax profit ($) and revenue (%). North American airlines lead the way, but Africa remains one of the weakest regions, as in the last 5 years.

Africa

Asia-Pacific

Middle East

Latin America

North America

Europe

-1.3%

2.2%

-1.7%

0.3%

6.0%

3.6%

Profit: -$0.2bn

Profit: $6.0bn

Profit: -$1.0bn

Profit: $0.1bn

Profit: $16.5bn

Profit: $7.9bn

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2020 – 01 Airlines

06/03/2020 10:17

Medicine 101

COVID-19 Everything you need to know IATA Medical Advisor Dr David Powell on the impact of the coronavirus on travel WORDS: DR DAVID POWELL

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T

he World Health Organization (WHO) has declared the coronavirus (COVID-19) outbreak a Public Health Emergency of International Concern (PHEIC) but is not advising any restrictions on travel or trade. More than 2,000 deaths have been reported, including some fatalities outside of China, and the number infected runs into the tens of thousands worldwide.

Alarmist headlines have screamed about the spread of the disease, with parts of China effectively shut down. Wuhan—the center of the outbreak is the most notable city in isolation— but China has also closed off all of the major cities in Hubei province, a number of temples, the Forbidden City and part of the Great Wall.

Even so, the coronavirus needs to be put in a global perspective. As far as is currently known, it is not as lethal as SARS (Severe Acute Respiratory Syndrome), which killed almost 10% of people who contracted it. Nor is it as contagious as measles, which spreads quickly and is still widespread in many parts of the world, such as Eastern Europe, Asia-Pacific and

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“The detail of how the virus is being spread is still an evolving story, but we are learning about the virus all the time” Dr David Powell, IATA Medical Advisor

Africa. And though hundreds of people have died, this doesn’t compare with the 1,000 every week that fall victim to the flu in the United States or the 650,000 who die annually from seasonal influenza.

“The genetic profile of the virus was worked out very quickly, and immediately shared worldwide so a diagnostic test for coronavirus could be put in place,” says Dr David Powell, IATA’s Medical Advisor. “The detail of how it is being spread is still an evolving story, but close proximity to someone who is unwell with the virus seems to be the main concern as opposed to casual airborne contamination. We are learning about the virus all the time, but the spread has been predominantly from contact with someone who is unwell at the time.”

Almost sterile

Global disease outbreaks inevitably lead many to question to the role of aviation. But the industry takes health emergencies seriously and works in conjunction with all relevant authorities to contain the spread of a virus as much as possible.

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Medicine 101

Two areas in particular become the focal point of media and public concern. The first is getting the virus from an infected person on a flight. This is only likely if a passenger is in close proximity to someone who is currently unwell.

“Many people don’t realize, but the risk of contracting a virus on board a flight is probably lower than in many confined spaces because modern aircraft have cabin air filtration systems equipped with HEPA (high efficiency particulate air) filters,” says Powell. “These filters have a similar performance to those used to keep the air clean in hospital operating rooms and industrial clean rooms.”

HEPA filters capture more than 99.97% of the airborne microbes and because a cabin air system delivers approximately 50% outside air and 50% filtered, recirculated air, it means the supplied air is essentially sterile, and the risk to be avoided is therefore direct spread from one person to another.

Viruses are far more likely to be passed on through touching a surface recently touched by contaminated hands. The trays at security checkpoints are an example of a potential pathway for such transmission. It makes regular handwashing a must.

A second focal point is the effectiveness of temperature scanning at airports. One deficiency of this as a screen is that passengers could “cheat” the scan by taking medicines prior to landing to lower body temperature.

“However, thermal scanning is of some use,” informs Powell. “WHO has acknowledged that some early cases of coronavirus were picked up in this way. But it only works if somebody is already unwell rather than going to become unwell, so it needs to be accompanied by advice

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on what to do if symptoms develop later.

“What we need is a more coordinated, harmonized and evidence-based approach to entry and exit controls,” he adds.

Learning from past pandemics

Key advice Passengers on a flight should: Wash hands carefully on a regular basis, or use a hand sanitizer Avoid touching other people Avoid touching face with hands Cover coughs and sneezes, and then wash hands Avoid traveling if becoming unwell Passengers only need to wear masks on a flight if they start to feel unwell. It is not recommended for cabin crew to wear masks. Masks become damp and act as potential reservoirs of infection. Respiratory infections tend to be spread more efficiently by touch than by exhaled air, which is why frequent handwashing is essential.

Aviation is experienced in outbreaks and understands the value of collaboration.

International coordination has been in place for years and is key to an effective response.

Powell is in regular contact with counterparts at WHO, the US Centers for Disease Control and Prevention (CDC) and ICAO, for example. There is also IATA’s Medical Advisory Group, which comprises medical directors from 10 airlines.

Cooperative efforts were enhanced after the SARS outbreak in 2003. WHO, with IATA input, developed the International Health Regulations (IHR), which came into force in 2005. One year later, ICAO launched the Cooperative Arrangement for the Prevention and Management of Public Health Events in Civil Aviation (CAPSCA) to coordinate the industry’s response to public health risks by bringing together organizations at all levels.

International collaboration developed further during the influenza pandemic of 2009 and more recently during the two Ebola virus outbreaks in Africa.

Guidance materials for maintenance crew, cabin crew, cleaning crew, cargo and baggage handlers and passenger agents developed by IATA are widely available. They show what cabin crew should do when dealing with a suspected case of communicable disease on board a flight, for example, and also instruct cleaning crew in how to disinfect an aircraft as part of normal cleaning routines.

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CEO Interview

Focusing our ambitions WestJet CEO Ed Sims says that when faced with strategic decisions around operating capabilities, airlines must keep thinking positively despite the challenges ahead WORDS: GRAHAM NEWTON

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he Boeing MAX 737-8 disruption has been well-documented, but for an airline like WestJet—which relies solely on the manufacturer— the impact has been keenly felt.

Despite the challenges that those production issues have caused, Ed Sims remains positive that the airline can continue on an upward curve.

What difference will the acquisition by Onex make to the airline and its strategy?

The acquisition has reaffirmed the strategic path we are on to build a long-term sustainable business model. It is more of the same but at a faster rate. Being well-funded enables the airline to be nimble and adapt quickly to market conditions. We will continue to invest in our ultra-low-cost product in Swoop and our premium service in WestJet as we evolve to become a global network carrier including the introduction of our Dreamliners and business cabins. The strategies are interdependent.

