Airlines International Dec 13_Jan 14

AIRLINES INTERNATIONAL DEC-JAN 2013-2014 - ISSUE 47

INTERNATIONAL ISSUE 47 DEC-JAN 2013-2014

SPECIAL ISSUE

CELEBRATING 100 YEARS OF SCHEDULED COMMERCIAL AVIATION

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Airlines International

CONTENTS COMMENT

SPECIAL REPORT

36

6 Tony Tyler Celebrating 100 years of scheduled commercial aviation

36 Safety in numbers It has never been safer to travel and there is no safer mode of transportation than air transport

100 YEARS

FEATURES

8 A century of scheduled commercial aviation milestones and benefits in pictures

48 Passenger Experience Personalization will help defi ne a sustainable future, says Martin Rivers

AGENDA 16 Industry and IATA update Climate change, ICAO Assembly, financial forecast, re-energizing cargo, security, NDC

52 Airports Collaboration is the name of the game for airlines and airports if infrastructure is to develop in a cost-effective manner

CEO INTERVIEWS 22 Air France-KLM Alexandre de Juniac, Chairman and CEO Air France-KLM talks consolidation and European regulation

SUPPLEMENT

5

57 Views on a sustainable future from aviation suppliers 48

52

DATA

30 Aer Lingus Christoph Mueller, CEO, believes airlines and regulators must be fair and transparent

76 The latest traffic data and 100 years of industry figures

40 Vietnam Airlines President and CEO, Pham Ngoc Minh, explains the rationale behind the airline’s strategy

78 Dr Assad Kotaite, President Emeritus of the Council of ICAO Council, celebrates 100 years of commercial aviation

SOAPBOX

IATA Corporate Communications Director Anthony Concil Creative direction Richard McCausland www.iata.org

Advertising Business development manager Nigel Collard +44 (0)20 324 2763 nigel.collard@redactive.co.uk

Editorial Editor Graham Newton Senior designer David Twardawa Senior picture researcher Claire Echavarry

We welcome feedback, content ideas and distribution requests at airlinesint@iata.org

Production Deputy production manager Kieran Tobin +44 (0)20 7880 6240 kieran.tobin@redactive.co.uk

Follow IATA on Twitter @IATA and join our LinkedIn group

Publishing director Aaron Nicholls

Published by Redactive Media Group, 17 Britton Street, London EC1M 5TP, UK +44 (0)20 7880 6200 www.redactive.co.uk

Printed by Pensord Press Ltd Airlines international 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.

The paper in this magazine is elemental chlorine free (ECF), manufactured within ISO14001 environmental management standards and is sourced from sustainable managed forests.

Airlines International is available free for iPad and Android devices Download from the Apple and Google Play stores DEC-JAN 20 2013-2014

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Comment • Tony Tyler • Director General and CEO, IATA

“With the growth of commercial aviation, our world has become much smaller and our future has grown much bigger”

A CENTURY OF CONNECTIVITY

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n 1 January 1914 the airline industry was born.

A visionary entrepreneur named Percival Fansler brought together investors, a pilot and an aircraft. And Abram C. Pheil paid $400 to cross from St. Petersburg to Tampa, Florida in just over 20 minutes.

Over the next 100 years, commercial aviation transformed the world in ways in which those early pioneers barely could have imagined. The fi rst century of commercial fl ight has given people freedom to push back boundaries, embark on adventures and satisfy their curiosity about the world.

Today we take for granted the ability to use that freedom to connect safely across enormous distances with friends and family, link together businesses and markets, knit together ideas and concepts, grow friendships and transport goods. Even as the Internet grew virtual connectivity, the demand for people to travel and meet only increased. In 2014 we will fly double the 1.6 billion people who traveled in 2000.

Change is at the heart of the story of commercial aviation’s fi rst hundred years. Markets were opened for entrepreneurs to bring their products and ideas to the world. People came together to solve problems. Crosscultural understanding flourished as people explored the world for business, adventure or learning.

Today it would be hard to fi nd any business that is not in some way touched by commercial aviation. Over a third of the goods traded internationally are delivered by air.

Over $2.2 trillion of economic activity is supported by air transport. And air cargo supply chains are integrated

into businesses ranging from your local florist, grocer, pharmacist or jewelry shop to those that manufacture your phone, TV or automobile.

With the growth of commercial aviation, our world has become much smaller and our future has grown much bigger.

Every day an amazing feat of coordination and cooperation is repeated tens of thousands of times to make it all happen. It involves some nine million people who work directly in the industry. The dedication and commitment of airport workers, pilots, cabin crew, engineers, dispatchers, baggage handlers, security staff, air traffic controllers, office workers and many others keeps our world connected.

As an industry, the celebration of our fi rst 100 years provides a great opportunity to share the enormous contribution aviation makes to all of our lives. Everybody who fl ies has a stake in aviation. Without a doubt, among the billions of passengers who will crisscross the globe next year will be politicians, business people, regulators, artists, adventurers, students, future leaders, and of course, families.

Over the next twelve months, IATA will engage in a global conversation rooted in the enormous changes since that fi rst passenger boarded a plane one hundred years ago, and focused on making the next century even more momentous. I invite you to join. •

AIRLINES INTERNATIONAL

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100 years of commercial aviation

years of commercial aviation Scheduled commercial aviation is celebrating 100 years of economic, social, and cultural benefits

1922

1914

The first scheduled commercial airline flight – St Petersburg-Tampa Air Boat Line. Tony Jannus piloted the Benoist flying boat with Abram C. Pheil, the former Mayor of St Petersburg, as his only passenger. It is reported that Phiel was able to place a hefty order for his wholesale business before taking the return flight about an hour later.

1919 The first KLM flight. The oldest carrier in the world still operating under its original name. It started operating scheduled flights between London and Amsterdam in 1920, a service that continues to this day. In its first year, KLM transported 345 passengers and around 25,000kg of mail and cargo, which is approximately the load carried by a single 747 flight today.

1923

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General Pedro Nel Ospina, then President of Colombia, used a SCADTA (later to become Avianca) aircraft to conduct official business for the first time. The geography of Latin America has made air transport vital to connectivity.

The Warsaw Convention was signed on 12 October 1929, coming into effect four years later. It mandated the passenger ticket and baggage check and helped to harmonize liability law, establishing the global nature of air travel.

AIRLINES INTERNATIONAL

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1935

The first Transpacific Clipper flight (between San Francisco and Manila) operated by Pan American World Airways. It took a week for the China Clipper to arrive in Manila via stops in Honolulu, Midway Island, Wake Island, and Guam, ultimately delivering more than 100,000 pieces of mail. It was meant to fly over the San Francisco-Oakland Bay Bridge (then under construction) but the pilot realized the plane wouldn’t make it and managed to fly underneath the bridge instead.

1939 9

1936 The Douglas DC-3, the “plane that changed the world”, enters service with American Airlines. It could fly New York-Chicago non-stop and was still being used into the 21st century.

It cost around $100,000 to buy in the 1930s and these versions still fetch a similar price today.

The first airport lounge, the American Airlines Admiral Club, opens at LaGuardia Airport, New York. Lounges have become synonymous with airlines offering their customers the opportunity for greater productivity, comfort, and convenience during their journey.

1944

The Chicago Convention.

There were 52 signatory states to the original Convention. It established ICAO and set up rules regarding aircraft, airspace, and safety that continue to serve the industry and its customers today.

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100 years of commercial aviation

IATA was founded in Havana, Cuba in 1945 and now represents some 240 airlines or 84% of scheduled traffic. It represents, leads, and serves the industry through such initiatives as the IATA Operational Safety Audit and Simplifying the Business. Its financial services form the backbone of the airline industry.

1945

The first Springbok Service by South African Airways, connecting South Africa with Europe. The journey took three days but this was still considerably quicker than other modes of transportation. Such was the demand for a quick connection between Africa and Europe that the service went from weekly to six times a week.

3 DAYS

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1947

Qantas flies the first Kangaroo route. The fare was equivalent to about two years annual salary for the average Australian while today it would cost about a week’s wages, an indication of the real cost reductions that have taken place in the industry.

1952 The first production commercial jetliner, the de Havilland Comet, enters service with BOAC. The Comet suffered from safety issues, however, and although later models proved successful, BOAC stopped flying the aircraft in 1965. The Comet’s last commercial flight was in 1981.

AIRLINES INTERNATIONAL

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1959

1961

The year is not in doubt but exactly where the first jet bridge was used is open to debate. One version has a frantic effort by Delta Air Lines to have a jet bridge ready in time for the arrival of its first DC-8 at Atlanta.

Whatever the truth, the jet bridge has proved an enormous success and was an early marker on the road to greater passenger convenience.

David Flexer of Inflight Motion Pictures developed the 16mm film system for a wide variety of commercial aircraft. TWA was the first carrier to use Flexer’s innovation while Pakistan International was the first nonUS carrier to show a regularly scheduled in-flight movie.

Passenger services haven’t looked back since, even if the advent of personal devices and content has changed the landscape somewhat.

1964

The Beatles arriving at JFK. A sure sign of aviation’s ability to integrate and spread cultural values, about 4,000 UK fans saw The Beatles off at Heathrow while a similar number welcomed the arrival of Pan Am 101 at New York’s JFK Airport. The following day, the group appeared on The Ed Sullivan Show, watched by some 73 million viewers.

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1970 The Boeing 747, the first widebody aircraft, enters service. Boeing famously “bet the company” on delivering the 747. It entered service in January 1970 on Pan Am’s New York-London service and its latest variant, the 747-8 came online in 2012.

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100 years of commercial aviation

1971

1972

Southwest Airlines launches service. Southwest is recognized as a pioneer of low cost travel.

Since its inauguration, LCCs have transformed the aviation landscape, bringing a number of innovations to the market and forcing legacy carriers to become more competitive to the ultimate benefit of the consumer.

First neutral paper ticket and the establishment of the Billings and Settlement Plan (BSP). The BSP is a crucial initiative that ensures airlines get any monies owed as promptly and as accurately as possible. In 2012, 88 BSPs served 350 airlines in 177 countries and territories. The total amount processed was $252 billion.

Start of the Treasures of Tutankhamun tour.

Annually, aviation carries goods worth $6.4 trillion.

Shipments range from the everyday to the unusual.

The treasures of Tutankhamun first traveled in 1961 but the tour that began in 1972 is regarded as the most famous. It visited Europe, Russia, and the United States, drawing crowds that, in terms of numbers, many museums have never bettered.

1976 Concorde flew for first time on scheduled service – London-Bahrain and then Paris-Rio de Janeiro. The supersonic jet remained in service for 27 years. The aircraft had to be painted predominantly in a white reflective paint due to the heat build-up caused by the aircraft’s high speeds.

AIRLINES INTERNATIONAL

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1978

US Airline Deregulation Act. This phased out government control of fares, routes and market entry by new airlines, exposing US carriers to market forces and beginning the long road to the full, global liberalization of the industry. The beneficial effects can be seen in the price of a New York-Los Angeles roundtrip that would have cost near $1,500 before deregulation and today costs around $300.

1981

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1989

Start of American Airlines AAdvantage. Bob Crandall was the driving force behind AAdvantage, recognized as the industry’s first true frequent flyer program (FFP), even though Texas International Airlines had launched a loyalty scheme a couple of years earlier.

AAdvantage clearly blazed a trail and remains among the largest FFPs with around 67 million members. The data involved in FFPs is the basis for greater personalization.

KLM-Northwest Airlines Wings Alliance. The first major alliance never grew beyond the two airlines but it proved both the advantages of consolidation to the consumer and the challenges that had to be overcome. True cross-border mergers remain an industry aim but are not possible in the current regulatory environment.

1990

Air India, in association with Indian Airlines and the Indian Air Force, is in the Guinness Book of World Records for “the largest evacuation effort by a single civilian airline.� It flew 111,000 people from Amman to Mumbai in 59 days, operating 488 flights just before the First Gulf War. DEC-JAN 2013-2014

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1997

Five airlines from three continents founded the Star Alliance. Two other global airline alliances, oneworld and SkyTeam, followed soon after, bringing a multitude of benefits to customers and replicating as much as possible the economies of scale brought about by consolidation.

1999

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16 H

PHOTOGRAPHY: GETTY, CORBIS, REX, ALAMY, REUTERS, PA, AMERICAN AIRLINES, JOHAN KNIJN

100 years of commercial aviation

1998

Montreal Convention 1999. This amended important provisions in the Warsaw Convention. Of note is the enablement of e-freight, potentially reducing the costly cargo processes for both airlines and shippers. The 2013 target was to grow e-freight coverage to 45% of global trade lanes.

First Transpolar flight by Cathay Pacific.

Dubbed Polar One, the flight crosses the northern polar region and connects New York with Hong Kong in about 16 hours.

Improving the connection between the United States and Asia serves the continuing growth in demand for air travel between these two regions and is a key element in aviation’s support of the global economy.

2004

Aid flights for Indian Ocean Tsunami. Aviation’s speed and reliability can be critical during humanitarian emergencies. Examples of airlines providing flights to affected areas are numerous and include not only the 2004 tsunami but also the Haiti earthquake in 2010 and the East African famine of 2011.

AIRLINES INTERNATIONAL

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2008

100% electronic ticketing. A key enabler of the various Fast Travel projects that have followed, electronic ticketing finally rid the passenger of the need for a paper ticket, improving the convenience and reliability of air travel.

2004

Singapore Airlines introduces non-stop flights to Los Angeles and Newark, New York. These were the longest scheduled commercial flights capabie of modern aircraft and were driven by the need to connect people and business in world leading cities.

2009

Safety is the number one priority for the industry.

All IATA members are IOSAregistered and many other airlines and governments have also seen the wisdom in this global standard.

Enhanced IOSA is now being rolled out and will become mandatory in late 2015.

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2011 The first commercial biofuel flight. The Lufthansa service between Hamburg and Frankfurt was the first of many passenger-carrying biofuel flights.

A number of biofuel variations have been successfully tested. The challenge now is to ensure biofuels’ commercial viability to help airlines achieve their stated environmental goals.

2014

Airbus A350 due to enter service.

Qatar Airways is the launch customer of the Airbus A350. The aircraft is a century away from the bi-plane used by Tony Jannus and represents yet another leap forward in customer comfort and operational and environmental efficiency.

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Agenda • Environment • NDC • Security

Upcoming events...

AGENDA

Legal Symposium 23-25 February San Francisco, United States

World Cargo Symposium 11-13 March Los Angeles, United States

Empowering aviation to deliver greater value

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IATA has urged the United States administration to re-commit to airline deregulation and the free market. This would allow aviation to continue to deliver the benefits of global connectivity that make possible $2.2 trillion worth of economic activity.

“Airlines are the transit system for the global economy; and they have transformed commerce every bit as thoroughly as the automobile transformed America,” said Tony Tyler, IATA DG and CEO, at the Wings Club in New York. “But our ability to meet the growing demand for connectivity is at risk. Our biggest challenge comes from governments that are engaging in what I would broadly describe as regulatory backtracking.”

The US Department of Transportation is threatening to mandate how and where airline ancillary products are displayed. But the market is already moving to give consumers a more transparent air travel shopping experience through the New Distribution Capability (NDC). “NDC is about bringing the same level of capability to display and sell additional products and services through the travel agent channel that already exists on airline websites,” said Tyler. “The NDC standard will enable much richer comparison shopping for travel products, not just the base fare, but the entire spectrum of offerings.”

Meanwhile, the US Department of Justice (DOJ) announced it would sue to prevent the merger of American Airlines and US

ICAO’s Kobeh retires

The air transport community came together in late November to honor the outgoing President of the ICAO Council, Roberto Kobeh González.

