IATA World Financial Symposium 19th September 2018

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Wednesday 19 September 2018: Issue 01

Airlines.

5th World Financial Symposium

SPONSORED BY

September 17 - September 20, 2018 | Madrid, Spain

Welcome

to the 2018 World Financial Symposium (WFS). We’re continuing with the theme of “Innovate – Accelerate – Deliver”, with emphasis this time on strategies to achieve accelerated delivery of our industry agenda! To this end, this year we will explore how partnership can help the airline industry transform at speed to deliver sustained airline financial health.

ISSUE 01

The expected surplus of $33.8 billion in 2018 will mark the ninth consecutive year of industry profits and the fourth year in which airlines will make an aggregate return exceeding their cost of capital. It is clear evidence of aviation’s strong financial performance.

Costs are rising, however. The industry will be sorely tested this year, with fuel prices up as much as 40% over the past year. No surprise that earnings are being squeezed and will slip from the $38 billion achieved in 2017.

Engaging our partners earlier and

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more effectively will be critical to the accelerated delivery of industry change.

Also, now more than ever, a HighPerforming Finance Organization is crucial in guiding the entire airline workforce to hit tough financial targets.

WFS is the forum for aviation finance professionals to come together to discuss and debate the challenges to achieve sustained financial health.

The opening plenary will include sessions on a Strategic Roadmap in Supporting Sustained Airline Financial Health; How Digital Transformation is Changing the Airline Landscape; and fireside chats with key industry leaders.

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Aleks Popovich

We will also have specialized tracks covering everything from payment regulation and fraud prevention to digital transformation and the future of hedging. In addition, the Innovation Jam Session will return for a second year. There will also be a High Impact Seminar to which senior executives of airlines and industry partners are invited. It is sure to be an exciting and informative few days for everyone.

Aleks Popovich, IATA’s Senior Vice President, Financial and Distribution Services airlines.iata.org

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Wednesday 19 September 2018: Issue 01

Transforming airline finance processes with a comprehensive solutions portfolio

11.25am Financial Committee update Main auditorium

SPONSORED BY

The transformation journey An interview with Neela Bhattacherjee, Executive Vice President—Financial Solutions, Accelya.

Do you believe that the role of airline finance has evolved in the last few years?

Absolutely. Airlines have a wealth of financial data at their disposal. Airline finance leaders need to leverage technology to turn this data into meaningful insights.

In addition to managing cost, revenue, profitability, and compliance, they are also the co-pilot of their organization, guiding the airline to success.

How is Accelya enabling this transformation for airlines and their finance teams?

We combine our comprehensive solutions, industry best practices, and consultative approach to simplify airline systems—across the order-to-cash and procure-to-pay lifecycles; while improving quality of revenue and reducing cost. At the heart of our solutions is the rich data we leverage to provide actionable insights for modern finance departments.

What has been your most recent contribution towards this?

We believe in agility, innovation, and continuous investment to support the airline finance function.

We have partnered with Mastercard to offer a Payment Gateway solution. This enables us to deliver a true end-to-end payments solution for airlines.

Last year, when Accelya and Mercator combined, I mentioned that integration of our revenue accounting portfolio was our priority. I am happy to share that our new version reflecting the best of both our solutions— REVERA® and RAPID— is ready and has been implemented by many customers. We also invested in Artificial Intelligence and advanced analytics capability.

Achieving sustained financial health in the industry means overcoming several challenges.

Some cost elements, such as fuel, are difficult to predict despite the significant impact on the industry’s financial health. There is also the fast-changing environment of various spend areas with which to contend. Cost savings achieved for the industry just a few years ago could be at risk again due to new regulations, changes in accounting standards, or new supplier business models.

“We need to adapt quickly, review our strategy, and constantly amend our approach,” says Michael Doersam, SVP Group Finance, Emirates and Chair of the IATA Financial Committee.

Challenges are being compounded by the transformation journey many airlines have embarked on to respond to the dynamism of the industry. Changes to the business model need to be supported even as the associated new costs areas are properly assessed.

“A modern airline finance organization of today can’t be compared with the one from 5–10 years ago,” says Doersam. “Business transformation requires a significant investment in change management for our staff, which needs to run in parallel.

Whereas we only looked at a standard accountant job profile in the past, today’s requirements are far more diverse.”

Agility, flexibility, and a constant learning environment are key components of a high performing organization, not only for finance.

“Our traditional approach takes far too long with the risk that new players will move into the open space and limit business opportunities for us as airlines,” Doersam believes. “That’s one key element why airlines and our partners are here in Michael Doersam, Madrid to discuss during the WFS and the SVP Group Finance, High Impact Seminar how we jointly better Emirates and Chair of the accelerate and deliver with speed.”

IATA Financial Committee

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“A modern airline finance organization can't be compared with the one from 5-10 years ago.”

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Working to prevent fraud

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15.55pm Fraud Prevention Munich Room

“Only by working together, machines and humans, can sustainable progress be built.”

Anca Dolocan, Portfolio Manager, Card and Fraud Services

Fraud is a major challenge for aviation. The cost of “card not present” fraud—where the buyer does not physically present a card for inspection—is estimated to cost airlines close to $1 billion every year, according to IATA. And the potential cost of fraudulent frequent flyer activity is even greater. Loyalty program credits are currency, just as good as cash. They are travel’s equivalent of the bitcoin. With The Economist estimating that there are 23.8 trillion unredeemed miles in the industry and each mile valued at $0.01, meaning $238 billion is at risk.