Onex understood that from day one, and it is why they were prepared to pay a 67% premium for the airline. We will also continue to invest in a regional capacity purchase model in WestJet Link, pursue joint ventures and look to establish a strong presence on the transatlantic market.

How damaging has the loss of the MAX 737-8 been to your plans?

It is impossible to overstate the negative impact this has had on the traveling public, the Airlines 2020 – 01

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CEO Interview

“The industry can grow but we need to connect with the traveling public on all levels— let’s remain ambitious” airlines.iata.org

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industry, and WestJet. It represented 7% of our capacity. That’s a lot of available seat kilometers to lose. For us the frustration is losing our newest, most fuel efficient and quietest aircraft—I think of it as a narrow body 787.

And, of course, there are many destinations that we have had to suspend announcing or put on ice until the MAX 737-8s are back in service.

We also need to resolve discussions with Boeing on quantifying the loss. There is a financial impact that has to be addressed.

But perhaps most importantly, our guests (customers) are questioning the safety framework of the industry as a whole. I still come back to saying that 2017 was the safest year in history, the top three years were all in this decade; the industry is extremely safe and getting safer. But the exposure of the MAX 737-8 has been enormous and in an era of social media and armchair quarterbacks people have access to information that lacks context and it has led guests to doubt the industry. So, there has been a threefold impact. There are lost opportunities, financial implications, and anxious guests leading to a potential decrease in demand.

What’s the latest on the joint venture with Delta and why do you think the JV is a good idea?

We are waiting to hear from the United States Department of Transportation (US DoT) for Anti-Trust Immunity (ATI). We have undergone a very robust, rigorous and transparent process and other airlines have articulated their views.

We have replied to the US DoT’s questions in full. Now it is a matter of waiting for the outcome on their deliberations. This deal has been two years in the making and we are confident of a decision in the first half of 2020. From our point of view, of course, the sooner the better.

How is the airline tackling diversity?

Alongside our commercial objectives, there are four strategic pillars in the way we will build our relationships with communities we fly into but also with our WestJetters. Diversity is one of the central pillars along with sustainability, mental Airlines 2020 – 01

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1996

CEO Interview

WestJet was founded in 1996 by a consortium, beginning life with just three aircraft and five destinations.

22 years later, the airline flies to more than 100 destinations across the world using a 124-strong all-Boeing fleet.

health and our relationships with indigenous peoples in Canada.

Overall, 56% of WestJet employees are female yet at the senior management level that drops to just 25%. We have to close the gap, and we have been taking a number of steps to do that. You must provide suitably-qualified candidates with a level playing field. We are working through our People team internally and recruiting to close that gap and reviewing on an annual basis.

Interestingly, WestJet continues to exceed the global average (5%) of female pilots and we are proud to be one of the top airlines in North America for female pilot representation. At WestJet, females currently comprise 7% of our pilots—including 10% of pilots at WestJet Encore. We continue though to work to improve diversity across the board.

Are you happy with the national infrastructure, particularly regarding airport charges and fees?

I was encouraged to see Canada’s Prime Minister prioritize airport reforms following his re-election last October and the federal government is looking to implement measures to strengthen the transparency, accountability and efficiency of Canadian airports.

This not about ownership—it doesn’t matter whether it is private or public. What matters is establishing a joint strategy so that airlines can feed into the governance of a facility.

In Canada, we have had years of unregulated solutions to infrastructural challenges. Now we are stuck with airside and landside facilities that we cannot afford to maintain.It is possible for a guest to pay up to C$50 in airport improvement fees before they even step on an aircraft. That places a huge strain on airlines that must stimulate demand through pricing. As an airline driving growth in all segments, including our ULLC Swoop, all elements of improving Canada’s aviation cost structure are of interest.

In your experience as a former air navigation service provider (ANSP) CEO, how can airlines

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CEO Interview

and ANSPs improve their working relationship to achieve greater efficiency in the skies?

In a recent presentation to NAV CANADA I reminded them that I was happy to see investment in concepts like performance-based navigation, which are proven to have clear benefits. Being able to minimize fuel burn, reduce emissions and noise are a priority for us.

But the benefits of longer-term concepts like space-based automatic dependent surveillance—broadcast (ADS-B) are less tangible in the short term and yet airlines are expected to pay the cost now. I would prefer to get the procedural improvements first and then we can get to the question of how much we should pay for them. Navigational efficiency must be balanced with cost efficiency, just as it is in our own business when every invested dollar has to be found within airfares.

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Is aviation doing enough to convince the public that it is taking environmental responsibility seriously?

No. Though it is true to say that we are only 2% of the climate change problem, the industry cannot hide behind that figure.

A few years back, the spike in fuel prices to well over $100 a barrel got airlines thinking seriously about fuel efficiency and happily fuel efficiency made environmental sense.

But it is different now. Unless the industry can convince the public that is thinking about the environment first and foremost then we will see decreasing demand. There is no point in greenwashing—talking about the environment without making positive, visible changes. The targets set must be credible, and the action we take must mean something to a concerned person buying a ticket.

In general, what other challenges and opportunities do you see for the industry in the near future?

Technology is central to the airline industry and its future. From analytics and insights to marketing to guest experience, there is so much airlines.iata.org

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66% “Overall, 66% of WestJet employees are female yet at the senior management level that drops to just 25%. We have to close the gap”

25 “Targets must be credible, and the action we take must mean something to a concerned ticket buyer”

We will also continue to pursue joint ventures and look to establish a strong presence on the transatlantic market.

opportunity but also challenge. I have often talked of WestJet as a digital company with an airline behind it. But don’t think in terms of going from paper to desktop PC to laptop to tablet to app. It’s not that linear. Most people now are using their smartphones as part of their everyday life. So, let’s start with that. Start with designing an app and understanding how that is used and its potential. Don’t migrate existing thinking and processes to it.

If you could change one thing about the industry tomorrow, what would it be and why?

I think the industry is guilty of putting constraints on itself and its ability to grow. We need to connect with the traveling public on all levels. They are demanding air travel, but they also want transparency in the travel process and meaningful environmental responsibility.

Canadian air traffic has doubled in the past 20 years and we can do that again with the proper strategies in place. Let’s remain ambitious!