Kobeh enjoyed a long and distinguished career in civil aviation during which he made a significant contribution to the sustainable development of aviation. His departure was marked by a special luncheon, jointly hosted by the three Director Generals of ACI, CANSO, and

IATA. The lunch was also attended by President-elect, Dr. Olumuyiwa Benard Aliu.

“No matter what the issue, I knew that we could count on Roberto’s natural inclination for collaboration as the cornerstone on which to build solutions,” said Tony Tyler, IATA Director General and CEO. “On behalf of the world’s airline community, I wish Roberto much happiness for a long, happy, and welldeserved retirement.” •

Airways, despite the fact that consolidation has resulted in a healthier, more profitable industry that has allowed airlines to invest in their products and services.

“This is a global issue, but it is particularly distressing to fi nd that the United States, where this industry was born and which led the world in liberalizing domestic and international air transport, seems to be moving forward into the past,” said Tyler. “Apparently policy makers in Washington no longer trust the invisible hand of the marketplace to maintain a vibrant, competitive industry—despite overwhelming evidence that the market is working. The net result is not just bad for airlines, but for air travelers and the economy.” •

New ideas for StB IATA has released a third edition of the Simplifying the Business White Paper.

It provides a progress report on existing initiatives and identifies new ideas for potential industry transformation.

The new ideas are related to airline distribution and are inspired by the opportunities created by the New Distribution Capability (NDC) project.

Dynamic Product Engineering would develop a capability to offer real-time product to market in an NDC world. And the vision for Order to Cash is to have one single customer order for all purchased products and services. A Universal Customer Travel Data Exchange would support these ideas.

Customers could then be served at any time and any touch point of the journey.

“These ideas are not projects yet, but areas for exploration only,” said Stephan Copart, Head Strategy and StB, FDS Transformation. “IATA will engage with the involved stakeholders to further develop the ideas, assess their feasibility and evaluate the impact on the industry.” •

AIRLINES INTERNATIONAL

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www.iata.org/events Wings of Change 26-27 March Santiago, Chile

Ops Conference 31 March-02 April Bangkok, Thailand

Aviation and Environment Summit 29-30 April, Geneva, Switzerland

IGHC Ground Handling Conference 27-30 April Kuala Lumpur, Malaysia

IATA Annual General Meeting 01-03 June, Doha, Qatar

Highlights of the 38th ICAO Assembly Safety: The Assembly endorsed the Enhanced-IATA Operational Safety Audit. It also encouraged greater state participation in the ICAO managed global Airline Operator Certifi cate registry.

Security: The Assembly encouraged the use of ICAO global standards by immigration and border control agencies as well as the standardization of air cargo security regimes.

Regulation and Taxation:

Landmark agreement on climate change IATA welcomed the landmark agreement on Climate Change at the close of the 38th ICAO Assembly.

The agreement commits ICAO to developing a global market-based measure (MBM) that will be an essential enabler for the industry to achieve carbon-neutral growth from 2020 (CNG2020). A global MBM is one pillar of the industry’s four-pillar strategy on the environment, which also includes improvements in technology, operations and infrastructure.

The industry believes a global mandatory carbon offsetting scheme would be the most efficient and effective MBM. At its AGM in June 2013, IATA’s member airlines overwhelmingly passed a resolution asking governments to develop this type of scheme.

“Reaching agreement was not easy,” said Tony Tyler, IATA’s Director

General and CEO. The many states that took an active role in the discussions are fully aware of the many pressures to deviate from a global approach.

“Everybody—Europeans included— returned home with a sense of great accomplishment,” he added. “So it is no exaggeration to say that the European Commission’s proposal basically to ignore the work at ICAO and include the portion of international flights within European airspace in its emissions trading scheme from January 2014 was greeted with disbelief, shock and horror.

Governments will need to sort this out. And we call on them—particularly European governments—to keep the global and long-term view that underpinned the success at ICAO. The big prize is a global agreement to manage aviation’s emissions post-2020.” •

The Assembly urged the universal adoption of the Montreal Convention 1999 (MC99) and called for governments to align consumer protection regulations with MC99’s provisions. The IATA resolution on consumer protection regulation was noted by the Assembly. In addition, states were encouraged to avoid imposing discriminatory taxes on international aviation and double taxation.

The Assembly asked for cooperation among competition authorities regarding how alliances, mergers and joint ventures are viewed. And it asked ICAO to develop a multilateral agreement on foreign ownership and control.

Furthermore, it was agreed to convene a Diplomatic Conference to update the Tokyo Convention, which provides the international legal framework with respect to unruly passengers.

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Technology: The Assembly encouraged states to develop equipment standards based on capabilities and refrain from mandating the use of specific satellite navigation systems. Recognition of the capabilities of flight simulation training entities that operate under global guidance developed by ICAO and the industry was also encouraged. • DEC-JAN 2013-2014

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Agenda

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Speaking at the 22nd AVSEC World conference in Istanbul, Tony Tyler, IATA’s Director General and CEO, said security stands at a crossroads.

“Global passenger numbers will be approaching 4 billion per year by 2017 and the ageing systems and outdated procedures of the current security system will not be able to cope,” he said. “We need to change from prescriptive one-size-fitsall measures and embrace performancebased regulation if the economic benefits of aviation growth are not to be curtailed by security inefficiency.”

The importance of early collaboration between industry and government was highlighted. The move to risk-based security requires advance passenger information (API) to be collected by governments. Some 45 states already have API or Passenger Name Record (PNR) programs, with a similar number looking to implement such schemes.

It is essential, however, that these regimes be harmonized in line with ICAO regulations.

In addition, the cost of collecting and processing the data should be borne by governments and not the airlines.

The data being collected can be used more effectively. The use of registered traveler programs can be broadened as passengers are willing to share more data to smooth the security process.

GETTY

Security at a crossroads

“Governments and industry can work together to make better use of the data collected,” said Tyler. “A good example is the Checkpoint of the Future initiative, which aims to improve the security and convenience of passenger screening by moving to a risk-based approach and adopting advanced technology. The flying public is eager to see the Checkpoint of

Future deployed as quickly as possible.

Stakeholders are aligned behind a staged implementation that will see the fi rst versions in 2014. Subsequent stages will see us move from re-purposing equipment and using data more thoughtfully to the eventual deployment of new equipment in the fi nal stage, around 2020.” •

Re-energizing air cargo To improve air cargo’s competitiveness, IATA has called on all stakeholders in the air cargo value chain to work together toward the common goals of improved quality, increased efficiency through e-AWB and e-freight, and more effective security.

Air cargo is suffering from a prolonged slump that has seen falls in yields, revenues and market share. Since 2010, world trade has grown by 12% yet air cargo demand has stagnated with only 2% growth.

A divergent trend in passenger demand, with growth continuing in the historical 5%-6% range, has complicated the situation. It means airlines have introduced capacity to serve passengers but this has

resulted in considerable downward pressure on cargo yields. Cargo revenues in 2013 are expected to be $59 billion, some $8 billion below the 2011 peak.

“No business or business model survives over the long term without evolving,” said Tony Tyler, IATA’s Director General and CEO, speaking to the Air Freight Institute at the World Congress of the International Federation of Freight Forwarders Associations (FIATA), in Singapore. “Air cargo is being buffeted by forces for change. These include changes in the economics of just-in-time manufacturing, longer delivery lead times, innovation by alternative modes of transport, and

environmental pressures. In the face of these challenges, air cargo needs to work together as an industry to improve competitiveness and protect its value proposition.

“By working together we have made global air cargo safe, secure and reliable,” he added. “So reliable, that it is often taken for granted. It is the unsung hero of the global economy—underpinning global supply chains and delivering products to markets. But if we are to return the business to growth, the industry must collectively embrace an agenda for enhanced quality, efficiency, and security,” said Tyler. •

AIRLINES INTERNATIONAL

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New VP for Africa IATA announced the appointment of Raphael Kuuchi as the Association’s Vice President for Africa from 17 February 2014.

Kuuchi joins IATA from the African Airlines Association (AFRAA) where he was the Director of Commercial, Corporate and Industry Affairs. He will report to Hussein Dabbas, Regional Vice President for Africa and the Middle East and lead a team of some 23 professionals in IATA’s four sub-Saharan offices.

“I look forward to leading IATA in Africa at this important time in the development of the continent’s aviation sector,” said Kuuchi.

“Governments have committed to the Abuja Declaration with the ambitious but achievable goal of a world-class safety record by 2015. Supporting

this will be at the top of a very full agenda that includes working with governments to promote liberalization, develop infrastructure, and create a more business-friendly environment with an appropriate tax framework and effective regulation.

“There are many opportunities for IATA and global standards to play a critical role in Africa’s development,” he continued. “I look forward to working with partners across the continent to support the success of these initiatives. This includes very close cooperation with AFRAA.” Tony Tyler, IATA’s Director General and CEO, welcomed Kuuchi to the IATA team. “Africa is a continent of enormous potential for aviation,” he said. “It also faces many fundamental challenges—not least of which is improving safety across the continent. Success will require a team effort by governments and airlines with the support of IATA, AFRAA and many other partners.”

Kuuchi is a Ghanaian national who began his career at Ghana Airways in 1991. He succeeds Mike Higgins in the role, following Higgins’ reassignment as the Regional Head of Airport, Cargo and Passenger Services for Europe. •

NDC pilots underway Five New Distribution Capability (NDC) industry pilots are underway.

These include the following participants: • American Airlines, JR Technologies (JRT), US based consolidator • Air New Zealand, JR Technologies (JRT), US based consolidator • Travelsky, Hainan Airlines, CTBA • Travelsky, China Southern, Ctrip • Swiss International Air Lines, Datalex, PROS, HP

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The pilots are diverse geographically and in terms of content. Their scope covers general seat availability to more complex scenarios. Other areas such as the airline profi le building block and scalability/volume testing will also be covered. There will be a year-end review of the pilots and the fi ndings will be shared with industry partners. • www.iata.org/ndc

IATA people Yanik Hoyles Head, NDC Program What were the big talking points at the World Passenger Symposium in Dublin?

The WPS was a unique opportunity to have 700 representatives of the entire value chain together under one roof for three days.

We were able to give a clear message that was very much appreciated that New Distribution Capability (NDC) is a standard that is business model agnostic and channel agnostic. For the first time, we heard senior representatives from corporate buyers, airlines, travel management companies, and global distribution systems discuss the opportunities and barriers to adopting NDC live in a panel. The overriding message was that to improve the customer experience and help the industry achieve sustainable growth all the actors of the value chain must work together.

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How important is it to get all stakeholders involved in, and supportive of, NDC? NDC will be a success only if all stakeholders are aligned and buy in to the concept. NDC creates value and there is potential for all parties, including the customer. The distribution environment will modernize. If there is collaboration, it’s win-win. If there isn’t, there will still be modernization but it will not happen in a transparent way.

How will the pilot projects progress NDC? The aim of the pilots is to test and learn about the robustness of the standards. They will provide crucial information in the areas of cost, implementation, and process flows. • See NDC pilot project story opposite

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Agenda

Don’t take Gulf success for granted

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Speaking at the Annual General Meeting of the Arab Air Carriers Organization (AACO) in Doha, IATA Director General and CEO, Tony Tyler, said that the cooperation between government and industry in the Middle East was a clear example of best practice, but cautioned that the Gulf success story should not be taken for granted.

Capacity is being squeezed in airspace.

“The Gulf region is a hub for global connectivity,” said Tyler. “But, there is a huge amount of capacity in a relatively small area. That area is further limited by military airspace. In fact, only about half of the airspace across the region is open to civil aviation. Already we are seeing delays becoming commonplace.”

Tyler urged governments to continue to recognize the importance of civil aviation in their national development plans. And he called for that recognition to manifest itself in even greater cooperation across the Gulf so that infrastructure could be managed efficiently for everybody’s collective benefit. •

The Gulf region is a hub for global connectivity but only about half of the airspace across the region is open to civil aviation

IATA’s 100th Anniversary Campaign to promote aviation benefits Throughout 2014, IATA will run a campaign celebrating 100 years of scheduled, commercial air transport to help promote the benefits of aviation.

The campaign—which will run under the banner of “Small World, Big Future”— will be organized by the global communications consultancy, Ketchum.

The aim is to engage with a broad audience, ranging from Heads of State to the flying public. Aside from commemorating aviation’s historic achievement, the campaign will look to connect with the audience to discuss the challenges facing the industry. This discussion can then be fed back into industry action to ensure the next 100

years of commercial aviation are equally successful.

Other industry stakeholders are encouraged to join forces with IATA to reinforce the campaign’s message and aims. •

Reference guide for NFC In conjunction with the Near Field Communication (NFC) Forum, IATA has published an NFC Reference Guide for Air Travel.

The publication is the result of extensive collaboration between the NFC Forum’s Air Transport Task Force and IATA’s Fast Travel Working Group.

It seeks to help aviation better understand and evaluate the potential benefits and costs and implementation options associated with the adoption of NFC technology.

“The ultimate beneficiaries will be air travelers, who will enjoy faster boarding, easier baggage management, and other benefits through the use of NFC,” said Koichi Tagawa, Chairman of the NFC Forum. “IATA and the airlines who contributed are to be commended for developing this opportunity.” •

AIRLINES INTERNATIONAL

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05/12/2013 08:10

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22/11/2013 09:17

In this interview • Consolidation • Alliances • Motivation

WONDERFUL

WORLD Tony Concil talks to Alexandre de Juniac, Chairman and CEO Air France-KLM, about the need for airlines to adapt to the global stage

PHOTOGRAPHY: GETTY

22

The Air France-KLM merger is almost a decade old. What have you learned and how will you develop in the future?

As you know, a full merger is legally and practically impossible. It’s impossible legally because of state regulations. And it’s impossible practically because of the concentration and number of staff at the main hubs—in our case Paris Charles de Gaulle and Schiphol in Amsterdam.

And certainly from a customer perspective, we will continue to be operationally independent and based at our respective hubs.

But it is possible to merge some of the key functions such as the commercial, network, and revenue management functions. In fact, two components of Air France and KLM business—cargo and engineering and maintenance—are fully merged. This is the direction that we will continue to move in.

We have various brands in our Group. The Air France and KLM brands are well known.

But our portfolio also includes KLM cityhopper, CityJet, Transavia (in the Netherlands and France) and most recently Hop!. The aim is to segment the market in the most competitive way—geographically and commercially. I believe that we can do this better—to be totally complementary across all our operations and transparent for our passengers.

Do you see more scope for consolidation in Europe?

I’m not sure if there is scope for further major consolidation at the present time. You have three major players—British Airways/Iberia in IAG, Lufthansa and Air France-KLM. And you also have two major low cost carriers (LCCs) in easyJet and Ryanair. A third—Vueling is developing rapidly under the IAG group.

What is interesting is that in the United States you will have a similar landscape once the DOJ has approved the American-US Airways merger—with three big network carriers and two or three significant low-cost competitors. It seems to be a good balance and economically wise. At last airlines are making some money with a reasonable evolution in yield and capacity. This is quite different from the situation five years ago when the American landscape was devastated.

How about consolidation across political borders?

I’m not sure. Some airlines are taking equity stakes in other carriers. Our friends at Etihad have set the example with their stakes in Jat, Air Seychelles, Aer Lingus, Air Berlin, Jet Airways and others. On the other side of the Atlantic you see Delta investing in Gol, Aeromexico and Virgin

AIRLINES INTERNATIONAL

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05/12/2013 08:13

23

DEC-JAN 2013-2014

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05/12/2013 08:13

Air France

Atlantic. So something is happening even within the current legal framework.