Already, Cambridge Intelligence has reported that fraudsters have exploited 72% of airline frequent flyer programs (FFPs) and that about 80% of frequent flyer fraud is only discovered by pure accident. In 2016, the Industry Fraud

Prevention project began laying the foundation for fraud detection and loss reduction, establishing best practices and setting standards in all aspects of fraud prevention. It also enabled benchmarking to improve industry performance.

A year later, fraud management became operational within IATA and in 2018 two fraud prevention working groups were created under the IATA Standards Governance Passenger Service Conference to provide recommendations in card and FFP fraud prevention. These best practices should be validated as IATA Recommended Practice by the end of the year for the benefit of the entire industry.

IATA is also leading airline cooperation with international law enforcement agencies, particularly as fraudulent activities occasionally turn out to be related to other crimes, such as human trafficking, drug smuggling, and terrorism.

“We also cooperate with a range of service providers to ensure the best available tools and services are being promoted,” says Anca Dolocan, Portfolio Manager, Card and Fraud Services. “The IATA FraudClear and Perseuss tools offer a unique, real time, fully automated or communitybased solution for fraud management for airlines and travel agents. As we say: it takes a network to defeat a network. This is what IATA is aiming to build to ensure the fraudsters get less and less efficient in attacking our industry.”

But there is no one-size-fits-all solution. Rather, a combination of technology and appropriately skilled humans must be tailored to the circumstances of individual airlines and organizations.

“Each airline should plan their strategy individually and coordinate with peers and IATA for the best possible solutions,” Dolocan advises.

“Only by working together, machines and humans, can sustainable progress be built.”

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WFS Welcome Reception

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Delegates from around the world enjoying the Welcome Reception as sponsors Neil Gabriel - Accertify (inset top) and Amit Desai - Tata Consultancy Services (inset middle) address guests ahead of the World Financial Symposium 2018

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Making the most of finance talent 6

The role of the airline finance professional is changing. It’s less about old-fashioned number crunching and transaction processing and more about being a value manager with a focus on critical areas such as payment, risk management, decision support, and data analytics.

This transformation is at the heart of financial sustainability and turning airlines into High Performing Finance Organizations (HIPO). But getting an entire organization aligned behind financial targets and sustaining financial health depends on attracting top finance talent.

“We’re taking a multi-pronged approach that is focused around attracting candidates, developing, and retaining the airline’s existing finance talent pool and building a sustainable community of airline finance professionals,” says Aleks Popovich, IATA’s Senior Vice President, Financial and Distribution Services.

Under the Financial Committee's guidance, IATA has launched an airline finance internship program with leading universities worldwide.

In the few months that the program has been up and running, 55 candidates have applied for internships and seven airlines have committed to offer up to 26 intern positions. So far, three candidates have been placed with an airline. The 2018 target calls for 20 airlines to provide internships for up to 50 candidates, however, so

IATA would welcome additional airlines into the program. IATA has also formed the IATA Finance Academy to prepare the existing airline workforce to support the HIPO pillar.

The curriculum is being built on such subjects as Decision Support and Analytics; Airline Finance Transformation; Financial Risk Management; Payment and Liquidity Planning; Process and Project Management; Aircraft Financing; and Cost Management.

“Our target audience for the IATA Finance Academy is existing airline professionals within and beyond Finance who are in need of development as value managers,” explains Popovich. “Class registration is open at this year’s World Financial Symposium and courses will start being offered in 2019.

“By developing and recognizing the financial skillsets that are going to deliver the most value to airline leadership, we’re raising the profile of the finance function within the airline and creating conditions and incentives to ensure we have the right finance workforce in the airline industry, today and in the future.”

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Wednesday 19 September 2018: Issue 01

Partners for transformation

The 5th Edition of the IATA World Financial Symposium has a very focused theme: accelerating the delivery of innovation and digital transformation of finance in the aviation industry.

In the past year, the message coming out of industry discussions was clear; innovation with

speed was an important gap and needed to be addressed if the overall industry was to sustain its financial health. IATA studied the most disruptive elements in the industry and their impact on finance. It became obvious that digital transformation must be accelerated, and the right innovation ecosystem developed to foster ideas, engage with new stakeholders and quicken the pace of project implementation.

One persistent comment in the various discussions and initiatives in the past year was that success would only come with the strategic engagement of partners, what is referred to as Partners for Transformation.

The High Impact Seminar, an exclusive session for Airline CFOs and key partners, will showcase how partnership can be leveraged to create healthy discussions and ensure that the industry moves forward with the digital transformation of finance for the benefit of all.

13.45/15.55pm High Impact Seminar

Digital

transformation must be accelerated, and the right innovation ecosystem developed 7

Aligning payment and distribution According to Christophe Kato, IATA Head, Payment Services, any changes to an airline’s payment strategy must be aligned with its distribution strategy.

“It would be difficult to look at the constant stream of payment innovations and decide what solutions appear to be opportune without having a strategy linking each distribution channel, the expectations of the customers favoring each channel, the mix of payment instruments already supported and their related cost of acceptance, and the direction required to achieve balance between increased sales and cost reduction,” he says.

Once this exercise has taken place, it should appear obvious what payment instruments need to be added to the existing mix. There are many suppliers available to take the strain should an airline not have the resources to explore payment innovation. Some have extended their business model into providing clearing and settlement

13.50pm Payment Main auditorium

“There is always an element of hype in a new payment instrument.”

Christophe Kato, IATA Head, Payment Services

services, including repatriation of funds. Kato also warns that “there is always an element of hype in a new payment instrument.”

“An airline may either look for the good PR from actioning a new payment instrument, or forego the attention, but also spare itself the challenges as an early adopter,” concludes Kato. airlines.iata.org

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