2020 – 01 Airlines

03/03/2020 16:56

CEO Interview

Open up to competition Glenn Orsmond, Airline Division CEO, Comair, says open skies would lead to much needed discipline in the African market WORDS: GRAHAM NEWTON

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W

ith flat passenger growth, strong local competition and a struggling domestic economy dominating the South African air transport industry landscape, one would be forgiven for considering a low-cost carrier’s prospects as bleak. Comair Airline Division CEO Glenn Orsmond explains how the airline is harnessing people, innovating, and challenging regulations to ensure this isn’t the case.

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

The airline has been consistently profitable for many years, and we want that to continue. The company recently announced a restructuring in which joint CEO roles would be discontinued.

Wrenelle Stander has been appointed Group CEO for Comair Limited, while I have assumed the role of CEO for the airline division.

For the airline, regional African routes will be especially important in the next few years. The Boeing MAX 737 8 is key to those routes, and there is no doubt that the problems with the MAX 737 8 have hurt our business.

We’re also transitioning our aircraft line maintenance from South African Airways Airlines 2020 – 01

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Technical to Lufthansa Technik. This process is expected to take a year.

Is the local political and economic situation affecting airline operations?

The South African economy is stagnant at the moment with no real GDP growth. The trading environment is tough too, with no real passenger growth and fierce competition locally with three low-cost carriers and two premium carriers in the domestic market. We are pleased, however, that we have been able to achieve consistent passenger and revenue growth despite this.We remain confident about South Africa’s future and growth opportunities. There are exciting times ahead for this country and for our airline brands, and Comair will continue to grow in the next few years.

Will you continue with the diversification strategy and what is the rationale behind it?

Our strategy is to create a diversified aviation group, with multiple revenue streams to reduce earnings volatility arising from uncontrollable crude oil prices and currency fluctuations.

Our non-airline, aviation businesses—travel, airport lounges, training, technology and catering businesses—generally offer consistent

In brief…

Comair Comair has operated in South Africa since 1946.

It offers airline services within South Africa, Sub-Saharan Africa and the Indian Ocean Islands, under its low-cost airline brand, kulula.com, as well as under the British Airways livery, as part of a license agreement.

In addition, Comair’s non-airline business units, include hospitality, tourism, training and technology.

Meet the fleet Comair operates 26 Boeing 737 aircraft across its two brands. The fleet comprises 23 Boeing 737-800s and 3 Boeing 737-400s. Comair owns 10 Boeing 737-800s, as well as the 3 Boeing 737-400s, while it leases the remaining 13 Boeing 737-800s.

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CEO Interview

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CEO Interview

Do you see technology as the foundation for future success or is aviation still a people business?

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Comair has invested in a technology consultancy, NACELLE, which is mainly concerned with software development to create aviation products for small-to-medium carriers.

We are in the business of people though and we will always depend on people. They ensure that the demand for air travel is met safely and efficiently.

Our purpose is to lift people up in an inspiring, empowering, and innovative way and it is that which enables us to deliver superior returns to our shareholders in the long term.

That must mean diversity is important to your future. What is the airline doing to encourage gender equality?

Diversity has always been important to us and we have a steadily improving employee gender and race mix that reflects our country. South Africa is an extremely diverse nation, a melting pot of peoples.

It is full of skills across all disciplines, so we have a long list of applicants for every job. That long list is naturally diverse in all aspects.

Choosing the right people inevitably gives us a diverse workforce.

What do you see as the main trends and challenges in Africa?

There is no doubt that the continent is overregulated, especially when it comes to who can fly where. The main problem we have faced up to now is the preponderance and protection of national airlines.

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1943 Founded in 1943, Comair began operations in 1946 using Fairchild F-24 Argus aircraft

6m Comair carries 6m passengers annually on domestic and regional services

11 Destinations across Africa and the Indian Ocean Islands are served by Comair brands

1 Comair’s Kulula airline was the first low-cost carrier to originate from South Africa when it was formed in 2001

There is an element of pride in having a flag carrier, but it is simply not possible for every country in Africa to have a profitable, sustainable national airline.

These carriers are operating in shrinking markets as private airlines start up and provide better service at a more affordable cost.

What Africa really needs is open skies. If the airspace can be liberated, then I’m sure it would boost demand and lead to an enormous increase in connections. That in turn would allow aviation’s benefits to spread far and wide.

At least the visa situation is improving, and it is becoming easier for Africans to travel within the continent. That is pushing the demand for better connectivity, so the trend is promising. Of course, there are certain countries that remain troublesome but generally the constraints are loosening.

This is all about airlines being able to serve demand, wherever that demand may be. It would lead to a far more efficient intra-African network.

Is aviation doing enough to mitigate its environmental impact?

It won’t be enough until the environment is no longer an issue for the air transport industry.

The targets we have are ambitious and put us on the right path.

But environmental responsibility is also about our partners in the aviation value chain and not just the OEMs or air navigation service providers either. As mentioned, if governments deregulated African aviation, it would lead to a more efficient network, which is good for environmental performance.

Comair seeks to balance aviation and customer growth with delivery of its services in an environmentally sustainable way. We also strive to lead the industry in innovative efficiency.

That means conserving natural resources, reducing, reusing, and recycling waste material, sustaining a creative and innovative workforce, and giving back to the communities in which the airline operates.

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earnings growth at favorable margins and that allows us to achieve improved overall group margins and earnings.

There is another side to this too and that is our long experience in the aviation industry, which enables us to harness our core strengths internally. Our biggest asset—our people—will enable us to drive this strategy forward.

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Dossier: Environment

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Set for sustainability Aviation’s determination to reduce carbon emissions through the use of sustainable aviation fuels must be matched by governments and oil companies WORDS: GRAHAM NEWTON

Aviation’s environmental efforts are noteworthy. Carbon emissions per passenger have declined more than 50% since 1990. Fuel efficiency improvements have averaged 2.3% per year since 2009. And from 2020, with the help of the Carbon Offsetting Reduction Scheme for International Aviation (CORSIA), the industry will begin to cap net emissions.

Industry achievements are being built from the ground up. Air France, British airlines.iata.org

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Airways, and JetBlue are among airlines that will offset carbon from domestic flights, the latter two having started their programs on 1 January 2020.

According to Michael Gill, IATA’s Director, Aviation Environment, these announcements are fully aligned with industry objectives. “We welcome the commitments to climate action being made by increasing numbers of airlines,” he says. “The industry goal to reduce global CO2 emissions to half of 2005

levels by 2050 will necessarily mean some airlines will go further and faster than others in cutting carbon.”