From a purely economic standpoint, consolidation is a natural evolution for an industry that is capital and labor-intensive. Other industries that are also capital-intensive, such as the oil industry, have consolidated for this exact reason. It has to happen one day in aviation too. But I can also understand why governments want to keep their eye—and even a grip—on the air transportation industry in their country. It is seen as a key sovereignty issue.

Third Quarter 2013 Operating Result ( 700 Q3-2012

24

Having smoother and seamless IT systems between airlines could lead to even greater benefits particularly as frequent flyer programs evolve. One day the issue of standardizing the on-board product will be on the table.

Can European aviation be sustainably profitable within the European cost structure and regulatory framework?

There are many European carriers that are generating profits. And the situation in the US shows that it is possible to make a reasonable profit in a high cost operating environment.

For me the target for European aviation is to reduce its cost structure and take a tough look at how we are organized and do business.

LCCs have taught us some new operating rules and the three European legacy carriers are shifting a part of their network into low cost operations.

We also have to improve the way we reach the customer across all markets. It isn’t possible to address France the same way as other European markets are addressed, let alone China or India.

So being more multi-national in future will be vital. It is striking to see that the legacy carriers have remained primarily national in terms of their employees. But two groups of carriers are changing that. The LCCs have brought together a truly European workforce.

And the Gulf carriers have done the same, but by gathering staff from all over the world.

This is radically different from what has been done with the legacy carriers.

634

Q3-2013

577

600

491

500 440

400 300 200 100

Are the alliances a useful substitute for consolidation?

Alliances will continue but we are seeing more opportunistic partnerships, especially on a geographical basis.

It is our customers that benefit most from alliances. SkyPriority, available in more than 900 airports over the world, is a major benefit for SkyTeam frequent flyers, for example.

millions)

51 -69

0

54

69

87

-84

-100 Passengers

Cargo

Maintenance

Other

Total

Source: Air France

Internationalizing the workforce is essen-

ently. NDC will help. It is an ongoing process

tial and this is true commercially and operationally. Every airline will need Chinese speakers, for example.

but it will create a new bridge between the airline and passenger. But NDC has to be properly managed and controlled so that our partners—travel agents and GDSs—are fully supportive. Remember these partners are so important to the legacy business model.

But we need to cope with reality otherwise new players will do it in our place. If we get it right, it can make a big difference to the profit margin.

How will IATA’s New Distribution Capability (NDC) change the way airlines access the customer?

The digital revolution has triggered two important developments. First, everything has become digitalized or is capable of being digitalized and that includes travel agencies and global distribution systems (GDSs).

Second, it has triggered new and paradoxical behavior in customers.

“Customers want to stick to a brand but do not hesitate to compare prices” On the one hand they are hyper-mobile and rational. But on the other hand they are hyperfaithful to a brand and hyper-emotional.

To illustrate the point, customers want to stick to a brand but do not hesitate to compare prices. They are rational and will spend three days online to choose the cheapest ticket. And then they will pay a few hundred Euros in the last days to buy an upgrade and a nice meal “à la carte” or lounge access. The digital age facilitates the hyper rational element which gives them complete transparency and also offers the temptation of many options that plays to their emotional side.

These behaviors require our commercial and marketing services to think very differ-

From your two years in politics, do you believe that politicians understand that aviation is a key economic driver?

They understand what air transport brings in terms of tourism and business. And they understand the impact that it has on the wider economy. But I am not sure that they understand aviation as a driver of employment and a key employer in its own right.

They don’t see the direct and indirect contribution to employment. Air France is actually the major private employer in the Paris region. We have more than 40,000 staff linked to the two main airports in Paris— Charles de Gaulle and Orly. And often politicians do not see this.

The University of Strasbourg has done a major study and has come up with all the relevant figures—not only direct employment figures but also where our employees spend their money, including taxes. As an airline we have a big supply chain and we have a lot of companies working for us. So the economic footprint of the airline is huge and unknown to most politicians.

AIRLINES INTERNATIONAL

P22-26_IATA47_CEO KLM interview v2.indd 24

05/12/2013 12:24

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22/11/2013 09:38

Air France

Airlines have to make decision leaders aware of their economic and social footprint.

Can we get them to understand the importance of an initiative like the Single European Sky (SES)?

It is a key priority and it is such an obvious tool for improvement that it will continue to move forward. It is taking a long time because of national resistance but we will get there.

We must keep pushing and keep explaining— and not just to politicians but to our customers as well. It shouldn’t be just in the hands of the specialists and the technicians, because this is a program that is for everyone in Europe.

That should be explained clearly. It is not about air traffic control alone. SES will serve the European economy and all of its citizens in their day-to-day life.

After the progress made on environmental matters at ICAO, has the EU decision to restart their emissions trading scheme (ETS) put us back to square one?

26

There is no doubt that starting up the EU ETS as if nothing happened at ICAO is detrimental to European air transport. The airline industry in Europe is in bad shape and there shouldn’t be an additional burden on it especially in relation to its transport competitors.

But at a higher level, there is no need for such a regional effort. Aviation—airlines, airports and the aerospace industry—has handled the environment issue properly. We have set targets and we have been transparent about those targets and our reasonable strategies for achieving them. More and more people want to travel by air. We have tackled the environmental issue in a reasonable manner that allows the industry to grow and emissions to come down. That is the goal of the ICAO process.

And that should be the focus of Europe.

I expect some countries to react. The United States, the Gulf carriers, China and other major players, objected to the EU ETS. And I would be surprised if this action does not trigger a similar response.

There are plenty of anniversaries at the moment. Air France is celebrating 80 years of business, KLM is celebrating 94 years and there has been 100 years of commercial aviation. Looking forward from the perspective of this great history, what will we be talking about in 20 years’ time?

I think the major airline players will have to successfully manage the consolidation that

will inevitably happen. Ultimately, there will be a handful of major global airlines that will have strong partners in each continent.

There will also be consolidation in Africa.

This will be the new continent for air transport in the years ahead and we must properly integrate Africa into the global system.

The size of the industry and these major players will bring about some interesting innovations. The industry will need to develop new aircraft, for example. I think shorter travel times will be the most important consideration. So we may be talking about faster aircraft rather than bigger aircraft—even if we know that it is technically very difficult.

Another critical point will be infrastructure.

European airports, airports in the Northeast of the United States and also those on parts of the coast of China are very congested. We will have to fi nd new ways of approaching and taking off from airports. At the moment, the development programs to cope with the increase in demand are not in place. In China, they are trying to develop quickly but in Europe and the United States there is serious opposition to airport development because of noise and other environmental issues.

So perhaps the industry will have to develop not only faster aircraft but also aircraft that are less noisy and use biofuels which is essential for drastically reducing CO2 emissions.

How do you motivate your 100,000 Air France-KLM staff worldwide?

There is no secret. We designed a credible and exciting future for the company. Air France-KLM aims to be back as one of the top three airlines in the world by 2016 in terms of the number of aircraft, the quality of our product, and customer service. We have to stick to the value that the two main brands—Air France and KLM have in their DNA. This is a European approach to the quality of life and luxury concepts.

We are transforming the company and for this we need to make the Air France-KLM dream continue for our employees by painting a bright future that can be reasonably achieved.

And what would those staff say about your leadership?

I am focused on the customer, our group’s fast transformation, and results. I want to dramatically increase our focus on the customer. We need to be able to change and adapt quickly. And the reason that we do this is to deliver results.

In the digital world you need to be similarly focused on all three to be successful. • www.airfrance.com

Alexandre de Juniac Education: A graduate of the Ecole Polytechnique de Paris and the Ecole Nationale de l’Administration (1988, “Michel de Montaigne” class).

1988: Auditor then Master of Petitions and Deputy Secretary General of the Conseil d’Etat (State Council) 1993: Technical advisor then Assistant Director, responsible for issues related to communication in the cabinet of Nicolas Sarkozy at the Department of Budget 1995: Director of planning and development at Thomson SA 1997: Sales Director of Sextant Avionics 1998: Director of the economic interest grouping CNS Avionics, a joint venture between Sextant Avionics and Dassault Electronics 1999: Secretary General of Thomson-CSF, which became Thales in December 2000 2004: Senior Vice President in charge of the Aviation Systems division at Thales 2008: General Manager for Asia, Africa, the Middle East, and Latin America at Thales 2009: Private Secretary to Christine Lagarde, Minister for the Economy, Industry and Employment 2011: Chairman and CEO of Air France 2013: Chairman and CEO of Air France-KLM

AIRLINES INTERNATIONAL

P22-26_IATA47_CEO KLM interview v2.indd 26

05/12/2013 08:14

BAHRAIN

B90+.05. ;/, W,:; 40++3, ,(:;

B Mohamed Yousif Al Binfalah *,6 )(*

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MORE TO BELIEVE IN

22/11/2013 09:25

In this interview • Business Models • Distribution • Ancillary Revenue

PHOTOGRAPHY: AER LINGUS

30

A FAIR FIGHT

Christoph Mueller, CEO, Aer Lingus, believes both airlines and regulators must behave in a fair and transparent manner

AIRLINES INTERNATIONAL

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05/12/2013 08:15

What have you learned from the changes in the Aer Lingus business model?

Aer Lingus has certainly evolved over the years. We went from being a legacy carrier to a low cost carrier (LCC) after the tragedy of 9/11. It worked well while the Irish economy boomed but it became clear that we needed to evolve yet again when the economic environment deteriorated locally and globally.

So we have taken another step forward and become what we describe as a value carrier.

It is basically a hybrid model with short haul similar to an LCC model and long haul more akin to full service with two cabin classes.

Our unit costs are lower than legacy carriers but, because we use major airports, they are more than some LCCs. But I think the fact that we now serve some 11 million passengers every year and that we are profitable in a very difficult economic environment proves that the model works and that we have made the right decision. In fact, we have had plenty of other organizations study our business model for inspiration.

“We have multiple partnerships because we are interested in serving the Irish community wherever they may be in the world”

31

Being a value carrier is really about putting the customer fi rst and correctly matching their requirements with our network, fleet, and product. To be honest, the changes we made were painful and certainly very difficult.

But while we have left the legacy carrier and low cost models behind, there is one consistent element that has never been forsaken and that is the value of our staff in providing great customer service. That has been consistent in all phases of the Aer Lingus story.

How will the airline business model evolve at an industry level?

Everybody talks about consolidation. But this isn’t an industry solution although it may be right for individual carriers. As we have proven, there will be a wide range of applicable business models.

And when they talk about consolidation in connection with Aer Lingus, it always seems to be assumed that Aer Lingus would be on the receiving end—that someone would take us over. But I don’t accept that. We are a DEC-JAN 2013-2014

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Aer Lingus

Aer Lingus numbers in 2012

1.4 billion

10.9million

customers

revenue

69.1 million profit

Source: Aer Lingus

profitable airline and our balance sheet is good enough for us to maintain our independence.

Our business model is also scalable so we have room to grow organically.

32

What about alliances and codeshares?

Again, it’s about knowing and serving your customer. We have multiple partnerships because we are interested in serving the Irish community wherever they may be in the world.

Unfortunately, the Irish diaspora is not reflected in any one alliance. Effectively, we would only benefit from about one-third of any alliance network. We prefer to be more targeted in our approach and so, for example, partner with United and JetBlue in the United States to offer good connections to a variety of US destinations. Over 70 US domestic routes carry the Aer Lingus code.

So the Irish diaspora determines your fleet and network?

Absolutely. Our long haul network is mainly centered on the United States but we also serve Australia and the Middle East through our partners. Some 65% of our long haul tickets are sold in the United States. Our home market is abroad!

But we also have to look at competitors in the market and how they might affect our strategy. We compete with Ryanair from Ireland and of course there is strong competition across the Atlantic from a number of carriers. But unlike Ryanair, we fly into major airports—most notably London Heathrow.

And to the United States we have the advantage of pre-clearance. Departing passengers clear US immigration in Dublin or Shannon and they arrive in the United States effectively as domestic passengers.

Our fleet is mainly Airbus and it is mainly owned by the airline. There are 40 A320s for our short-haul network, for example, supplemented by 12 ATRs. We have a few leases

booking open for a couple of days for a small fee, for example. That’s something that isn’t possible to see through a GDS and it’s why we support IATA’s New Distribution Capabil-

to facilitate a degree of flexibility and we will lease three Boeing aircraft in 2014 to serve the North Atlantic market. That is a very volatile sector so it makes sense to lease.

But generally, ownership means we have tight control over our outgoings and are not subject to the various charges associated with leasing. We have Airbus A350s on order due for delivery from 2016 but we evaluating our fleet requirements and will make some fi rm decisions by early next year.

ity (NDC) project.

Technically, NDC isn’t that difficult and the potential gains are huge. We still have important markets that prefer to use travel agents even though Internet penetration is high. The United States is an example. And we have to be able to serve those customers properly.

“We are a retail organization now. Our website is the second most visited in Ireland after the national broadcaster, RTE” What are you doing to develop the distribution of your product?

It’s true that we are a retail organization now.

Our website is the second most visited in Ireland. We sell 90% of our tickets through the Internet and we can offer the full range of Aer Lingus products on our website. But we can’t do that through global distribution systems and travel agents. And that remaining 10% is still very important to us.

At first sight, our short haul product would look like any other LCC, because that is the basis of our model. But we offer so much more and the product can be adapted to fit the demands of the customer. You can keep a

Added value revenue has become critical to profitability but isn’t it a double-edged sword with customers able to opt out as well as opt in?

Of course, we must be careful. There are a couple of aspects to this. The fi rst is to thoroughly evaluate what works and what doesn’t work. We have stopped access to lounges in Malaga and Alicante, for example, because the demand simply wasn’t there.

On the other hand, the ability for customers in economy class to book business class meals has proven so popular that we are unable to keep up with demand. We didn’t know what would happen in either case but we learned quickly.

The second point is ensuring total transparency for the customer. This is critical to the customer and in fact we find that although there are customers that opt out, these are more than compensated for by the additional purchases of other customers. The customers want to know that you are being fair and that you are not trying to trick them into additional spending.

That would very quickly backfire.

Ultimately, in the modern environment, you have to give choice to the customer. And as long as you are transparent, fair, and provide value for money then you will be successful.

AIRLINES INTERNATIONAL

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05/12/2013 08:15

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IATA.11.13.033.indd 2

05/12/2013 08:42

Aer Lingus

Aer Lingus unit cost (EURc) for last 5 years (half-yearly) 8.00 7.00 6.00 5.00 4.00 3.00

Christoph Mueller

2.00

Education: University of Cologne and Harvard Business School

1.00 0.00 1H08

2H08

Fuel cost/ASK

1H09

2H09

Staff cost/ASK

1H10

2H10

Airport cost/ASK

1H11

2H11

1H12

Ownership cost/ASK

2H12

1H13

Other costs/ASK

Source: Aer Lingus

34

The agreement at ICAO on the environment was a big step forward but it seems Europe remains to be convinced. Are you concerned that the industry may yet have to battle a regional emissions trading scheme?

We are still unsure about the European situation. It is important to keep this discussion going in the right spirit but ICAO has great experience and I cannot envisage a better body to take charge of implementing a global emissions trading scheme.

Whatever the scheme, I think it is absolutely vital that any money collected is put back into environmental projects and not just deposited in general government coffers. That wouldn’t be fair.

In any case, I remain to be convinced that emissions trading is absolutely necessary.

Look at the price of fuel. An airline already has the greatest incentive it needs to be environmentally friendly and reduce fuel burn.

European regulation in passenger rights has also come under scrutiny.

It used to be that the United States was at the forefront of consumer protection but recently Europe has become very strong in this area.

It is regrettable but it is understandable.

Certain LCCs abused the system and it was inevitable that the regulators would step in.

