L IA N C E IO 2 SP DIT UE E S IS
I N T E R N AT I O N A L DA I LY 23 SEPTEMBER 2016
WORLD FINANCIAL SYMPOSIUM
Airlines International Daily is sponsored by:
21-23 September 2016 | Singapore
The business of freedom In his fi rst speech as IATA’s Director General and CEO, Alexandre de Juniac stressed that aviation is in the business of freedom. “The connectivity that we provide brings people and businesses together, enables global supply chains, and connects families and loved ones. The world is a better place for the freedom we provide.” He noted, however, that the current fi nancial success of the industry and its sustained fi nancial health—critical to the delivery of these benefits—should not be
taken for granted. “We have built greater resilience into our operations,” he said. “The roots of our fi nancial success lie much deeper than lower oil prices. But that does not mean we are immune to sudden shifts in fortune.” There are significant regional variations in profitability and the industry remains vulnerable to world events, such as an increase in the number and intensity of terrorist acts aimed at aviation and air travel or a sudden rise in oil prices. Other
potential risks include a global economic downturn and a retreat from the principles of free trade by one or more major economies. All of which, de Juniac said, “should point us in the direction of vigilance.” He urged speed and innovation as defences against such risks. “We need to be prepared to react quickly when the environment changes. That’s not easy for any business—and it is a real struggle for process-driven industries like air transport.” The WFS theme of high performing fi nancial organizations is a way forward. But, de Juniac stressed, high performance must also permeate the entire organization. “The dream team for any CEO has high performance across all of its functions, so that effective decisions can be made swiftly,” he said. “That’s what drives innovation with speed.” Innovation is one of four themes outlined in IATA’s Financial Committee White Paper for supporting sustained industry fi nancial health alongside smarter regulation, value chain optimization, and more efficient processes. “You can count on my continued support of these initiatives,” de Juniac said. “These resonate particularly well with me because each has an element of partnership. Our organizations are built on teamwork and the industry is founded upon partnerships.”
K E E P U P T O DAT E W I T H A L L T H I N G S A I R L I N E S R E L AT E D AT A I R L I N E S . I ATA . O R G
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IATA WORLD PASSENGER SYMPOSIUM WILDLIFE TRAFFICKING
18-20 October | Dubai, UAE
Innovating Better - TOGETHER Register now! You won’t want to miss WPS 2016. Hosted by Emirates, in the magnificent city of Dubai, WPS 2016 will once again shine the spotlight on innovation through collaboration as we continue to focus on improving the customer experience. This year’s symposium will feature an agenda focused on “Innovating Better - Together.” We will address the current transformation taking place within the industry in the areas of distribution, customer experience, airport operations & baggage, and IT & technology.
Register today at: www.iata.org/events/passenger-symposium/ W W W. I A T A . O R G . U K
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3 I ATA W O R L D F I N A N C I A L S Y M P O S I U M
Airlines facing “War for Talent” There is a ‘war for talent’ taking place in the world economy today, with companies from other industries keen to hire airline chief fi nancial officers (CFOs) because they are considered “battle proven”, says Michael Bell, consultant at executive recruitment fi rm Spencer Stuart.
fi nance. Meanwhile, six came from the commercial function, says Michael Bell. He says of the five CFOs who made the move to being CEO, four were internal appointments. Rachele Focardi, senior VP of employee branding and talent strategy APAC at Universum, says
“A lot of airline CFOs are being recruited, because they are seen to have an unrivalled education working in challenging industries,” says Bell. He says a survey of CFOs, done by Spencer Stuart, reveals that the top reasons given for why airline CFOs leave for another industry is because of: compelling opportunity in another industry, far superior compensation than in the airline industry and the other reason given is they leave because of instability in the airline industry. There are also signs that airline CFOs are fi nding it hard to fi nd opportunities to step up to CEO level in the airline industry. “Spencer & Stuart looked at CEO level appointments and found that of the 17, only five came from
one of the challenges airlines face is attracting the fi nancial talent they need. “We look at the fi nancial talent extensively but the feedback we’re getting is, they don’t see the airline industry is a viable [career] option for them.” She says it is important that airlines communicate in a way that attracts talent. “There’s a lot of competition out there for talent,” she adds. Focardi says talent retention is another issue. “The two main reasons people leave is, they feel they stopped learning. And the other reason often given, is multigenerational confl icts in the workplace. The latter issue is fundamental to the millennial generation. You have to make sure your managers are equipped to understand this new generation.”
IATA and CAAS exploring having ‘Big Data’ centre in Singapore IATA and the Civil Aviation Authority of Singapore (CAAS) are looking into establishing a global centre here in Singapore that will analyse airline data to help with safety and predictive maintenance. The director general of CAAS, Kevin Shum, announced the initiative at the opening session of the IATA World Financial Symposium (WFS). Airlines are wanting to make use of ‘Big Data’ to improve safety, on-time performance and aircraft maintenance; but there are synergies to be gained if airlines combine their resources for such an initiative, Shum tells Airlines International Daily on the sidelines of the WFS. He says the ‘Big Data’ centre, that CAAS and IATA are looking into establishing, would aim to serve airlines around the globe. Shum also disclosed that CAAS and IATA are involved in a trial - along with the air navigation service providers of China, Hong Kong, Thailand, Vietnam and Indonesia - to develop the methodology to flow more smoothly the traffic between their respective airspace. The Air Traffic Flow Management (ATFM) system provides some very practical benefits for airlines, says Shum. He says it allows airlines and airports to have better predictability of departures and fewer fl ight delays, he adds. IATA regional VP Asia Pacific, Conrad Clifford, says the fi rst ATFM trial took place in August.