Etihad Airways, meanwhile, will halve its 2019 net emission levels by 2035. “The global focus on the environment and the urgency of reducing carbon emissions has never been greater,” says Tony Douglas, CEO of Etihad Aviation Group.

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Dossier: Environment

Airlines 2020 – 01

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Airlines have invested some $1 trillion in new aircraft since 2009

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$1trillion

50% A flight today emits just 50% of the carbon of an equivalent flight in 1990 challenge as a fast-growing industry is to deliver meaningful initiatives, which can quickly help reduce carbon emissions.”

Etihad’s Greenliner program uses its Boeing 787 fleet to test sustainable products and practices. It also became the first airline to secure commercial funding conditional upon compliance with the United Nation’s (UN) Sustainable Development Goals. The €150 million will help to finance the development of a multistory eco-residence for cabin crew living in Abu Dhabi.

Bigger targets and bigger battles lay ahead. By 2050, the industry has pledged to halve emissions compared with 2005.

And in 2022, ICAO will announce a government-backed, long-term environmental goal for aviation.

These will have to be achieved amid a difficult regulatory and political atmosphere. Aside from the ground swell for the flight shame movement, for example, the UK’s Committee on Climate Change has suggested oil companies and airlines should pay for a tree-planting drive to fight climate change to help the country achieve its 2050 net zero emission target.

The committee also commissioned a report by Imperial College London that suggested a frequent flyer levy or the elimination of frequent flyer programs (FFP) entirely. The questionable logic is that frequent flyer programs cause people to take more flights than necessary to accrue FFP miles.

Policy incentives

The quest for sustainable aviation fuels (SAF) is particularly affected by governments’ lack of strategic direction on the matter. Forward purchase agreements for SAF amount to approximately $6 billion but this is a mere drop in an ocean of demand.

Discussion on… CORSIA The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) will ensure carbon-neutral growth on international flights. It is estimated it will reduce emissions by about 2.5 billion tonnes and, by 2035, it will raise around $40 billion in climate finance.

Airlines asked for its implementation and will pay the bill. As of 1 January 2019, all carriers have reported their CO2 emissions though only flights between volunteering countries

are subject to offsetting requirements in the initial stages of the scheme. Even so, more than 80 countries are signed up to this voluntary phase.

From 2027, all international flights will be subject to offsetting requirements. There are exemptions, such as flights to and from Least Developed Countries and Small Island Developing States but all can participate on a voluntary basis.

Despite this groundbreaking global agreement that ICAO Member States signed up to at the 39th Assembly, unilateral rules for monitoring and reporting emissions and so-called green taxes still abound. The European Union and China are examples of the former and there are proposals from the likes of the Netherlands and Sweden for the latter.

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Dossier

Insufficient policy incentives are a major contributor to shortfalls in SAF production. Governments successfully plotted the development of solar and wind solutions for power generation, for example, but SAF solutions for aviation do not enjoy the same progressive framework.

Enough sustainable fuels are produced to power about 10% of aviation’s needs but most are destined for road transport despite the fact that the electrification of road vehicles is tried, tested, scalable.

Aviation has no near-term electrification option, underlining the need to make SAF a policy priority.

There are some bright spots. The European Union agreed to apply an enhanced incentive for aviation compared with ground transport under its Renewable Energy Directive II, starting this year and in California the Low Carbon Fuel Standard combined with the Renewable Fuel Standard could get SAF down to a competitive price.

Alaska Airlines and Washington State Governor, Jay Inslee, are meanwhile supporting the introduction of a Low Carbon Fuel Standard in Washington State.

“The legislation that Governor Inslee proposes would be expected to make the Pacific Northwest more attractive for, and a production location of, SAF fuels,” Patrick Gruber, CEO of Sustainable aviation fuel producer Gevo, notes.

Traditional energy suppliers must also prioritize investment in SAF. “The major oil companies have the expertise, the distribution networks and— importantly—the financial power to make a real difference,” says Alexander de Juniac, IATA’s Director General and CEO. “I call on them to make this an absolute priority, helping to underpin global connectivity for future generations by making sustainable aviation fuels a commercial reality.” airlines.iata.org

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Discussion on… Taxes don’t work IATA’s Director General and CEO, Alexandre de Juniac, believes taxes are a politician's way out of the intense environmental debate.

“They are easy to put in place and make it look like action is being taken,” he says.

“It requires more time and more effort to put in place a package of measures that can actually reduce emissions in the long-term. But if designed correctly, they will advance sustainability much more than a blunt tax ever could.”

A proposed Environmental Preservation Fee to be paid by all passengers departing from Sao Paulo’s André Franco Montoro International Airport in Brazil is a case in point.

IATA analysis consistently shows that punitive taxes on passengers is inefficient and does not help reduce carbon emissions or mitigate other environmental impacts.

In Brazil’s case, it would undoubtedly dampen aviation’s well-documented social and economic benefits.

Effective policies that are based on best practices for environmental management

and compatible with the policies agreed by Brazil and other countries through ICAO are a far better way forward.

“Taxing people who fly will make travel more expensive and do little to reduce the environmental impact,” says Peter Cerdá, IATA’s Regional Vice President for the Americas. “This solution is purely political and does not take into account its negative impact on the economy.”

Carbon tax proposals are also under discussion in Germany, the Netherlands, and Switzerland. France introduced a carbon tax this year, putting

€1.50 on outgoing economy class tickets and €18 on business tickets. But taxes simply limit aviation’s ability to invest in long-term solutions to make flying sustainable.

IAG’s Chief Financial Officer, Steve Gunning, noted at a conference that the UK’s air passenger duty was originally described as an environmental fee. But the €800 million a year paid by IAG alone goes into opaque government coffers.

He said taxation is a result of aviation not being able to dissuade politicians’ concerns, but, in any case, taxes would not solve environmental issues.

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Spotlight on… SAF aspirational goal SAF, as it stands, represents around 0.01% of global fuel uptake. It is more expensive than normal Jet A1 and its scarcity means the price is unlikely to achieve parity any time soon.

But the positivity surrounding SAF has led to a realistic aspirational goal of deriving 2% of global jet fuel from non-fossil sources as early as 2025. The percentage is significant in that it could be a tipping point for the production and cost of SAF. The 14 SAF production facilities currently operating, under construction or in the final stages of financing and planning take the industry

toward the 2% goal. They should contribute in the region of 3.5 billion liters of SAF annually. Among them is a Singapore facility owned by Neste, that will expand its renewable product capacity by up to 1.3 million tons by 2022. New announcements of SAF production have become a regular, if not yet common, occurrence.