Aer Lingus has never had a single law suit from a customer and yet we must pay for the way others abused the system.

But regulation in itself is not the problem.

2002-2004: Chief Financial Officer, DHL Worldwide

I would accept regulation if it is fair and equitable among all modes of transportation.

The problem is that the authorities added different approaches and created different layers without ever addressing the core issues.

And now aviation is treated very differently to other modes of transportation. How do you explain the reasoning behind this fact?

If a taxi drops you at the bottom of a hill when it is snowing heavily even though you live at the top of the hill, you understand—and you don’t have any right to insist the driver attempts to get up the hill. If a law existed that said a taxi must try to get to the top of the hill or pay you back the full fare, taxis would simply stop running when it started to snow.

Airlines are not only paying for problems, such as bad weather, outside of their control but they are also paying an amount that is not related to the money paid by the customer. If there was another volcanic ash cloud we could be paying for customers to stay in hotels for a week or more—even if they only paid $50 for the air ticket. There must be limitations to the exposure faced by airlines.

So, the current rules are not fair and they are not equitable. In fact, in the Netherlands it has become so obvious that airlines are exposed in this area that a whole sub-industry has built up with lawyers advertising their services to sue airlines under the passenger rights ruling, EU 261. Whenever that happens you know the law has gone too far. •

2004-2006: Member of Executive Committee of Deutsche Post AG after the acquisition of DHL by Deutsche Post AG Jan 2006: Became Executive Aviation Director at TUI Travel Sept 2009: Joined Aer Lingus as CEO Jan 2012: Appointed to Board of Tourism Ireland April 2013: Appointed non-Executive Chairman of An Post, the Irish postal, distribution and financial services provider Christoph has also held senior positions at Daimler Benz Aerospace and Lufthansa and was the CEO of the Sabena Group

www.aerlingus.com

AIRLINES INTERNATIONAL

P30-34_IATA47_CEO Aer Lingus interview v2.indd 34

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IATA.11.13.035.indd 2

BENEFITS TO AIRLINES

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22/11/2013 09:29

In this report • Safety • Data Sharing • Training

ILLUSTRATIONS: MITCH BLUNT

36

AIRLINES INTERNATIONAL

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SAFETY IN NUMBERS

37

Graham Newton explores how data sharing is becoming the key to accident prevention

T

he exact origin of the word travel is unknown but it is traditionally linked with the French word travail, meaning to work or endure.

The association is apt because throughout most of human history travel has been an arduous process. In its early days, air travel was no exception. Longer journeys could take days with numerous stopovers. And comfort and safety were not the guarantees we take for granted today.

Fortunately, aircraft equipment and aviation safety standards have improved leaps and bounds in the past century. Overall, aviation continues to post the best safety statistics of any mode of transportation. In 2012, there was just one hull loss accident for every 5 million fl ights of western-built jets—the safest year ever.

The achievement marks a century of continual improvement. In the 1930s, for example, water-cooled engines were replaced by superior air-cooled versions. Cockpit

instruments became more accurate and Precision Approach Path Indicators were introduced—runway lighting that allowed pilots to get the angle of descent correct.

In the following decade, radar was implemented and the Nate Price-designed pressurized cabin became commonplace, keeping passengers happy at higher altitudes where there was less turbulence and aircraft could fly at greater speeds.

The improvements kept on coming and the sophistication of modern aircraft with their advanced materials and multiple redundancies in both structures and systems stand as a tribute to all the work has gone before.

A precision approach But for much of this time, aside from advances in technology, the main steps forward came from studying accidents.

Diligent analysis of the cause of an accident led to improved products and techniques.

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Special Report

From a retrospective analysis the focus has shifted to preventing accidents before they occur

The historical trend proves this has been an effective approach. Today, there are some 3 billion travelers on an annual basis and it has become so safe that passengers in the United States could on average fly safely every day for 123,000 years, according to Arnold Barnett, a Professor of Statistics at MIT. That is some going for a network that accommodates 2 million passengers and some 30,000 fl ights every day.

Nevertheless, the fact is that many of the safety improvements were based on lessons learned from commercial air accidents. More recently, there has been a crucial change in the approach to safety. From a retrospective analysis the focus has shifted to preventing accidents before they even occur. This new approach involves capturing and analyzing enormous reams of data to understand and improve all aspects of fl ight.

IOSA sets the standard The IATA Operational Safety Audit (IOSA) is a cornerstone of this paradigm shift. It became a condition of IATA membership in 2008 and is now synonymous with best practice in aviation safety. The 2012 figures show that the total accident rate (all aircraft types) for IOSA registered carriers was 4.3 times better than the rate for non-IOSA carriers (0.96 vs. 4.11). IOSA has also been mandated at state level in several countries.

Enhanced IOSA is now in place and reinforces the notion that prevention is the best course of action. Enhanced IOSA puts a stronger focus on continuous monitoring to support the bi-annual audit and advances Safety Management Systems and a safety culture within an airline, vital components in accident prevention.

Ian Herbert, CEO, Vistair Systems, agrees that prediction can only be truly effective when everybody in the organi-

38

zation feels empowered to contribute towards that process.

“A cultural change will ensure that everybody in the organization, from the CEO and senior management to the cabin crews and ground crews, are onboard and fully engaged in the safety culture,” he says.

“The key to this cultural shift is awareness, because only by raising awareness of safety, and then creating an environment where everybody in the organization feels empowered to contribute to the process, can you better collect that all-important data and improve performance,” adds Herbert. “Once you reach that point, and have effective processes in place for properly gathering the data, the job of mining that information for the purposes of incident prediction starts to have a greater value.”

With Enhanced IOSA, airlines need to release a conformance report containing internal audit results prior to the IOSA audit. Auditor Actions, a tool currently used

by IOSA auditors, will be made available to the airlines to support them in assessing IOSA Standards and Recommended Practices internally. There is also a Partnership for Quality initiative to support airlines’ quality departments in adapting to Enhanced IOSA as well as regional workshops. As of September 2015, Enhanced IOSA will become mandatory for IATA members.

A big warehouse IOSA generates plenty of data. This data can be used not only to help improve the individual airline performance but also to assist the industry in its safety efforts. Data sharing will play a crucial role in preventing future accidents and is critical to helping safety analysts spot trends and identify key mitigation measures. Work is now complete on the database structure and the management process is going through ISO certification.

Western-built jet hull-loss rate per million sectors

Red is 2012 Gray is 2011

Commonwealth of Independent States Europe

Industry Standard

0.20 0.37

North America

0.00 0.00

North Asia Middle East & North Africa

0.00 3.71 2.02 3.27

0.00 0.00

Africa

IATA members

0.00 0.41

0.00 1.06

0.15 0.00

Latin America & the Caribbean

0.42 1.28

Asia-Pacific

0.48 0.25

Source: IATA

AIRLINES INTERNATIONAL

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GISIC data The Global Safety Information Center provides multiple sources of industry data.

• The IATA Safety Report contains critical information on aviation industry accidents, causes and prevention strategies. It is the collaborative effort of industry partners from airlines, manufacturers and international organizations.

• Flight Data Exchange is an aggregated de-identified database of FDA/FOQA type events. It will allow flight operations and safety departments to proactively identify safety hazards.

• The STEADES database of de-identified airline incident reports is the world’s largest, offering a secure environment for airlines to pool safety information for global benchmarking and analysis needs.

airlines, ground services providers, cargo handlers and other industry stakeholders. Using internationally recognized audit standards, ISAGO also aims to improve efficiency by reducing the number of redundant audits.

• The IOSA program is an internationally recognized and accepted evaluation system designed to assess the operational management and control systems of an airline.

• The Ground Damage Database is designed to facilitate data-driven decisions to measurably reduce aircraft ground damage.

• Within the objective of improving safety and reducing ground damage, the IATA Safety Audit for Ground Operations (ISAGO) brings together

• GSIC cabin safety enhances safety by providing airlines access to in-depth reports and recommendations derived from this information. •

The Global Safety Information Exchange and the Global Safety Information Center (GSIC) allow users to access and aggregate multiple sources of industry safety data.

There are now more than 400 organizations contributing to GSIC, a widespread commitment that is tearing down silos within the industry.

All of this information feeds into plans to improve safety without waiting for an incident to occur. The Runway Excursion Risk Reduction (RERR) Toolkit is an example of this forward-thinking strategy. RERR provides carriers with the information necessary to prevent runwayrelated accidents.

Unstable approaches are another dominant theme. The information can be fed back into pilot training, the final component in improving air safety in the 21st century.

More than just box ticking Evidence-based training cements the safety strategy together. The main issue is ensuring ever-improving standards while welcoming enough new recruits to satisfy the increase in demand for air transport.

The Multi Crew Pilot License (MPL) accepts that it is impossible to train for a successful outcome of the infi nite number of all possible abnormal and emergency situations.

Instead it is a competency-based approach rather than the traditional box-ticking, hours-based, prescriptive training. Students are guided seamlessly from ab-initio training to airliner type rating, using simulation designed for multi-crew training. Upset Prevention and Recovery Training, Threat and Error Management and Crew Resource Management are key components of MPL. Fatigue Risk Management Systems are another important advance for pilots. Like competency-based training, this moves pilots away from a proscriptive, time-based approach and takes a more holistic view of a pilot’s capability to work.

“There has been a dramatic improvement in safety in the past 100 years and that trend is accelerating thanks to a greater focus on safety management systems, a safety

culture, and stringent audits,” says Guenther Matschnigg, IATA Senior Vice President, Safety and Flight Operations.

“Technology has also improved of course but more important is the way we enable and implement that technology. Zero accidents remain the goal and we will get ever closer to achieving that in the years ahead.”

Data will be the key, says Matschnigg. The more you can collect, the more chance you have of identifying important trends. Then, airlines can begin to apply the lessons learned and start making a difference to safety on the individual and collective level.

“Safety is fundamental for every successful carrier, and 100% safety is a serious objective for all airlines, including Eithad Airways,” says Etihad Airways Chief Operations Officer, Captain Richard Hill. “With the current pace of technological evolution, we cannot accurately predict exactly where the industry will be 100 years from now.

Looking in the shorter term, the industry continues to deliver year-on-year improvements in safety with fl ight crew training in particular an area that is rapidly changing as it focuses more on the human element, and how to manage risks created by human input, with the continuing advances in technology.

“I believe the next major development will be in the form of systems design improvements to the man– machine interface,” he concludes. “Whether the industry manages 100% air safety in the next 100 years is dependent on these and many other complex factors both on the ground and in the air. It’s a challenging matrix, but I am optimistic that the current rate of improvement in the global safety rate is sustainable. Recent statistics show that despite the record increases in passenger kilometers flown in ever more crowded skies, there has never been a safer time to fly or indeed travel through an airport. With the continued commitment of the industry leaders I expect that will continue.” •

39

Data will be the key. The more you can collect, the more chance you have of identifying important trends

www.iata.org/safety DEC-JAN 2013-2014

P36-39_IATA47_Special_report v1.indd 39

05/12/2013 08:18

In this interview • Competition • Liberalization • Market Positioning

PHOTOGRAPHY: GETTY

40

AIRLINES INTERNATIONAL

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WE SEE COMPETITION AS A GOOD WAY TO GROW

41

Pham Ngoc Minh, President and CEO of Vietnam Airlines, says market positioning will be crucial in a fiercely competitive region. Interview by Tony Concil

DEC-JAN 2013-2014

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Vietnam Airlines

How is Vietnam Airlines performing?

The airline’s fi nancial performance has been excellent and it is improving year-on-year.

We have been very fortunate and we have never made a loss despite the various crises that have hit the industry in recent years.

We are making a profit in 2013 too. The figures are even a little bit up on last year. The result should be better than 2012 by about $6–$7 million.

Is the growth in traffic mainly business or leisure travelers?

The majority of our business is leisure traffic.

We are not yet seeing the same level of growth in business travel although that sector is growing. And it is worth noting that domestic traffic is growing faster than international traffic at the moment.

Tell us about the IPO and the reasoning behind it.

There is a plan for an IPO for Vietnam Airlines

42

and we are on track. We have completed an enterprise evaluation both domestically and internationally. The board needs to report to the relevant government agency and once that is complete and we have the Prime Minister’s decision we can start the next phase of the IPO. The reasoning behind the strategy is quite simple. The Vietnam government wants to encourage greater transparency in stateowned companies such as Vietnam Airlines and help us survive in a competitive market.

You’re also looking for a strategic partner to assist in making you more competitive?

We are open for discussions! Vietnam Airlines needs to develop into a strong international

carrier. A long term strategic partner that could join us in a venture that benefits both parties would be very welcome.

It doesn’t have to be a SkyTeam partner.

We are looking beyond the alliance for any investor who is interested in our airline and our growth strategy. It doesn’t even have to be another airline. The point is that the investor has the ability to help the airline grow into a more competitive international business.

Of course, airline expertise helps but it is more about being a professional partner. They would need to bring new ideas and help address the core values of Vietnam Airlines.

The airline has placed a lot of aircraft orders recently. What is your fleet development strategy?

It’s true, there is an ambitious fleet renewal and expansion program at Vietnam Airlines. We decided to concentrate on a single narrowbody type. We have 50 Airbus A321s and this will grow to 60-plus aircraft. Then there is a small turboprop fleet for those small island and remote airports that we have to serve.

Finally, for widebody aircraft, we decided to be a pioneer. There are Boeing 787s on order and in fact, the airline was the fi rst to ask, negotiate and reach agreement with the Boeing team to upgrade from the 787-8 to the 787-9.

The Boeing team was then headed by Mr. Ray Conner who later became the CEO of Boeing Airplane Commercial. Until now, we still think that the conversion of B787-8 into 787-9 was a right decision for Vietnam Airlines.

We have also ordered Airbus A350s because they are slightly larger than the Boeing 787s and we needed the extra capacity. The total widebody fleet will be 19 Boeing 787-9s and 14 Airbus 350s.

The fi rst of the aircraft will be delivered in May/June 2015 and our order will be completed by the fi rst quarter 2019. So we will have 33 new aircraft delivered in under three years, which is a very ambitious schedule.

But we have done it to offer the best customer service in Southeast Asia. Also, the new aircraft are more environmentally friendly and more efficient so we will reduce our operating costs.

What will you do with the old aircraft?

We renew our fleet once they reach 10 years service. We pride ourselves on a young fleet but these days you can only really call it young when they are less than five years old. When they reach 10 they are not so young anymore and that’s when we move them on.

How does SkyTeam influence your strategy?

We contribute to SkyTeam as a Southeast Asian member and we have great partnerships with all the SkyTeam airlines. But we continue to look at what the alliance offers and the value it brings to Vietnam Airlines and its customers.

It is sensible to keep on evaluating the effectiveness of any partnership. But so far, SkyTeam has proven to be a great brand and it has provided a real boost to our business.

Will ASEAN liberalization make a difference?

There is a lot of argument about this program both at a country level and at an airline level.

Vietnam Airlines is ready for liberalization and we would welcome open skies. But there should be a clear path toward this goal and clear markers along the way because each country is in a different stage of development and their airlines are also in different stages of development. Look at Singapore—they want open skies. But Singapore is at a very different stage of development to Indonesia or Myanmar.

So, our position is that we see competition as a good way to grow the airline in a sustainable fashion. And it is good for the customer because it gives them more choice. But we also support a clear roadmap to get everybody to that end goal in an equitable manner.

What is your view of the development of Low Cost Carriers (LCCs) in the region?

LCCs have brought an overall expansion in traffic in the industry. More and more people are traveling because of the low fare sector.