Even so, Michael Gill, Executive Director of the Air Transport Action Group has noted that “we need to double that production stream and then double it again to make a noticeable impact on our carbon footprint.”

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Dossier: Environment

Spotlight on… Waste

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More than 40 different airlines have used sustainable aviation fuels for commercial flights

SAF on the up

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Waste management is a vital, if less public, aspect of environmental responsibility.

Airlines have embarked on a number of innovative schemes—even turning waste into SAF in the case of British Airways and Japan Airlines— but restrictive laws hamper their progress.

Biodiversity concerns are often at the heart of recycling issues meaning a lot of waste, even unopened food, is burnt or sent to deep landfill.

For the same reasons, the substitution of plastic utensils with alternative materials does not improve their recycling rate. Alternatives might also be heavier, for example, creating additional fuel burn and emissions.

Changes to international laws and regulations are needed to help airlines deal with their onboard waste. IATA is working to establish best practice procedures.

Spotlight on… Noise The noise footprint of new aircraft is at least 15% smaller than that of the aircraft they replace. Nevertheless, the industry is making every effort to reduce the noise impact of aviation even further.

New air traffic services such as performance-based navigation that deliver precision approaches are among the many other initiatives bringing down the decibel level.

The 2001 ICAO Balanced Approach still guides industry work in this area. It promotes reduction at source, land-use management and planning, noise abatement operational procedures, and, as a last resort, operating restrictions.

Essentially, the most suitable measure or combination of measures to combat a noise problem will be specific to each airport and a thorough evaluation is therefore vital.

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There is much to commend SAF to prospective investors. There are five technical pathways to SAF certification and a 60-80% reduction in CO2 is being achieved. A sixth certification pathway is on the cards.

Since they were first certified as ready for use in commercial operations in 2009, over 220,000 flights have taken off using some blend of low carbon fuel. It has saved some 150,000 tonnes of CO2, equivalent to 25,000 cars being taken off the road.

Five global airports are regular suppliers. At Brisbane, Australia, for example, SAF has been introduced into the hydrant system, using the isobutanol to jet fuel pathway produced by Gevo.

Los Angeles International Airport (LAX), meanwhile, last summer welcomed what it claimed was the most eco-friendly commercial flight in aviation history. The United service from Chicago used SAF; produced zero cabin waste; had its carbon footprint offset; and used all-electric ramp equipment.

United has committed to buying 10 million gallons of SAF at LAX and has pledged a 50% reduction in its carbon footprint by 2050.

Promoting sustainability

Indeed, airlines are heavily involved in countless projects to further SAF integration into fuel supply. Etihad is partnering in the development of SAF refined from saltwater-tolerant plants and is also committed to support

SAF developed from municipal waste in Abu Dhabi.

British Airways is investing $400 million in the development and uptake of SAF as part of its Flightpath Net Zero, which aims for net zero emissions by 2050. Last year, the airline launched a Future of Fuels competition for UK universities, awarding winners a £25,000 grant to further their research. Parent company, International Airlines Group (IAG) estimates that SAF will comprise up to 30% of UK aviation fuel delivering a 30% reduction in CO2 emissions.

In the meantime, IATA will continue to promote sustainability developments at ICAO. It believes that if all options to increase SAF production are explored up to 1 billion passengers will have flown on a SAF-blend flight by 2025.

The association also represents the industry in two leading sustainability organizations: the Round Table on Sustainable Biomaterials and International Sustainability and Carbon Certification (ISCC).

IATA Environmental Assessment The IATA Environmental Assessment (IEnvA) improves airlines’ environmental performance through the implementation of best practice and compliance with domestic and international standards and obligations.

As of end December 2019, 17 airlines have achieved IEnvA Stage 1 or Stage 2 certification, with 10 more preparing for Stage 1 assessment.

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Aleks Popovich: IATA Opinion

A customer-centric strategy The customer is at the heart of the decisions behind internal organizational changes at IATA, says Aleks Popovich, Senior Vice President, Customer and Business Services

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or 75 years, IATA’s mission has been to represent, lead and serve the global airline industry. Last year, with the guidance and approval of our Board of Governors, IATA announced a new strategy built on three activities at the core of our mission: advocacy, standards, and services.

As a result, the organization is transforming to better align ourselves internally with these activities and our strategic priorities. This is the logical evolution of a journey that we have been taking to put our customers at the heart of IATA—making doing business with IATA simple, timely, and effective, with a human touch.

One of the most exciting changes is the creation of a new IATA business unit: Customer and Business Services (CBS).

The new business unit brings together our customer service functions currently residing within Financial and Distribution Services (FDS), including our Global Delivery Center (GDC) and Customer Service Center. Direct sales activities, account management capability, our Strategic Partnerships program and our Events oversight will also move over to CBS.

ILLUSTRATION: SAM KERR

Evolution not revolution

This will build stronger relationships with our customers and give us the capability to better understand and serve them.

Bringing our customer and business service activities under the same roof in an integrated customer-centric business unit will also align our products and services with the overall strategy.

The creation of the Financial, Distribution and Data Services airlines.iata.org

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division reflects our alignment of IATA Business Intelligence Services oversight with existing FDS Travel Intelligence Services. In doing so, we are recognizing the vital and growing role of aviation industry data and leveraging its business value throughout the entire value chain to more effectively support our digital transformation strategic priority.

This will enable IATA to focus on product differentiation, efficient airline processes, and the aforementioned digital transformation. These priorities are supported by industry initiatives including New Distribution Capability (NDC), ONE Order, and Dynamic Offers.

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Hard work pays off

Industry Payment Services is another important element.

Payment costs represent a significant and rising share of airline expenses that need to be addressed.

Programs, such as IATA Pay, which aims to provide a lower-cost and more secure alternative for customer payment on the airline website, is one example of how we can support the industry in reining in costs using efficient airline processes and digital transformation.

Another initiative is to give airlines greater visibility into their payment costs in the third-party channel—Transparency in Payments (TIP) is doing that.

I’m excited about these developments and believe that the changes will ensure that IATA remains true to our vision of working together to shape the future growth of a safe, secure, and sustainable air transport industry that connects and enriches our world.