And all airlines benefit from that because people get a taste for travel. It also helps Vietnam

AIRLINES INTERNATIONAL

P40-44_IATA47_CEO Vietnam interview v1.indd 42

05/12/2013 08:19

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IATA.11.13.043.indd 2

22/11/2013 09:30

Vietnam Airlines

Fleet development plan to 2020 160 140

280-300 seat aircraft 150-180 seat aircraft

120

70 seat aircraft

63

100 80

25 19

60 40

70 51

58

20 16

14

17

2013

2015

2020 (based on PM’s approval

0

Source: Vietnam Airlines

44

Airlines keep costs low to be competitive.

The challenge for a full service airline is in how to engage the sector. Vietnam Airlines has decided to become a shareholder (67%) in Jetstar Pacific. It means we can leave this arm of the company to compete in the low cost arena while Vietnam Airlines concentrates on premium travelers and full service.

It enables us to deliver a full suite of products in an efficient way.

Can the market really be segmented in this way?

It can because it helps the customer easily recognize the different service propositions.

Vietnam Airlines offers a comprehensive network and all the benefits that come from a full service carrier and a member of SkyTeam.

And that counts on short haul flights too.

It’s not about the free sandwich but about the network and the added value. Customers care about whether you can offer a great connection.

How will the growth of China affect the region and Vietnam Airlines?

Of course, China is a huge market, which is a good thing. You cannot be afraid of the big guy.

We have some good routes into China and within Indo-China. We have a good product to offer the Chinese traveler and we see double digit increases in their numbers every year.

But China’s carriers are also growing. We appreciate the competition because we want to be a part of industry and Chinese growth and we must be robust enough to compete in an integrated world.

As a country, Vietnam is also looking for ways to integrate into the global economy. It

has joined the World Trade Organization and the Asia Pacific Economic Cooperation and this will also help our airline.

Looking ahead, how will you position Vietnam Airlines in the market?

Our vision for the long term is not to be a global carrier like British Airways or Air France. But we cannot rely on just the Asia Pacific region either. It will become ultra competitive. And that is why we have bought long haul trans-continental aircraft.

We will concentrate on Vietnam, Laos, and Cambodia but we will look to feed this traffic into selected long haul destinations.

What would you say are the biggest challenges to your growth strategy?

The biggest challenge is surviving. That will not be easy for an airline in an open sky, liberalized environment. We have to achieve sustainable growth in the face of fierce competition.

It will also be a challenge to get the human factor in the airline right. It is important to look at each person in the company and at the organization as a whole to make sure we can achieve our vision.

Each individual must align with the vision and help move the airline forward. It is not just about fleet and the network. It is about having the right people with the right capabilities. An airline is a team.

Pham Ngoc Minh Education: BSc Engineering Economics, Kiev Aviation University; MBA Maastricht School of Management; PhD Institute of International Economic and Political Research of Russian Academy of Science in Moscow 1990: Deputy Director General Southern Airport Authority 1993: Vice President of Vietnam Airlines 1996: Executive Vice President Commercial, Vietnam Airlines Corporation 2007: President and CEO of Vietnam Airlines Achievements: Awarded the Chevalier de la Légion d’honneur by the French Government; he is also maitre de la commanderie de Bordeaux - Ha Noi Chapter and a member of Confrérie des Chevaliers du Tastevin Borgogne

What would employees say about you?

That he is tough but fair. • www.vietnamairlines.com

AIRLINES INTERNATIONAL

P40-44_IATA47_CEO Vietnam interview v1.indd 44

05/12/2013 08:20

EmbraerCommercialAviation.com

Continuous improvement.

Continued.

The newly enhanced E175. It’s the result of our commitment to continuous improvement of our E-Jets family. This ongoing optimization of an already successful platform is our way of ensuring best-in-class performance gets even better. Lower fuel burn, longer service intervals, lower noise levels, upgraded avionics, and an even more refined cabin combine to keep us well ahead of any competitor — which means the E175 history of success is a story to be continued.

1000+ E-JETS. 65 AIRLINES. 45 COUNTRIES.

IATA.11.13.045.indd 2

22/11/2013 09:31

ONE MIND, ON A SINGLE PATH, THE EVOLUTION OF AIR TRANSPORT AND SITA CANNOT BE SEPARATED TOGETHER WE ARE SHAPING THE FUTURE

IATA.11.13.046-047.indd 2

22/11/2013 09:32

www.sita.aero

IATA.11.13.046-047.indd 3

22/11/2013 09:32

www.sita.aero

IATA.11.13.046-047.indd 3

22/11/2013 09:33

In this feature • Personlization • Technology • Transformation

MAKING A DIFFERENCE Martin Rivers explains how the passenger experience has come full circle with the return of personalization

“T

he shape of things to come,” proclaimed Imperial Airways, the colonial precursor to British Airways, in a 1936 advertisement for Short Empire Flying Boats. Its notice featured an artist’s impression of stately travelers boarding one of the revolutionary aircraft, which were due to enter service the following year.

Imperial’s four-engine, double-decker Flying Boats had sleeping accommodation for 16 passengers, with cabin interiors comprising three large saloons, one kitchen, and one ever-essential smoking room. On day-time fl ights, its capacity stretched to 24.

Handling just 8,012 passengers in 1936/37, the airline’s idealistic vision of the future may have seemed reason-

48

able at the time. Indeed, the travel norms of the time were factored into the fledgling air passenger experience. Highnet-worth customers expected one-to-one service at all times, having become accustomed to such pampering on rail and sea transportation.

Fast forward seven decades, however, to an age when 3 billion travelers take to the skies each year, and the prophecy of small-scale airborne luxury is hard to reconcile with modern-day reality.

For a time it seemed the so-called Golden Age of aviation would become a distant memory as aviation experienced a gear-change from an era of extravagance to one of commoditization.

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The passenger journey Prior to the Flying Boat, the air London to Sydney journey took 12.5 days. By 1938, the Flying Boat had reduced this to 9.5 days spanning 30 segments. The Sydney to Singapore leg alone required three overnight stops. Moreover, the single fare of £195 on the Kangaroo Route exceeded the average Briton’s annual salary.

Some loose parallels can perhaps be drawn between the service on Imperial’s Flying Boats and the fl agship double-decker jets of a more contemporary operator. Emirates Airline was one of the fi rst modern carriers to provide chauffeurs for all First Class and Business Class

But while economic realities have long since hit home in the airline industry, it is wrong to suggest the glory days of air travel are over. New technologies continue to evolve operational efficiency and on-board products, rekindling many of the more romanticized service propositions of yesteryear.

Back to the Future The airline industry has advanced leaps and bounds by nearly every conceivable metric; safety, speed, range, capacity, reliability, punctuality, choice, and price. Even the two perceived cornerstones of the Golden Age— comfort and convenience—have seen significant progress.

Comfort has advanced profoundly when measured by turbulence, noise levels, cabin ergonomics, and seat design.

Convenience cannot be disputed by anyone booking a

Personalized service can create the illusion of VIP treatment

passengers, reviving a true sense of VIP treatment (although, today, drivers drop you off a little further from the aircraft). Its First Class Social Area—much like a bar offered by some of today’s airlines— embodies the spirit of Imperial’s smoking rooms. •

fl ight, scheduled according to demand, with the swipe of a fi nger on their mobile phone.

The challenge for airlines today is to accommodate the rose-tinted expectations of yesteryear without losing sight of practical cost constraints. Personalized service can create the illusion of VIP treatment, and technology is the key to unlocking its potential.

“Passengers tend to engage with airline businesses through the vertical stream,” explains Glenn Morgan, Head of Service Transformation at British Airways. “They start with the inspiration and selling stage, then they move to operational areas, and then they have a follow-up.

But they go through individual silos. What we’re trying to do is look horizontally across the business—trying to join up the whole experience—so the customer has a single conversation all the way through the journey.”

British Airways has already issued 2,000 iPads to its cabin crew, enabling staff to personally greet passengers as they board the plane. “Previously, they were welcoming a blank face,” Morgan notes. “Now they know who they’re talking to, and what they should or shouldn’t be saying depending on customer feedback.”

An in-house team of iPad developers has been tasked with creating apps tailored to the needs of employees looking to offer the best possible service to customers.

Although the devices are particularly useful in premium cabins, their potential for conflict resolution brings benefits to all categories of travelers.

Baggage handlers can notify cabin crew of any mishandled luggage, for example, allowing staff to seek out and advise affected customers. This personal interaction fosters a sense of transparency and reassurance that can avert potential disputes. “Before, customers had to wait at a carousel for 45 minutes,” Morgan notes. “All the while the customer experience is steadily going downhill. Being proactive enlightens customers.”

49

Immediate impact Similarly, by advancing standards for self-service options across the industry, IATA is helping to streamline process points and speed up the passenger experience, bringing back the immediacy of the early days of aviation.

IATA’s Fast Travel program envisages that complete self-service suites will be available to 80% of global passengers by 2020. This will span the entire travel process: online, kiosk and mobile check-in; self-tagged bag drops; self-scanning document checks; kiosk fl ight DEC-JAN 2013-2014

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Passenger Experience

A vision to the enable the perfect journey

e iv

l r sa

Cu

RO

T E NGI N DUC

EE

Ex ch

RI

an

N

G

P 1.

er Travel Da ta stom

ge

Un

1. Product Engineering • Innovative dynamic product determination capability • Total customer offer (ancillary & seat) Revenue Management • Faster and easier multi-channel product to market • Analytics and contextualized offering

D 3. OR

DE R

2. Shop to Order

C AS

P

TO

TO

ER

OR

SERVICES

H

2.

SH

O

• Modern data transmission standard between airlines and travel agents • Consistent multi-channel merchandising capability • Greater transparency and improved shopping experience for the customer

3. Order to Cash • New customer-centric architecture • Single record of order and purchase • Streamlined back-office processes Source: IATA

50

re-booking; self-boarding; and missing bag notification.

Removing the reliance on manned desks will empower customers to manage their own travel, much in the same way online banking revolutionized the personal fi nance industry. IATA is also part of a consortium examining intermodal products for the ultimate in seamless journeys.

Three other future developments are of note in the search for the perfect passenger experience. First, airlines are looking to become more agile at engineering their products and determining their offering to customers.

Standards are being scrutinized that would enable dynamic product offerings based on multiple product components.

New Distribution Capability is the catalyst to move away from a “one size fits all” seat price offer.

Second, a redesign of airline back office processes would enable a more effective and efficient customer ordering process that would help customer recognition and a consistent service offering. Despite the many advances in recent years, such as e-ticketing, the airline customer ordering process is still arranged around traditional, laborintensive methods.

Third is a proposal for a Universal Customer Travel Data Exchange. This would allow all stakeholders in the travel chain to recognize the customer through a unique customer identifier enabling better customer service, especially during disruption.

“Not all ideas will be brought to life and not all of those realized will transform the industry,” says Eric Léopold, IATA Director, Transformation, Financial and Distribution Services. “But some will. As an industry, we all need to consider every opportunity for setting standards and

also challenging the norms. New customer behaviors are shaping the transformation in our industry.”

Convenience and cost Challenges remain. The industry is still dominated by legacy systems and processes. And while there are also issues with the next generation of technologies such as mobile, a fundamental shift is underway. Ownership of the process is moving from the industry to the customer. The path to customer managed travel and true personalization has been set.

And this modern version of personalization aligns convenience and cost, safeguarding the long-term health of the industry.

“Cost constraints are in the eye of the beholder,” says Jeff Foland, Executive Vice President of Marketing, Technology and Strategy at United Airlines. “If you earn a return on the investment, it makes sense to do it. For all of the features, benefits and services we’re layering on top of the core product, we have to do each of those on a disciplined basis.”

In other words, the ever-rising tide of customer expectations in the modern era is actually a positive sign for an industry that relies on operational perfection and constant innovation. It is an opportunity for revenue and an opportunity to improve.

“When people talk about the Golden Age of flying, it’s a lie,” concludes Thomas Winkelmann, Chief Executive Officer of Germanwings. “These were very slow, noisy aircraft, it was super expensive, and you were flying at 10,000ft through the clouds. Today is the Golden Age. What we need to do is just bring the humanity back to flying.” •

While there are issues with the next generation of technologies, a fundamental shift is underway

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22/11/2013 09:34

In this feature • Collaboration • User Charges • Design

A collaborative deal in the spirit of partnership is the best way forward

PHOTOGRAPHY: GETTY

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AIRLINES INTERNATIONAL

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SHARING RISK AND REWARD An improved airline-airport relationship could lead to benefits for both parties

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irports have undergone incredible changes in the past 100 years—a trend that looks set to continue.

From the sheds and repurposed barns of yesteryear, airports have developed into some of the most inspiring feats of architecture in the world today. The main terminal at Beijing’s Capital International is the sixth largest building in the world by floor area, for example—but still isn’t the largest airport building today.

That record belongs to Dubai’s Terminal 3 (by the floor area metric it is ranked second in the world behind the New Century Global Center in Chengdu).

Such significant construction takes time and money, of course. And though this just one element of the rollercoaster relationship between airline and airports is on an upswing, the question of investment—and the user charges that follow—is always a fractious one.

The recent Memorandum of Understanding between IATA and Airports Council International (ACI) underlines that forward thinking is taking place. But for Paul Griffiths, CEO Dubai Airports, if the relationship is to develop into something more permanent than the ephemeral liaisons of the past, user charges must be tackled head on.

“Airports must be an intelligent member of the aviation supply and support its airline partners, which control the core business-to-consumer relationship,” he says. “Airports are being asked to have greater exposure to commercial risk, for example. This is a perfectly acceptable argument and could be beneficial for both parties if the structure of the arrangement is right.”

Griffiths points to duty free as an example of what could be achieved. Onboard duty free is an area ripe for airlines and airports to share the risk and the reward. Airlines struggle with the concept, says Griffiths, because of the difficulty in combining choice with the practical issues of weight and fuel burn. Consequently, the service rarely meets the expectations of the modern customer due to the limited choice and availability.

“Wouldn’t it be better if airlines did sales in the sky and then the order was fulfilled once the passenger arrived?” asks Griffiths. “This would reduce airline operating costs and increase their commercial potential. And airports would obviously benefit from increased sales.”

Griffiths believes this scenario could be taken even further and the amount of sales could feed directly into

how much an airline pays the airport. Airlines and airports would each have an incentive for increasing sales and forming a real partnership.

Market power The airline-airport connection seen in the Middle East isn’t often replicated in other parts of the world.

Charges at London Heathrow have tripled in the past 10 years, for example, according to Joe Thompson, Director of Airports for Virgin Atlantic. “Obviously it is a concern to us that our passengers pay some of the highest charges in the world,” he says. “It deters inbound tourism and foreign investment. That will always provide challenges and where airports have market power, as the CAA has concluded they do at both Heathrow and Gatwick, the interests of airlines and our customers will come into conflict with the airports.”

A fi nal, binding decision from the UK Civil Aviation Authority on Heathrow Airport Limited’s capital plans is expected in January 2014. One version meets all airline and, by proxy, passenger expectations. But a second plan that reduces investment by some $1.5 billion will not meet requirements and puts HAL in a difficult position. Operational resilience—a critical factor when the airport is 99% full—and the passenger experience will deteriorate to the extent that “Heathrow will never be Europe’s hub of choice as its owners hope it will be,” according to Gerry O’Connell, IATA’s representative at Heathrow.

Even here, however, the issue doesn’t preclude a close working relationship and the opportunity to share risk and reward in future. Thompson believes it is important that day-to-day operational relationships between airports and airlines remain good and productive, even when there are tough debates about price taking place in parallel. “We will continue to work closely with all of our airports to ensure that we are delivering the best and most efficient service possible,” he adds.