2020 – 01 Airlines

03/03/2020 16:59

Ground handling

Reach for the stars Ground handling companies must reverse staffing trends, going from high staff turnover rates to attracting, developing, and retaining the best talent available WORDS: GRAHAM NEWTON

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T

IMAGES: ISTOCK

urnover rates are as high as 50% in ground handling, making it tough to run a successful, sustainable business. Low pay, heavy lifting, hard schedules, and outside work in adverse weather are all cited as being part of the problem.

Overcoming these challenges and providing airlines with the safe, efficient service they require will take considerable effort. Ground handlers must recruit effectively, train intelligently, and, ultimately, retain staff for longer. Becoming a talent management-focused organization and embracing digital transformation is the name of the game. Perks, improved rostering, improved facilities, and leadership training are all on ground handlers’ to-do list.

Some companies have even determined to expose candidates to the realities of the job at an early stage by interviewing late at night.

After all, shift work is part and parcel of ground operations. Most importantly, rather than have employees, ground handlers must move to offer careers. Progression throughout the working life has become increasingly important to millennial and Gen Z applicants.

In effect, all employees must have the opportunity to become the future CEO and be seen as assets to be developed. This begins with technical training and obtaining the necessary qualifications but also includes leadership and management courses.

Attracting staff

Work to attract staff needs to start immediately.

The IATA Aviation Ground Handling Report

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2019 estimates that 83,000 extra ground staff will be required in the next three years to meet airline operational requirements.

“Recruitment is an important issue in aviation and ground handling is no exception,” says Ivica Kovacic, Head, Global Partnerships and Innovation, IATA Training. “It is a vital area of operations that needs to attract and keep the best possible talent.”

It won’t be easy; global unemployment is at its lowest level for decades, turnover is high, and ground handling has a low profile within the industry, never mind the global job pool.

Moreover, education is improving globally, and labor-intensive roles are becoming less appealing.

Nevertheless, industry growth will continue to generate jobs even as technology advances.

A recent study of ground handlers by IATA revealed that technology will never completely replace the need for human resources.

Digital training

Of course, technology will be important. To begin with, it could ease the recruitment process and lead to the best available candidates. “At a basic level, video calls can reduce costs while allowing companies to spread their recruitment catchment area,” says Kovacic. “More advanced is gamification, immediately understandable to younger generations while also supporting the easy identification of desirable traits.”

Once recruited, technologies such as virtual reality (VR) will also have an important role to play in ground ops staff training. Digital training is more immersive and alluring to millennials

83,000

Ground handling

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83,000 extra ground handling staff will be needed by 2022

2020 – 01 Airlines

03/03/2020 17:00

Ground handling

and Gen Z than traditional classroom courses and has the added benefit of being less costly while providing real-life scenarios in a safe environment. VR allows trainees to experience and walk around the ramp, for example, giving them hands-on understanding without risk.

Moreover, using technology to train new ground handling recruits whenever and wherever possible might mean nobody needs to be taken out of the front line, improving organizational and operational efficiency. And if new recruits learn digitally, they can learn at their own speed, increasing the likelihood of improving their effectiveness and retaining them into the future.

“The shortage of pilots and engineers has been well-documented,” concludes Kovacic.

“But aviation demand requires staff in every aspect of the industry. Ground operations is perceived as hard work for low pay in tough conditions and this makes recruiting staff especially difficult. But with the right strategy the challenge can be overcome.”

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Classroom-based training in ground operations is expected to decline in importance as use of online, app-based training and programs with simulators and virtual reality increase.

In-person training will drop from 69% to 46% E-learning will rise from 21% to 28% Blended learning will rise from 10% to 26%

Standards training… best practice Airlines must play their part in assisting ground handlers to meet demand by standardizing training. In reality, airlines have few common practices even on the same aircraft type, and so training takes longer than necessary.

“We need to make ground operations training more efficient and standardized across the board, so operations are safer for our people as well as economically feasible for handling companies,” says Joseph Suidan, IATA’s Head of Ground Operations. “Efficient training will increase safety and can also really improve the job satisfaction of ground handlers, resulting in higher retention.”

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Recruitment and retention issues are exacerbated by the constant need to train new and existing recruits to provide safe and efficient ground operations.

On average, it takes new recruits four weeks to complete mandatory airport training.

Taking into account such other training requirements as different aircraft types and equipment, there is clearly considerable cost and time involved that the high turnover rate can scarcely justify.

A large ground handler can take on 20,000 new employees per year, largely to replace leavers. It can take up to six months training for a new employee to reach full

productivity as most have no experience of aviation. But in that time, many move on. The cost of training is in excess of $50 million, almost half of which is for training that occurs in the first two weeks of employment. Factor in wages, and this can bring the total nearer $200 million.

To further support the industry, IATA has developed a ground operations training program for frontline personnel that creates an opportunity to reduce costs in airline- specific training, Suidan says.

Chapter 11 of the Airport Handling Manual—on which the training is based—will become a requirement in the

Standard Ground Handling Agreement (SGHA) in 2023.

Suidan states that one of IATA’s key ground operations objectives for 2020 is to enhance training content and support members with its implementation.

“The safety of employees ensured by standardized ground handling processes is a priority for all ground handlers,” concludes Claire Hall, Menzies’ Global Executive Vice President of People. “We need to find better ways to retain these employees as well as to provide new recruits with the appropriate training so we as an industry can better meet increase demand.”

airlines.iata.org

03/03/2020 17:00

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03.02.2020 09:35:12 18/02/2020 10:35

Cargo

Lightening the load A new audit programme promises to raise the bar for global cargo handling operations WORDS: GRAHAM NEWTON

C 38

71tn

Airlines will carry over 50 million metric tons of goods worth more than $7.1 trillion in 2020 Airlines 2020 – 01

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argo handling audits have long been a key part of the sector, allowing airlines to ensure their carg0—a substantial bottom line contributor—is handled correctly.

But, like much else in cargo, the process has grown organically and become unnecessarily complex, costly, and lengthy and as a result. So much so that it is estimated 360,000 days per year are wasted annually on redundant cargo handling audits.

“That’s a lot of time and money,” says Glyn Hughes, IATA Global Head of Cargo. “And in the current global economic climate, it is money that air cargo carriers can ill afford to lose.”

To alleviate at least some of this burden, IATA has devised the Smart Facility Operational Capacity (SFOC) program. The aim is a 50% reduction in redundant audits and an improvement in cargo handling safety and quality levels.