It is a sentiment that echoes globally despite some isolated resistance. In North America, most airports are managed by the local municipality and discussions usually focus more on the development than how that development is fi nanced. Further south, a bout of privatization has been less forgiving. Quito, Lima, and Bogota boast new facilities while three major airports in Brazil have been privatized and more are scheduled to follow.

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Airports

In Bogota, a new terminal hasn’t sufficiently satisfied the need for extra capacity. The situation is being exacerbated by an inefficient stand allocation system and restricted airspace. IATA has voiced its concern but is working with the airport to maximize efficiency.

of air bridges and lounge access. “Look at what’s happening at KLIA and Singapore’s Changi,” he says. “Both airports were among the pioneers in low cost terminals in Asia. Both are now developing new facilities. The services at KLIA2 will be comparable if not better than KLIA, while Changi’s T4 will be ahead of its predecessor, the Budget Terminal.”

The best way forward, says Goel, is to maintain a focus on overall airport efficiency, passenger convenience, and airline operating requirements while allowing airlines to choose which facilities they want to use.

Asia-Pacific leads the way With Asia-Pacific leading the way in real and potential growth in traffic, many eyes will turn to the region to see how the airline-airport relationship develops.

There is plenty of positive news and a greater balance in risk and reward at many airports. Vinoop Goel, IATA Head of Infrastructure and Government Relations in Asia-Pacific, says the airline-airport relationship in the region continues to evolve. “A collaborative deal in the spirit of partnership is the best way forward,” he says of user charges. “We have seen some very good examples in Asia-Pacific. We now have long-term charges agreements with Narita Airport, for example, that have provided considerable relief to airlines. We are also working collaboratively with the airport on a number of fronts to improve the operations and efficiencies at the airport. All these efforts will help Narita improve its service proposi-

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tion for airlines planning to fly to Tokyo.”

The potential fly in the ointment for Asia-Pacifi c comes in the form of low cost terminals, a phenomenon particular to the region. Building terminals for specific business models may not be the best use of scarce airport space and resources. Goel doesn’t have a problem with the idea of low cost terminals—since all terminals should be operated as efficiently as possible—but points out that their lack of flexibility is dangerous, “white elephant” territory. “That is what’s happening at Nagoya Airport now, which has had to review its plans for its low cost terminal due to AirAsia Japan ceasing operations,” he notes.

Goel believes that while some passengers are content to travel on low cost airlines they might have higher expectations of their airport experience, such as the use

Data sharing “Airports and airlines can work together to take costs out of the system,” says Angela Gittens, ACI Director General.

“We can collaborate on projects to build capacity for more effective security, higher safety performance levels, better environmental management, non-aeronautical revenue generation, and top notch customer service.”

As an example, Gittens points to Airport Community Recommended Information Services, which allows the sharing of data to accomplish tasks such as self-service baggage check-in. Spreading this enabling methodology

Airports have developed into some of the most inspiring feats of architecture in the world

could both take millions of dollars out of airline and airport processes directly as well as allow airports to meet increasing demand without additional bricks and mortar.

“Think of common use systems without airlines or other users having to retrofit their applications to meet whatever system the airport happens to have,” says Gittens. “Also think of spreading the use of Airport Collaborative Decision Making to all busy airports so that delays are minimized and irregular operations are recovered more quickly. How much is that worth to airports, airlines and passengers? Sharing data can make that possible; the technology exists, the protocols are agreed.

What has to happen next is a collaborative mindset on the part of the airport, the airline, and the air traffic manager. The respective industry associations are poised to help.” •

Design with a difference Thanks to airline industry innovation in its booking processes, airport size hasn’t detracted from the passenger experience. To incorporate e-ticketing, mobile boarding passes and the like, airports are refashioning their footprint.

Dubai Airports CEO Paul Griffiths, says the priority there is to eliminate from the design those time-consuming processes that don’t add any value.

Development can focus on the remainder of the footprint in a way that best serves the customer.

Many of the travel processes that are common today have their origins in the early days of aviation. The bank of

check-in desks in a central building is a case in point. “There is no longer a need to reconfirm a booking multiple times,” says Griffiths. “Once the passenger has made the transaction and the airline has all the relevant passenger information there is an electronic footprint that does not need to be verified time and again.”

Dubai Airports plans to accommodate these changes in process to deconstruct the airport environment. “It will allow us to give every passenger an experience unique to them while at the same time we can combine the different elements seamlessly to ensure efficient operations,” says Griffiths.

Pushing the essential travel processes behind the scenes allows the airport to concentrate on the services that make the difference to the customer. On arrival, passengers generally want to reach their vehicle or train as quickly as possible. On departure, choice is king and the variety of services and amenities will be a key differentiator between competing airports as will the connecting time. At major hubs, airlines and airports need to work together to reduce connecting times, says Griffiths.

This would make the combination of airline and airport more attractive to the end user. •

AIRLINES INTERNATIONAL

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Fraport. The Airport Managers.

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Steve, 57, is an engineer on a new power station project.

Rosario, 41, is on a disaster relief mission for UNICEF.

Dina, 21, is part of a university cultural exchange program.

Patricio, 68, is off to stay with his son and meet his new grand-daughter.

Komi, 32, is a farmer taking his cargo of flowers to market and visiting new clients.

Markus, 26, is just going home to see his mum for her birthday.

Raj, 35, is off to the U.S.A to do a Masters in Geology.

Seong Joon, 14½, is visiting his older sister, who now lives in Australia.

Solveig, 29, has seen the world, working for her airline.

Fredrik, 43, is attending a U.N. climate change conference.

Carole, 73, is travelling to Cambodia with her best friend.

Sione, 38, is leaving his island to find medical care abroad.

Monhla, 47, is a micro-finance CEO visiting investors.

Khaled, 46, is a construction materials trader visiting a client.

Hazel, 54, is moving abroad to start a new nursing job.

Plane stories. Everyday people.

Visiting family, sharing cultures, exchanging knowledge, doing business, transporting aid and medical care - every day, every flight.

Aviation makes it happen for 3 billion people and 35% of the worldâ&#x20AC;&#x2122;s goods by value, each year.

Thatâ&#x20AC;&#x2122;s $2.2 trillion in economic activity, supporting 57 million jobs worldwide.

Find out more at:

www.iata.org/policy/pages/benefits IATA.11.13.056.indd 56

05/12/2013 12:42

DEC-JAN 2013-2014

THINKING AHEAD Leading industry suppliers offer their views on what the future has in store for aviation

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CONTENTS 59 Jörg Troester Senior Vice President Corporate Strategy, Hahn Air

60 Makoto Natsume President & CEO, Narita International Airport Corporation

62 Aidan Brogan CEO, Datalex

64 Dr. Stefan Weingartner President Commercial Maintenance, MTU Aero Engines AG

66 J. Douglas Cline CEO, Lumexis Corporation

68 Eric Young Managing Director, Nordisk Aviation Products AAR Manufacturing, Inc

70 Jörg Möller Executive Vice President Travel & Transportation, Wirecard AG

72 Neil James Executive Director, Corporate Sales and Product Management, Panasonic Avionics Corporation

74 Richard Stokes CEO, EDIfly - Innovative Software S.à.r.l.

75 Gerry Kelly CEO, Aviation Services Ireland

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THE WOW OF NOW Jörg Troester Senior Vice President Corporate Strategy Hahn Air

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he predicted demise of the existing distribution model has been around for years. But with IATA’s New Distribution Capability (NDC) initiative, indirect distribution is experiencing a renaissance.

After 9/11, airlines were under huge fi nancial and commercial pressure. They upgraded their Internet booking engines (which was not very popular with the travel agencies), offered chargeable ancillary services (which was not very popular with the customer) and developed by-passes around expensive distribution platforms (which was not popular at all with the global distribution systems—GDSs).

The battle for higher revenue and lower costs between travel agencies, GDSs, and airlines had begun. All parties showed a strong will to survive while customers were a disbelieving audience, watching the battle unfold.

Finally, IATA has seized the initiative to update airline distribution to an adequate 21st century standard. This allows airlines to fi nally reach their customers with any content through all channels.

I strongly believe in the future of indirect distribution.

But there is no doubt that direct distribution is relevant, indeed essential, for airlines today. Without revenue through ancillary services airlines would not survive. But at the same time, travel management companies and online travel agents, as well as smaller agencies all over the world, play an essential role in completing an airline’s global sales network.

Hahn Air supports airlines’ global strategy and believes in the power of travel agencies. Our team goes beyond connecting 260 airlines with 91,000 travel agencies in 190 markets. With e-alliance and speed-alliance, we already provide airlines and rail companies that are not available through GDSs easy access to indirect distribution. Hahn Air’s latest product is e-direct. It promises

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I strongly believe in the future of indirect distribution.

But there is no doubt that direct distribution is relevant, indeed essential, for airlines today. travel agencies future access to full airline content, including ancillary services.

Wherever NDC is heading, there’s plenty more to come.

Hahn Air is already on its way, offering ADM-free services, insolvency insurance as part of customer protection, and neutral distribution platforms.

That’s the wow of the future. • DEC-JAN 2013-2014

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COMPETITION LEADS TO PROGRESS AND OPPORTUNITIES Makoto Natsume President & CEO Narita International Airport Corporation

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chieving 100 years of scheduled, commercial air transport should not be underestimated. The challenges have been many, from technical to political.

In Japan, for example, it has been only 50 years since the Japanese traveller benefited from the total liberalization of outbound tourism. And yet, in 2012, 18.4 million Japanese travelled abroad a year, while, at the same time, 8.4 million overseas tourists visited Japan and will be expected to exceed 10 million in 2013.

Aviation has come a long way. Back in 1914, not long after the famous Tony Jannus flight, the first civil aviation contest was held in Japan. The longest gliding time was 31 minutes 22 seconds and the highest recorded altitude was 6,580ft. Today, everyone can fly at 41,000ft of altitude and at a speed at Mach 0.84 in comfortably pressurized aircraft that get you anywhere in the world.

The global aviation industry is getting more and more important and will continue to contribute to the world’s economic growth. But unless infrastructure is kept upto-date and caters to airline needs, a part of that contribution will be lost. The story of Narita Airport typifies the challenge of airport expansion as well the great op-

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portunities available for all stakeholders if that expansion is delivered in time and cost-effectively.

Step by step In 2013, Narita Airport celebrated its 35th anniversary. During those past 35 years, we have created an extensive aviation network with countries around the world and we are proud to serve as the international hub of East Asia.

But such important developments have taken time.

And we cannot stop now if we are to meet the demands of the future.

In 1978, Narita airport opened with just its phase 1 facilities, including a 4000m main runway. In total, it

handled only 37,000 aircraft movements and some 4.9 million passengers. But the airport’s impact was immediate. Japan’s economic growth boomed and so did traffic demand. In fact, traffic grew so fast that the airport’s capacity limit needed to be expanded with the construction of phase 2 facilities almost immediately.

But 2002 was the next critical milestone when the second runway opened. Even though this created extra capacity, it was still not enough to meet the strong market demand in Japan. The resulting capacity constraint has been the biggest issue for Narita Airport ever since.

In 2010, the Ministry of Land Infrastructure and Transport (MLIT), the Chiba Prefectural Government, local government, and Narita fi nally reached agreement to expand airport capacity up to 300,000 aircraft movements, which represents an almost 50% increase in capacity.

This agreement provides great opportunities not only for the airport but also for airlines and local communities.

Since then, the Japanese Government has begun discussions with the United States as well as many ASEAN and European countries about open sky policies, including Narita. As a result, airlines are now free to open new routes, introduce additional fl ights, and commence operations to/from Narita airport. The open sky is perhaps the greatest change in the history of our airport and Narita sees this as an enormous opportunity.

The expansion to 300,000 aircraft movements a year will be completed in March 2015, on schedule. Even so, according to a new traffic demand forecast that MLIT released in September 2013, the expected demand will exceed the total capacity limit of Tokyo’s two airports, Narita and Haneda, around 2022.

Already, MLIT has established a technical subcommittee to study the feasibility for further expansion in airport capacities, including new runways or reviewing

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operating restrictions, to meet future demand. Of course, Narita has also established a working group to analyze the situation and support the technical study with MLIT. Updates of the Narita study will be made available as soon as possible.

Competition drives progress In parallel to this story, competition among airports is intensifying, especially with the ongoing development of mega-scale international hub airports in Asia. This puts extra pressure on Narita to come up with a viable solution to the capacity problem.

To become a chosen airport, one of the key strategies of the current three-year mid-term management plan, “Innovative Narita 2015”, is to reduce airport charges.

We have lowered the landing charge, but also have introduced an incentive package for additional aircraft capacity. These schemes apply to all new routes or additional fl ights from April 2013.

Narita’s priority is to maintain good relationships with all airlines to improve the customer experience and the efficiency of airport operations for all partners.

Furthermore, an important part of Narita’s development strategy is to fully support IATA’s Fast Travel and Checkpoint of the Future initiatives as a way to streamline and speed up passenger processing at the airport in a convenient and comfortable environment. Narita’s priority is to maintain good relationships with all airlines to improve the customer experience and the efficiency of airport operations for all partners.

As we stand on the threshold of a new century of commercial aviation history, Narita’s challenge will be to continue with its vigorous pace of innovation and ensure infrastructure constraints do not affect aviation’s ability to be a force for good. •

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INCREASING THE PACE OF CHANGE Aidan Brogan CEO Datalex

Unified retail platforms will ensure a seamless and consistent travel retail experience with one single view of the customer, via all points of the traveler journey

money rich and time poor, and demand appropriately tailored choice, value, and control. Gen Z consumer groups demands instant gratification, are always connected and share experience through extensive social networks.

Keeping pace with these consumer trends and leveraging advances in retail technologies, airlines have sought to provide value beyond the baseline seat. Many are already doing so profitably by merchandizing revenue-enhancing products and services while enhancing the traveler experience and economic value of the brand. Over the coming years, this will continue to require significant investments in technological, operational, and supply chain processes to optimize and deliver increased value and choice.

Those leading this transformation envision a future where airline retailers will drive much needed profitabil-

data both historical and in real time. Shopping and booking behaviors are broken down into a multitude of variables that describe the traveler, the shopping context, and the products with which they interact. Patterns emerge from the data as to which variables have the greatest strength of relationship with shopping conversion outcomes. In the future, your DNA will be your data and a crucial retail currency in the pursuit of active customer listening and engagement throughout the travel purchase continuum.

Current forecasting and pricing techniques will have to be modified or replaced. In the future, new capabilities will predict customer choice and total customer value for any channel or touch point. Airlines will ensure

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ity through appropriately tailored and optimized choice and service to the traveler.

reland has had a unique and pioneering aviation history over the past century, from the arrival of the fi rst non-stop transatlantic fl ight in 1919.

And as an Irish company, Datalex has enjoyed over a quarter century of charting the advancement of technology used to transform the airline retail experience.

To imagine the future requires a pioneering vision.

Could any of us have envisaged that the pace of technology today would progress more each hour than it did in its fi rst 90 years? It is less than a quarter century since the advent of the Internet and the emergence of online travel shopping. In that short time, online travel has grown to be the biggest ecommerce category representing nearly 40% of total ecommerce activity.

Could any of us have envisaged the world’s most typical person in 2013 to be a right handed, Chinese man who has a mobile phone but no bank account? Or that travelers are connected before, during, and after the travel experience by virtue of technological advancements? Millennial consumer groups have grown up with low cost airlines, are

Your DNA will be your data Already, consumers increasingly demand contextual, collaborative, and intuitive conversations with the airline retailer. They look for relevance and value, in real-time, and no longer desire to see aggregated content and choices that do not take into account who they are or where they are. They are willing to share data for value.