“SFOC will remove the need to validate generic cargo operation procedures and reduce audit complexity and duplication for cargo handling facilities.,” says Hughes.

Certified facilities

The new IATA initiative has two components; a standardized global audit program and a commitment to reduce the number of separate audits. The first component will result in the Smart Facility Operational Capacity Audit Certification (SFOC Audit Certification) to provide airlines with the assurance that SFOC

Certified facilities are adhering to IATA's Resolutions and Recommended Practices in cargo handling and with IATA’s Cargo Handling Manual (ICHM).

Airlines participating in the SFOC program will undertake a gap analysis to determine which audit standards will not need to be assessed for SFOC certified facilities. The revised audit scope is then defined through the second component, the audit reduction commitment (ARC).

In other words, airlines will provide clear visibility on the potential audit reduction for SFOC certified facilities, ensuring there is a solid mechanism to eliminate redundant audits.

“Auditing is critical to ensure the global standards that underpin the safe and efficient operations in the aviation industry,” says Hughes. “IATA’s strong capabilities in auditing have been proven in the successful IATA Operational Safety Audit (IOSA) and CEIV programs. The SFOC program will bring this expertise to general cargo handling operations.”

Industry collaboration

As is typical of such initiatives, the buy-in of relevant stakeholders has been essential from the start to guarantee that all benefit.

The SFOC program has been launched in conjunction with Singapore Airlines and SATS Ltd, the local handler in Singapore. SATS now operates the first cargo handling facility to receive the new SFOC Audit Certification and Singapore Airlines is the first airline to airlines.iata.org

03/03/2020 17:00

Cargo

$2 bn Every day, airlines carry goods valued at close to $20 billion

Cargo Facility of the Future Alongside the SFOC program, IATA has an established initiative to develop the cargo facilities of the future. Technology upgrades mean the concept will be in a constant state of evolution but a safe, secure, sustainable and automated warehouse would make for an easier audit process.

It envisages automated high-rack warehouses, green vehicles navigating throughout the facility, and employees using artificial intelligence (AI) and augmented reality (AR) to be more efficient.

Providing a fit for purpose—in size and location—facility for users is key.

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IATA’s white paper on the subject lists six technologies set to revolutionize air cargo facilities:

join the SFOC program by signing the ARC. Singapore Airlines worked closely with IATA to refine the audit and certification process and Chin Yau Seng, Senior Vice President Cargo, Singapore Airlines, says this has enabled an even greater emphasis on safety and security.

“The combination of both the SFOC audits and our own audits serves to provide a comprehensive picture of our service partners’ capabilities and operational quality while improving audit efficiency for us and our service partners,” he says.

Yacoob Piperdi, CEO, SATS Gateway Services, says: “The certification affirms SATS’ airlines.iata.org

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consistent standards and the quality of our service. We hope other airlines will follow this example to realise the SFOC programme’s full audit efficiencies for the entire industry.

The main objective for 2020 will be to facilitate the expansion of airline endorsements of the SFOC program. “We anticipate many airlines conducting their individual gap analyses and signing the ARC this year,” IATA’s Hughes concludes. “This is a crucial step for the program’s adoption across cargo handling operators and achieving our stated audit reduction goal for the entire industry.”

Green, sustainable, buildings Big Data leading to predictive AI systems Drones and autonomous vehicles Internet of Things for connected cargo and devices Robotics and automated systems Augmented reality and wearables Already, a study on augmented reality has been completed. This has shown that special wearable glasses helps with processing speed, error reduction and user satisfaction—perhaps not surprising given that there are estimated to be over 3,000 rules and checks required before a carrier can accept a shipment.

2020 – 01 Airlines

03/03/2020 17:01

Advertising Feature: Biometric Services with NEC

Dr. Atsushi Iwata, Vice President of NEC’s Safer City Solutions Division

Shaping the airport of the future

Biometric services can play a key role in creating a better end-user experience for air passengers and help airports achieve digital transformation

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Global air passenger traffic continues to soar to record levels, increasing by over 6% in 2018 to reach a total number of air passengers of 4.3 billion, according to the International Civil Aviation Organization (ICAO).

The ICAO also reported that 1.3 billion passengers traveled on Low Cost Carriers (LCCs), which now comprise 31% of the global total. The continued growth of air passenger traffic has put considerable strain on airport infrastructure, and some of the world’s leading airports are increasingly turning to new technologies to help them manage growing passenger volumes while still delivering a high-quality customer experience.

In a recent interview, Dr. Atsushi Iwata, Vice President of Public Safety for NEC’s Safer City Solutions Division, explained how biometric services can play a key role in enabling airports to better manage increasing passenger volumes, improve security and enhance the end-user experience for air passengers. He also described the key role that NEC has played in assisting airports to achieve these goals.

The interview opened with Dr. Iwata highlighting Tokyo’s Narita International Airport as an industry-leading example of how an airport can leverage face recognition technology to improve its operations.

“Passenger traffic at Narita has been steadily increasing for years, starting with the arrival

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of several LCCs and hence millions of new international passengers,” he said, referring to the massive growth in international tourists to Japan. In fact, according to the Japan National Tourism Organization, over 31.2 million tourists visited the country in 2018 compared with just over 10 million visitors five years earlier. This growth has proved a challenge for all tourist infrastructure in Japan, including airports.

Dr. Iwata pointed out that 40 million overseas passengers will visit Japan in 2020 alone, and said: “Narita recently decided to implement the new ‘One ID’ check-in to boarding process, which uses our NeoFace biometric face recognition technology, to sustain future growth. Once deployed, the system will allow passengers who opt in to register face recognition data to proceed with baggage drop off, passenger security and screening and flight boarding without the need to repeatedly show a passport.” The new service will launch in the spring of 2020 and will be one of the first in Japan.

Implementing the ‘One ID’ system will not only create a better user experience for air passengers, but also has the potential to offer other benefits to Narita Airport. Face recognition technology can reduce human error when checking passports and improve overall airport security. For example, the United States Customs and Border Protection (CBP) agency uses NEC’s face

recognition technology to verify passenger identities. Only three days after the system was deployed in Washington D.C.’s Dulles International Airport the system was able to determine that a passenger was traveling on a fraudulent passport.

Dr. Iwata noted that security is a top priority for Narita Airport, revealing that they chose NEC because it is number one in biometric technology as evidenced by its ongoing partnership with the CBP. Reducing the number of passport checks required per passenger can also reduce the amount of human labor required to process passengers, and so ease staffing needs. This is especially important in countries like Japan, which is facing a severe labor shortage.

The growth in air passenger traffic in Japan is also encouraging government agencies within airports to adopt face recognition technology. The Japan Customs has implemented electronic customs procedure systems equipped with NEC’s face

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03/03/2020 17:01

Advertising Feature: Biometric Services with NEC

recognition technology to realize smooth, yet rigorous, customs clearance for all foreign visitors and travelers entering Japan.

They aim to expedite and raise the efficiency of the customs clearance process by reducing the amount of questions and inspection time. Japan Customs announced that these electronic customs procedure systems have been operational at Narita Airport Terminal 3 as of April 2019, and will be operational at six major international airports in Japan from the spring of 2020.

“We are also starting to see signs of cooperation across international borders as well,” Dr. Iwata added. He mentioned the recent World Economic Forum’s Known Traveler Digital Identity program, which is an initiative with the goal to allow passengers to travel internationally without the need for a passport. A pilot project is underway between Toronto Pearson International Airport and Amsterdam Airport Schiphol that will allow travelers to travel between

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Canada and Holland using a mobile phone instead of a passport. If users consent, passenger data is shared among the airlines and immigration authorities in both locations to create an interoperable digital identity for each passenger. Dr. Iwata believes that biometric services, such as face recognition technology, are very well positioned to play a key role in such initiatives, which will “redefine the travel user experience”.

The results of the 2019 IATA Global Passenger Survey show that passengers are looking to technology to improve their travel experience. Facilitating a seamless journey remained one of the top passenger priorities, with nearly half (46%) of respondents favoring biometric identification as a replacement for the passport.

The survey found that 70% of passengers are willing to share additional personal information including their biometric identifiers to speed up processes at the airport.

This increases in correlation with the number

of flights taken per year. The highest support for this (76%) is among fliers who travel for business, more than 10 times per year.

In addition, 46% of passengers would prefer to use biometric identification instead of a paper passport for their journey and 30% would opt to use a biometric token to board the plane.

Dr Iwata added: “In the coming years, retailers and off-airport companies, such as hotels, could also use such a platform and essentially make passport checks obsolete.”

Explaining why he believes NEC is very well positioned to capture this growing opportunity, he concluded: “Although NEC is a newcomer to providing end-to-end services to airports, we have strong face recognition technology and have been able to forge solid partnerships to deliver new airport solutions. We have been in the airport technology business for many years, selling our air traffic control systems and flight information display system (FIDS), and look forward to constantly increasing and improving our portfolio of airport technology solutions.”

Dr. Iwata summarized the interview by stating: “We are really only at the very beginning of redefining the future of the airport using biometric services. Going forward more airports, airlines and government agencies will have the option to use one secure and interoperable platform to create a more efficient and more comfortable user experience.”

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For more information, please visit nec.com/aviation

2020 – 01 Airlines

03/03/2020 17:01

60 seconds with...

Lance Gokongwei CEO, Cebu Pacific

“We want to be attuned to our customers—to improve their experience” How has the LCC sector evolved in Asia-Pacific?

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While the LCC business model came later in the region, it has emerged as one of the fastest-growing markets in the world.

This was propelled by a combination of government deregulation, economic growth, increased purchasing power, and consumer demand. These factors helped Cebu Pacific grow over the past 23 years.

Why was the time right to join IATA?

Joining IATA will enable us to learn and share operational experience and best practices with other carriers. Because the aviation industry is growing, and with it the preferences and expectations of customers are changing. This will allow us to adapt new technologies and processes to further enhance customer experience and benefit consumers.

How important is technology to the customer experience?

We live in an increasingly digital world, with a greater number of our population now being digital natives. Increasingly, the customers are in the digital space, and for our business to thrive, we should be able to harness the power of technology to reach out to them—not only to market to them better, but more importantly, to address their needs and pick up on what we ought to do better. Technology enables us to turn our visions into reality, and to scale quickly in a fast-paced environment.

What does the airline hope to achieve in 2020 and beyond?

In 2020, we hope to fly our 200 millionth passenger since Cebu Pacific commenced operation in 1996. Our mission is to enable everyone from all walks to life to have accesible and affordable air travel. Sustainability is also at the core of what we hope to Airlines 2020 – 01

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In brief… Cebu Pacific As a low-cost carrier in the Philippines, the airline operates more than 100 routes across 15 countries Operating out of seven strategic hubs within the Philippines, Cebu Pacific has a 75-strong fleet of Airbus and ATR aircraft Founded in 1988, Cebu Pacific is the oldest low-cost carrier in Asia

62 15

destinations across

countries

achieve at Cebu Pacific. We want to drive greater efficiency and reduce our carbon footprint by first and foremost investing in aircraft and aviation technology that will help us reduce our fuel burn. In this regard, we are investing in new aircraft, so that by 2024, Cebu Pacific will have an all-new fleet of nextgeneration Airbus jets. More importantly, we want to be more attuned to the needs of our customers—to improve their experience flying with us. We will do this through investment in facilities, and technology that boosts our efficiency and supports customer service.

Why are you focusing on the China network?

China remains one of the top markets for inbound tourism for the Philippines and is one of the state’s key trade partners.

It is the largest outbound travel market in the world. With the accelerated development of transportation infrastructure on both ends, there is an expectation of an increased propensity to travel. Cebu Pacific will capitalize on these developments to continue to offer a safe, reliable and affordable air service. airlines.iata.org

03/03/2020 17:02

IMPROVE THE HEALTH & WELLBEING OF YOUR SKY HEROES INCREASE YOUR EFFICIENCY

The future of uniform management solutions is here As IATA’s only strategic partner in the development of aviation uniform solutions, Skypro cares for the wellbeing of crew with its unique SkyHealth Technology.

Meanwhile our breakthrough software innovation, mySkypro Portal, increases airline productivity in uniform forecasting, management and reporting.

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IATA.FEB20.043.indd 43

18/02/2020 10:49

THE 777X TAKES TO THE SKIES

The world’s largest and most efficient twin-engine jet took its first flight, a major milestone for Boeing’s 777X built on years of development, testing and rigor. With technological advances that allow it to fly farther with less fuel and emissions, the 777X will fly passengers more comfortably and efficiently than ever before. Keeping safety at the core of everything we do, we’re building the future of flight together.

boeing.com/777X #777X

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18/02/2020 10:50