Today, big data science and technology are innovating at pace to capture large volumes of traveler behavioral

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The Search

The Departure

Optimized Pricing Customer Persona

The Flight

Mobility

The Arrival

The Destination

Personalized

Up-Sell & Cross-Sell

The Return

Redemption

High Margin Ancillaries 63

Inventory Control

UNIFIED RETAIL

Merchandizing

Big Data

Tailored Promotions

optimal availability and pricing for multiple trip components. This will be a big data challenge, and will likely dominate the future of revenue management discussions.

Unified retail Unified retail platforms will ensure a seamless and consistent travel retail experience with one single view of the customer, via all points of the traveler journey. Sophisticated merchandizing and personalization will enable extensive and optimized pricing and shopping for a multitude of travel offerings appropriate to each touch point. The traveler will enjoy a seamless experience online, on mobile devices, at airports, in-fl ight and at the destination. Customer data hubs will provide consistent data for all pre-trip, during-trip, and post-trip operations and a record of all offers and purchases at all touch points. This customer-centric retail architecture will be maintained across the entire value chain by virtue

Advanced Availability

Revenue Management

Total Value - Super PNR

Smart Data

of common industry standards that foster competitive differentiation of airline retail brand offerings.

Loyalty practice will evolve beyond traditional frequent flyer program constructs to deliver rewards and recognition to 100% of customers. New virtual loyalty currencies will evolve and contribute to innovative new merchandizing practices. Even for the right handed Chinese man with a mobile phone and no bank account!

Customer centricity Disruptive technologies and standards will continue to play a key role in enabling the growth and transformation of airline retail practice, providing the agility and control to champion and challenge many untapped retail opportunities throughout the traveller experience I do not dare to predict the next century of airline retail.

But I am sure the future will rely on customer centricity, the value it seeks, and the pace at which it invents tomorrow. • DEC-JAN 2013-2014

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THE FUTURE BEGINS TODAY Dr. Stefan Weingartner President, Commercial Maintenance MTU Aero Engines AG

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he growth in commercial air traffic is continuing unabated. Air travel has become an affordable and convenient means of transportation for leisure and business customers alike. And without air freight, people would have to do without many of the products to which they have become accustomed in their daily lives.

At the same time, optimizing the use of resources is becoming ever more important in the aviation industry.

This is why future aircraft and engines must be more fuel-efficient, cleaner, and quieter. MTU Aero Engines has for many years been working on innovative technologies to further improve the environmental compatibility and eco-efficiency of next-generation engines.

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An indispensable part of the GTF is MTU’s high-speed, low-pressure turbine. The company has for many years been specializing in low-pressure turbines and has become the world’s technology leader in this field.

The latest achievement, and a key to success with regard to green aviation, is the geared turbofan (GTF), developed jointly by Pratt & Whitney and MTU. The two companies are building a highly efficient engine that burns 15% less fuel, emits 15% less carbon dioxide, and cuts the perceived noise level in half.

An indispensable part of the GTF is MTU’s high-speed low-pressure turbine. The company has for many years been specializing in low-pressure turbines and has become the world’s technology leader in this field.

The first engine of the PW1000G family of environmentally- friendly engines incorporating MTU technology has made its debut on the Bombardier CSeries

jet and will be followed by the engine for the Mitsubishi Regional Jet. Most importantly, the next Airbus generation, the A320neo, will be powered by the PW1000G-JM family.

Other jet manufacturers that have also opted for this eco-efficient powerplant are Embraer for its next generation regional jets and Irkut for the Russian-built MS-21.

The geared turbofan concept is catching on. With more than 4,700 orders received by the end of autumn, the engine has already developed into a bestseller.

In fact, the engine offers more than a significant reduction in fuel consumption, carbon dioxide emissions, and noise. The propulsion system is much lighter than a conventional engine as it has fewer stages, and hence there is a lower parts count.

This is important because aircraft manufacturers and airlines are focusing on the whole life cycle of an engine, bearing in mind the total costs associated with both purchasing and operations. With its maintenance activities combined under the MTU Maintenance roof, MTU is also a key player for maintenance services for commercial aircraft engines. In that respect MTU Maintenance is constantly investing into new technologies that help customer save money and where possible contribute to lowering their environmental footprint.

With MTU’s high-tech repair approaches are globally unique, mostly patented and known under the trademark MTUPlus repairs. The techniques run the spectrum from automated selective stripping application of coatings to specialty high-temperature brazing and high-precision welding using automated laser machines – techniques and products that were developed in-house. With them, the life of the parts is increased and customers benefit from cost advantages. MTUPlus repairs are adapted to the processes of a customer-oriented, high-tech company and

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tailored to the requirements of the industry, thereby saving time, money, and resources.

All repair techniques are continuously being improved and optimized. And customers benefit from decades of expertise MTU has accumulated in engine manufacturing and from its extensive collaboration with research institutions and universities across the globe.

A good example of the company’s engagement in green aviation is the so-called MTUPlus ER Coating eco. This erosion protection layer for high-pressure combustor blades was developed with nanotechnology and considerably increases the life cycle of these parts. This

in turn lowers the specific fuel consumption and CO2 emissions of the engine.

Whether it is the geared turbofan or the innovative repair techniques, there are great potentials for savings and greener aviation. And the company is already working on further optimization: With its Clean Air Engine (Claire) technology initiative, MTU aims to reduce fuel consumption and carbon dioxide emissions by another 30% by the year 2035.

MTU Aero Engines will certainly not run out of ideas on how to successfully attain the goals it has set for itself to offer its customers more benefits and meet global environmental standards. • DEC-JAN 2013-2014

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THE REAL FUTURE OF PASSENGER ENTERTAINMENT J. Douglas Cline CEO Lumexis Corporation

hree years ago, a bravely aggressive low cost carrier, flydubai, introduced a unique High Defi nition InFlight Entertainment (IFE) system. It was operated on an unprecedented onboard fiber optic (FO) network.

Beginning in October 2010, the carrier installed this FO cabling and IFE in its factory-new Boeing 737-800s and to date has completed 26 of 44 189-seat cabin installations.

Subsequently, Transaero Airlines, Russia’s second largest carrier, validated widebody installation by retrofitting five B777-300s and four B747-400s to full-aircraft Audio Video On Demand (AVOD).

In both cases, Transaero increased passengers by 90–100 seats from the prior operator’s configuration and yet reduced the fully installed weight of IFE by more than a ton. As a result, the carrier will retrofit another 13 widebodies in 2014.

Both carriers have become strong supporters of Lumexis Fiber-To-The-Screen (FTTS) fiber optic technology. Over the next three years, multiple other carriers will be installing fiber optic IFE in hundreds more narrowbody and

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widebody cabins.

The benefits of FO IFE Ease of installation and weight savings from the application of fiber optic networks in IFE have been verified by the experiences of these launch customers. Moreover, the claimed 99%-plus seat availability has been well documented, validating expectations that the technology provides a quantum leap forward in lower cost-ofownership.

But is such improvement enough? Is there still a supportable need to continue with full cabin, embedded IFE when new terrestrially-based, consumer technologies are entering the scene?

At the same time as this revolutionary FO architecture is permeating the airline industry, consumer Personal Electronic Devices (PEDs) are becoming ubiquitous. These offer the promise of low cost, onboard entertainment as each traveler’s device can contain their own, personally tailored content.

Simultaneously, WiFi technology, widely available on the ground, is becoming airborne. So, not only will passengers have their own pre-stored content to enjoy on their PEDs but also by merely joining an onboard wireless network, they can access content cached in an onboard streaming server as well. The expectation is that within 5–10 years, every commercial aircraft—widebody or narrowbody—will have WiFi onboard available to passengers.

Acknowledging these twin realities, many pundits are predicting the near-term demise of embedded IFE. Certainly, there is broad support for this view. But this majority perception may well be missing key influences. And it can be strongly argued that this is once again the case here.

The retention of embedded IFEs Since its advent in the late nineties, in-seat personal TV has become a requirement for all long-haul widebody

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With the relatively simple addition of WiFi to the full-cabin embedded IFE, a second screen capability can be provided through your smartphone, tablet or laptop.

aircraft. Despite the historically high cost of purchase and maintenance, low reliability, and generally poor quality of video presented, essentially every airline carried it since their marketing departments were afraid of surrendering market share to competitors.

So, if passengers are just as happy with their own PED entertainment, every airline’s marketing department managers should be ready to dump embedded IFE. Right?

Wrong!

The very simple reality is that if the costs to own a screen in front of each passenger were acceptably low, every senior airline marketing manager would demand embedded IFE. Just as Google selects and delivers ads to their users terrestrially, any carrier wants to select and deliver ads to their passengers. The airline would then be able to force everybody to watch paid advertising such as destination videos, or its own advertising for food or catalog items. This is not the case when the passenger provides their own display device, their PED. The cost of ownership for embedded IFE has dropped dramatically. Acquisition prices have already dropped by half within the last couple of years for infinitely better systems. And, in reality, the cost-of-ownership has dropped much further due to improvements in cost-of-carriage (less than half the installed weight of legacy systems) and maintenance (demonstrably higher reliability).

One screen isn’t enough Moreover, more and more people are using multiple screens, on multiple devices in their offices and homes, operating simultaneously and full time. Thus, when watching a deeply entertaining HD movie on your big embedded

1080p resolution screen, why should you have to stop it to go over to the moving map application?

With the relatively simple addition of WiFi to the fullcabin embedded IFE, a second screen capability can be provided through your smartphone, tablet or laptop.

Simply by joining the aircraft network, the passenger duplicates his or her in-office or in-home flexibility to watch movies yet continue other activities. The simultaneous presentation of facts about each movie scene or moving map update or catalog or food shopping applications on such second screens is just the beginning.

Even narrowbodies are getting very long legs. Of course, the vast majority of narrow body routes will remain shortto-medium haul, but consider the formidable range capability of the Airbus NEO and the Boeing MAX. Would you like to be sitting against the window in coach for six hours having to hold your PED at a watchable angle?

With more and more point-to-point, thin routes, airlines will apply these new narrowbody aircraft in place of widebodies for such markets. Fortunately, embedded fiber optic IFE systems weigh less than half of earlier products and remove the prior constraints on range. As a result, uptake will actually increase substantially as these new generation, long-haul platforms enter service.

Dramatically more reliable, lightweight and highresolution fiber optic technologies have opened a new era of embedded IFE, supporting passenger entertainment and carrier ancillary revenue in both widebody and narrowbody aircraft. Moreover, complementary application of WiFi interface to passengers’ PEDs can substantially enhance the traveler experience and carrier revenues as well. •

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LIGHTER AND STRONGER Eric Young Managing Director, Nordisk Aviation Products AAR Manufacturing, Inc

68

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S

ince the appearance of wide-body containerized aircraft in the 1970s, Unit Load Devices (ULDs) have grown to become an indispensable part of global baggage and cargo operations. Today, airlines and freight forwarders operate over 800,000 ULDs with a replacement value of approximately US$ 1 billion, upon which US$ 300 million per year is spent in repairs and maintenance.

At first sight, the evolution of ULD design over the past 40 years may not appear to have been as dramatic as some other aspects of the aviation industry. But today’s container or pallet is a far cry from those used on the early Boeing 747 fl ights. Indeed, it is quite reasonable to say that without ULDs’ contribution to the efficient and reliable handling of cargo between shipper and consignee, the air cargo industry as we know it today could not exist.

The overriding functional performance requirements for ULDs are specified in aircraft Weight and Balance manuals and must be met without fail every time a wide-body aircraft loaded with ULDs takes off. Thus, it is of upmost importance that ULDs meet the same exacting standards for operation

Today’s ULDs are generally 30-40% lighter than their equivalents from the 1970s and maintenance as any other aircraft part and in fact, this is required by the aviation authorities.

The primary challenge facing any ULD engineer is to design a unit that can meet the aforementioned performance standards established by the Federal Aviation Administration and the European Aviation Safety Agency, while creating the lightest possible ULD which is also able to sustain the often harsh handling environment each unit may face over its lifetime.

For over 40 years, Nordisk has successfully balanced these often conflicting requirements and takes much pride in having played a significant role in the ULD’s evolution to-date. Sample Nordisk innovations include welded corner pallets, full width lower deck containers, all-aluminium 20 foot pallets, and today, having the lightest certified AKE in the market, weighing in at just 55 kg. Owned by AAR, a diversified $2 billion aviation industry leader, Nordisk counts nearly 200 airlines as loyal customers, from New Zealand to Finland, from Chile to Mongolia.

Today’s ULDs are generally 30-40% lighter than their equivalents from the 1970s, made possible by advanced design techniques coupled with the availability of new lightweight materials. They are also more volumetrically efficient, facilitating the use of every available cubic inch of the aircraft holds, utilizing a combination of body contours that enable their efficient use in different aircraft hold types.

Looking ahead, ULD manufacturers will need to continue to innovate to address the aviation industry’s many challenges such as high fuel prices, risks associated with the transport of lithium ion batteries and other dangerous goods, and fi nancial pressures. New repair-efficient designs, high technology composite materials and IT solutions have emerged as playing important roles.

Nordisk’s goal going forward is simple: to develop creative solutions that enable customers to increase cargo revenues, reduce operational costs, and improve asset risk management. Nordisk will continue to invest in its ability to deliver such solutions globally through production facilities in Norway, China, and the United States, plus spares inventory and locally staffed Service Centers of Excellence in each of the Americas, Europe/Middle East/ Africa, and Asia regions.

Here’s to another successful 40 years together! •

69

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TOMORROW’S PASSENGER WANTS SPEED, FLEXIBILITY, AND CONVENIENCE Jörg Möller Executive Vice President Travel & Transportation Wirecard AG

A

irlines need a mobile payment platform that is flexible and robust to meet the many challenges facing airline marketing and distribution.

Payment is often simply added-on functionality and not analyzed in the same way as a sales tool or marketing campaign. But it is just as important and can deliver added value for airlines and passengers.

Mobile devices are increasingly becoming multi-facetted, multi-functional tools that are bundling a wide variety of opportunities to make everyday life easier. In effect, they have become a central hub for the consumer, tracking every aspect of their life.

It make sense to ensure the payment method by mobile, is equally convenient.

70

It is not straightforward. All of the systems now available on mobile have to communicate with each other. A highly flexible infrastructure is needed and state-of-the-art outsourcing services are probably the most-effective option.

Wirecard has been working with a leading European airline and just such a challenge. The entire IT structure had been changed to a new booking system ystem and there was also membership of an airline alliance to consider. It added up to a multitude of challenges in terms ms of payment processing that had to be addressed.

The migration of several partners with simultaneous reconciliation of payment flows needed ed to be harmonized into a single platform. This would enable nable the airline to get easily access to reports and statistical stical data, and also to the single sales channels and payment ment schemes.

As a first step, the Billing & Settlement ment Plan was integrated into the platform, and a pilot project oject to test this was set up in just two weeks. The system was live within three weeks. Other systems were then added d in one at a time and a new payment method, direct debit, was implemented as well. On-board sales were another essential sential element, and their inclusion meant an expanded customer ustomer experience.

In other words, facilitating payment allows an airline to take a holistic approach to the passenger. ger.

After that, work started on the integration gration of a voucher solution, based on the use of UATP cards. As UATP is already available in all existing booking oking and clearing systems, the voucher could be used without any additional work throughout the systems. s. Furthermore, the voucher solution can be combined with ith any other airline and can be shared with each other, without any effort.

The end result is obvious and sustainable. ainable. On the basis of this platform technology, alternative ve payment methods can be integrated quickly and cost-effi fficiently into mobile systems in the future.

AIRLINES INTERNATIONAL

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We offer airlines our comprehensive knowledge and services that we have already realized for MNOs such as Orange and Vodafone. A mobile app which is already integrated in the payment process is the perfect key.

“We now feel pretty much prepared for any upcoming technologies,” says a spokesperson for the airline client.

“But this was just a part of the puzzle in terms of how to manage the needs to offer our guests a complete and seamless use of various sales channels. Payment is strategic, but you should outsource it to specialists to minimize cost and complexity.” •

We now feel pretty much prepared for any upcoming technologies

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TECHNOLOGY WITH PURPOSE Neil James Executive Director Corporate Sales and Product Management Panasonic Avionics Corporation

72

W

hen businessman Abram Pheil boarded a plane in St. Petersburg, Florida everything was focused on his personalized, exclusive experience. Red carpet, quick check-in, press photographers, and a seat next to the pilot, the only passenger onboard.

He had paid the equivalent of $5,000 for a 23 minute long flight to Tampa, over four years wages for an average worker in 1913.

Shortly after, Tony Jannus’ St. Petersburg-Tampa Airboat Line made two fl ights daily, six days a week. The regular fare was $5 per person and $5 per 100 pounds of freight. Tickets sold out for 16 weeks in advance.

Almost exactly 57 years later, Pan Am’s first Boeing 747 took off from New York with 326 passengers onboard. Food was served, flight attendants were rock stars, and Hollywood directors thanked airlines for showing their movies on 16mm film projectors. As air travel became more accessible, airlines shifted focus, scaling their businesses to accommodate the ever-increasing volume of travelers and the logistics management required to meet the demand.

The focus of the passenger experience shifted towards technology. It may come as a surprise, but technology onboard the aircraft has always been a step ahead. Panasonic introduced its fi rst Audio-Video-On-Demand System (AVOD) in the late 1990s when people at home were still recording Baywatch on VHS cassettes.

Today, passengers can experience a library of 600 movies in HD, 10,000 CDs, interactive applications, and geo-location—all from in-flight entertainment (IFE) systems.

They are also connected in flight to business contacts and loved ones on the ground through in-flight Wi-Fi. Global technology corporations are interacting with consumers on a magnitude of touch points throughout their lives, and it is essential that we combine the various AIRLINES INTERNATIONAL

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dimensions of innovation for a seamlessly integrated and purposeful experience pre, during and post fl ight.

Passenger expectations There’s a long list of technological, socio-demographic, and behavioral trends shaping passenger expectations and the characteristics of the future passenger experience.

In the not-so-distant future, passengers will be greeted by name on the seatback display, upload personal preferences, pre-selected content, and social profiles. They will be able to seamlessly connect to the onboard in-flight entertainment and communications (IFEC) system with their own devices to customize and create a just-for-me experience.

Knowing their customers individually and anticipating their individual needs and preferences, airlines can immerse passengers into a curated experience. An experience created not by but for the passenger.

On average, people carry around about 11 different sensors.

With every new generation of devices, including those on board, there are more ways to gather and process data.

In the not-so-distant future, passengers will be greeted by name on the seatback display

73

“Wearables” like the recently released Galaxy Gear smart watch are just the beginning. Clothes that capture body position and vitals are in early development stages.

Health insurance companies are researching the possibility of implanting transmitting chips under the skin. In addition to a diversification of single purpose devices, we will see a convergence of functionality and purposes into single devices.

With connected IFEC systems and personal devices airlines will have an endless stream of data flowing back from those devices. If done right, the mining of that data will improve the passenger experience in a non-intrusive way and allow airlines to better understand and communicate with their customers.

Future generations will live more public lives than ever before. At the same time, it will be harder to obtain and keep their attention. Our industry must fi nd ways build sustainable relationships with passengers that go beyond the products and services they offer. Capable, open interface IFEC systems will be a key to that endeavor.

Futurist John Naisbit concludes that we very rarely change what we do but instead change how we do the things we’ve always done.

As a result of that, the IFEC industry is challenged to continue putting technology with purpose in the hands of the airlines. It will allow them to deliver an evolving one-of-a-kind experience for every passenger, at every airport on every flight—just as Tony Jannus did for Abram Pheil 100 years ago. • DEC-JAN 2013-2014

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GIVING MESSAGING A NEW LEASE OF LIFE Richard Stokes CEO EDIfly - Innovative Software S.à.r.l.

T

he fi rst 100 years of commercial aviation has seen incredible improvments in many areas. But a standard introduced by IATA in the 1970s – more than 40 years ago – is still prevelant. Generally known as SITA Message Type B, it is a costly way to exchange operational messages among airlines, GDSs, airports, ground handlers, revenue management providers, and other relevant parties.

The industry has looked for alternatives to reduce the high cost of such exchanges, which amount to several hundred million dollars annually.

The issue has become increasingly important as new applications such as APIS (Advance Passenger Information), revenue management, and e-freight have created a surge in the volumes of Type B traffic.

Pundits had orginally suggested Type B was going to be quickly replaced by the more recent XML standards, which is the lingua franca of the Internet age. But while XML has many advantages it can be too complex for the bulk of simple data exchanges, especially as it is not accepted by older systems used by scores of stakeholders.

Indeed, it can be argued that prohibitive Type B

74

How EDIflytm works

Other EDIfly user

Public Internet

Other EDIfly user

non-EDIfly user

FTP

EDIfly server

MQ series

SMTP

Type B/X network |EDIFACT

Web services

EDIfly server & examples of back-end systems

non-EDIfly user

communication spend has limited progress of some IATA initiatives, such as Cargo 2000 and e-freight.

A new lease of life But it does not have to be this way. It doesn not have to be either XML or Type B messaging. The latest web technology can in fact bring a new lease of life to the older global aviation standard and allow stakeholders to establish direct links with all partners, whatever the system.

In a collaborative industry like aviation a peer-to-peer solution, similar to Skype, WhatsApp or Vonage, almost imposes itself.

EDIfly allows all aviation stakeholders to: • Manage highly secured free exchanges between EDIfly users • Avoid changes in applications or addresses • Prepare a smooth transition from legacy standards to XML • Reduce operating cost • Increase control over all exchanges through digital signatures • Enable a gradual cutover without a big bang Groups of airlines or alliances that command substantial volumes could harmonize their exchanges to leverage the peer-to-peer effect of EDIfly with their partners. All global users are automatically connected to each others.

The message handling capabilities of EDIfly actually go beyond Type B. Type X, XML, and EDIFACT can be processed just as easily. Moreover, Type B messages are not limited to 5,000 characters by this web-based technology.

EDIfly is not a vision, it is a reality. Since 2011, tens of millions messages were securely exchanged over this increasingly robust system. One client predicts to process 40 million daily messages using EDIfly.

Type B messaging is still with us. But that doesn’t mean we have to be stuck in the past. •

AIRLINES INTERNATIONAL

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FROM THE DESK TO THE CLOUD Gerry Kelly CEO Aviation Services Ireland

Client Airline Revenue System

SIS

Billed Coupons for audit & review

ASI audits & prepares SIS compliant fi le

Client Airline

IS-IDEC File

T

hose familiar with the old days of revenue accounting will recall staff arriving into the lunch canteen with red fingers and thumbs. These staff were immediately identified as coming from revenue accounting as their hands were stained with the colour of the passenger coupons. It seems like a bygone age but in fact it was only a short decade ago.

Ten years ago, airline backroom processing was enormously complicated and associated with desks filled with heaps of paper and hundreds of supporting staff. The operating revenue accounting technology and software was inflexible and expensive. Now, the revenue accounting office has much less staff and paper is a rare commodity. Shipment costs of paper between airlines have been all but eliminated.

These changes in backroom processing in the airline industry have followed on from changes in the customer experience.

The customer doesn’t hold a paper ticket any more but carries a mobile device for ticketing, check in, and boarding.

The backroom has also changed from paper-based recording

systems to a series of electronic file transfer processes.

Revenue accounting will no longer be centred on investment in one technology. There will no longer be a need for low cost staff in far off labour markets. The backroom process will be flexible, divided into a series of niche operations managed by service companies and all providing the airline data managed by the airline in the cloud.

Revenue accounting will be viewed as a number of separate electronic processes each supported and quality tested by niche providers. The head of revenue accounting will be a manager of a service supply chain rather that a multitude of staff. The revenue accounting staff will be technology experts fi rst and industry experts second.

ASI is just one of a number of service companies providing expertise in managing electronic billing fi les combined with an industry knowledge that owes much to the early days in aviation. The passenger interline process will be all about managing electronic billing fi les moving between airlines and ASI as a service company will ensure accuracy and data integrity.

In the future, cloud-based airlines will be billing each other for bags, meal and seat preferences, service fees, and all the other added value items that will generate ancillary revenues. The complexity of interline taxes will increase. The electronic billing files will need to be checked for accuracy to prevent revenue leakage. Processing and billing deadlines will be more important. Airline backroom technology will need to be flexible and niche service providers will allow the airlines to adapt to such changes without loss of revenue.

In the future too, airlines will be faced with the loss of key industry backroom skills and niche service providers will fill this knowledge gap, allowing revenue accountants to focus on analysis and management information.

The red thumbs are no more. The future for backroom processing is in the cloud. •

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Data

INDUSTRY DATA Traffic and capacity growth on international markets Air transport demand continued to improve in the third quarter, with passenger growth averaging 5.0% for the year to date, slightly ahead of capacity growth. The picture for cargo is more mixed, with growth levelling off after a mid-year improvement, which had left cargo volumes at a 25-month high. Freight capacity however continues to expand ahead of demand, pushing the freight load factor down below 45%.

40

Revenue Passenger Kilometers (RPKs)

% change over year

30 20

Available Seat Kilometers (ASKs)

10

Freight Tonne Kilometers (FTKs) Available Freight Tonne Kilometers (AFTKs)

0 -10 -20 -30

76

2008

2009

2010

2011

2012

2013

Source: IATA

TOP 10 Airports by passenger numbers (Aug 2013) 1

Atlanta (ATL)

2

Beijing (PEK)

3

London (LHR)

Premium traffic growth, selected routes Premium traffic growth slowed a little in September after a strong expansion in August. However, improvements in business confidence appear to be driving an increase in business traffic across the key North Atlantic route. A pickup in Chinese activity is also helping Asia-Pacific premium traffic to record a strong year-to-date growth of 5.2%.

Premium Traffic Growth Share of total Premium Traffic

Sep 13 vs Sep 12

YTD 2013 vs YTD 2012

Within Europe

22.4%

1.6%

2.3%

North Atlantic

17.3%

3.1%

1.5%

Within Far East

10.7%

8.9%

5.2%

Europe - Far East

9.3%

2.9%

3.1%

North and Mid Pacific

5.9%

1.6%

0.6%

3.3%

3.4%

Route area 4

Tokyo (HND)

5

Los Angeles (LAX)

6

Chicago (ORD)

7

Paris (CDG)

8

Dubai (DXB)

9

Frankfurt (FRA)

10

Hong Kong (HKG)

Source: ACI

Total International

Source: IATA Premium Monitor

AIRLINES INTERNATIONAL

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100 YEARS OF DATA Kilometers flown

1 Jan 1964: 10,082,192 1 Jan 1914: 30

1 Jan 2013: 80,416,438

approx

Operating profit per passenger (inflation adjusted)

Fleet 1 Jan 1914: 1 1 Jan 1964: 3,127 1 Jan 2013: 24,613

1914: $0

1964: $29.91

2013: $7.18

77

Passengers per day 1 Jan 1914: 1 1 Jan 1964: 421,918 1 Jan 2013: 8,547,945 Typical fare (inflation adjusted)

1914: $117

1964: $5,000

2013: $800

(Tampa-St. Petersburg, FL)

approx (Lon-NY)

approx (Lon-NY)

Cargo tonne kilometers performed

1 Jan 1914: Unknown

1 Jan 1964: 11,369,863

1 Jan 2013: 494,320,548

but very small

Sources: IATA, J.Bowen World Shapers: the geographical implications of several influential jet aircraft

DEC-JAN 2013-2014

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Soapbox

STRIKING THE RIGHT BALANCE Cooperation among all aviation stakeholders is essential to a robust and enduring future

I 78

Dr Assad Kotaite, President Emeritus of the Council of ICAO

n the century since the first commercial fl ight, air transport has evolved into a global mass transportation system and a catalyst for economic, social, and

cultural development worldwide. It offers a base for peace and development. It creates millions of jobs.

In 1945, one year after the Chicago Conference, nine million people were travelling by air. When I first joined ICAO in 1953 as a member of its Legal Committee, the world’s airlines carried 52.4 million passengers. When I retired as President of the Council of the Organization 53 years later, they transported over two billion passengers on scheduled services alone and today, more than three billion.

In spite of a quantum leap in passengers and departures through the years, air travel is as safe as it has ever been.

It is also as secure and as environmentally responsible.

This remarkable achievement resulted in part from the development by ICAO, and the implementation by its Member States, of more than 10,000 universally recognized standards, procedures, and policies covering every aspect of safety, security, and environmental protection.

Just as critical to the safe and orderly development of civil aviation was the commitment of airlines, airports, air navigation service providers, manufacturers, and all other stakeholders to work together in ensuring the integrity of global air transport.

For example, coordination between the ICAO Universal Safety Oversight Audit Program (USOAP), which checks States’ compliance with ICAO Standards, and the IATA Operational Safety Audit (IOSA) for airlines continues to play a key role in improving safety. Our ultimate goal must always be zero accidents and zero fatalities.

Above all, it was the realization that civil aviation is fundamentally a human endeavor, one where human beings are dedicated to enhancing the well-being of others wherever they may be across the planet, for business and pleasure, in good times and moments of natural disasters.

But what of the future? By 2030, ICAO forecasts the number of passengers will reach six billion annually and the number of departures more than 60 million. IATA

sees the potential for that to grow to 16 billion passengers and 400 million tons of cargo by 2050. Aviation carbon emissions are being carefully managed. The objective is to reach a carbon neutral growth from 2020 and a 50% emission reduction by 2050. Governments, airlines, airports, air navigation service providers, and manufacturers should focus and agree on investment in technology, effective operation, efficient infrastructure, and positive economic measures.

For that to materialize, we must build on the technical and operational successes of the past. At the same time, we must provide for a regulatory framework that allows the air transport industry to adjust to the evolving marketplace realities of a globalized economy.

It is a challenge of truly planetary proportions. In the course of 100 years, air transport has grown into an essential, indispensable component of our “global village.”

In many ways, it has become too big to fail.

As the irreversible process of liberalization of the industry unfolds, we must continually strive for balance.

While there can be no growth in air transport without safety and security, no civil aviation can prosper without sound economic policy and good governance.

Achieving and maintaining this sometime-elusive balance has been for me a life-long mission. Throughout, I was inspired by the Convention on International Civil Aviation and its Preamble that reflects the will of States “that international civil aviation may be developed in a safe and orderly manner and that international air transport services may be established on the basis of equality of opportunity and operated soundly and economically.”

In the second century of commercial fl ight, the key to meeting that goal will be total and unfailing collaboration among all members of the world aviation community.

And as it has always been, ICAO will remain the global forum for the expression of this universal desire for cooperation and dialogue among nations of the world. • www.icao.org

AIRLINES INTERNATIONAL

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IATA.11.13.079.indd 2

15/11/2013 14:57

MTU – Maintaining your power

pair Fu l l r e i t y f o r il c a p a b 0 G r ow t h 9 the GE

At MTU Maintenance, we believe in streamlined, cost-effective results. We are the world’s largest independent engine service provider, combining the benefits of state-of-the-art technologies, decades of expertise, customized maintenance solutions and process excellence. MTU’s extensive MRO portfolio now also includes the GE90 Growth. Dedicated to support you. www.mtu.de

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