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4 I ATA W O R L D F I N A N C I A L S Y M P O S I U M
Don’t overplay importance of CFO: Joyce Airline chief financial offers (CFOs) are a key advisor to the airline CEO, but an airline CEO needs a team of advisors with different skill sets and perspectives, says Alan Joyce, CEO of Qantas Airways. Joyce says the CFO is usually the first person he speaks to each day when he comes to the office. This is by virtue of the fact that his desk is next to the CFO’s. But he says it is a mistake for a CEO in any industry to only have one strategic advisor. “I am a big believer in diversity and inclusivity. Having silos and divisions only leads to bad outcomes,” says Joyce, who was speaking on yesterday’s opening panel that addressed the question: “Is finance the preferred strategic partner of the airline CEO?” Joyce says it is important for a CEO to have a team of advisors with different skills sets and knowledge, as well as a good knowledge of the different parts of the business. He says Qantas has undergone an enormous transformation in recent years to profitability. “Our cost base was too high and customer service levels were not appropriate.” If the finance department had been the one solely in charge, the
focus would have been purely on cutting costs, says Joyce, adding that in order for Qantas to succeed, it needed to do more than that. “We needed to boost revenue, renew the fleet and improve customer service.” Robert Martin, CEO of BOC Aviation, says having finance people with foresight is key to an airline’s long-term viability. “There are 780 airlines operating in the world, but only 25% have more than 20 aircraft. Many don’t have the financial strength of a Qantas. So it is important [for the CFO] to have the ability to think ahead about what future turbulences may arise and ensure the airline is prepared financially to deal with that.” Martin says some of the recent “turbulences” gripping some airlines includes the sudden currency devaluation in Angola and the Brazilian Government’s decision to designate Ireland as a tax haven. Irish leasing companies have aircraft leased to Brazilian carriers, so Martin predicts the government’s move will increase those carriers’ lease rates by 25%. It has been announced that the government plans to increase taxes on lease rentals from Irish lessors.
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5 I ATA W O R L D F I N A N C I A L S Y M P O S I U M
Integrate your financial processes to better manage costs, risks and cashflows An interview with John Johnston, CEO of Accelya Group
Tell us about Accelya? Accelya has been in the business for four decades. We help over 200 airlines manage their fi nancial processes and gain insights on their business performance. Our expertise
spans across all critical airline fi nancial processes – Revenue Accounting, Payments, Audit & Revenue Recovery, Incentive Management and Cost Management. We also partner with IATA on industry-wide mission-critical initiatives such as BSP Processing, BSPlink, SIS e-invoicing and Neutral Fare Proration. We have always been at the forefront when it comes to simplifying complexities for the airline industry and you don’t stay at the forefront for as long as Accelya has without being innovative, agile and committed to quality.
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How is Accelya helping airlines overcome complexities in the financial processes? Accelya enables airlines to integrate and simplify their financial processes. Our partnership with airlines starts
Analytics is on everyone’s top agenda. What does Accelya offer in this space? Airlines are constantly looking for new opportunities to reduce costs or increase revenues. We have noticed that there are
from the time a ticket is issued, all the way through its entire financial lifecycle and until the data is converted into actionable intelligence. This allows the CFO to better manage costs, risks, revenue leakages, cash flows, profitability and overall business performance.
substantial opportunities hidden in their existing processes. Our experts use a combination of advanced analytics and deep understanding of the aviation industry to identify hidden business potential within airline processes, be it Network Planning, Revenue Management, Sales and Marketing, Alliances or Finance. Our approach to analytics is ‘minimum investment, maximum returns’ for the airlines.
What do you think is the secret of Accelya’s success in solving these challenges? I believe People + Innovation + Relationships; is our formula for success. All the three in equal measure helps us create value for our customers.
Upcoming Airlines International Daily publications include: World Passenger Symposium, Dubai – October 18-20, 2016 AVSEC World, Kuala Lumpur – October 25-27, 2016 IATA Ground Handling Conference (IGHC), Bangkok – May 21-24, 2017
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6 I ATA W O R L D F I N A N C I A L S Y M P O S I U M
Blockchain shows industry potential IATA is investigating the potential of Blockchain, a technology that is having an impact many industries
Dealing with Venezuelan blocked funds ATA has filed a request for antitrust immunity with the US Department of Transportation to allow airlines to discuss options to maintain connectivity to Venezuela in light of the Venezuelan government’s continuing refusal to release $3.8 billion in airline funds. “The economic situation in Venezuela is grave,” said Alexandre de Juniac, IATA’s Director General and CEO. “And it will be made worse if airlines cannot maintain connectivity as the blocked funds issue drags on. Despite years of effort by IATA and its members to resolve the issue, there has been little action by the Venezuelan government. We are now asking the US government to approve antitrust immunity for discussions among airlines focused on maintaining connectivity while the blocked funds crisis persists. This is an escalation of the industry’s efforts to find a solution to this untenable situation.” Venezuela’s refusal to allow repatriation of airline revenues contravenes its obligations under international agreements. Many bilaterals include provisions that require the timely repatriation of revenues to the home
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country of the air carrier. Bilateral investment treaties to which Venezuela is a party contain similar obligations. Since 2003, Venezuela has operated a currency control system that prevents foreign airlines from repatriating their funds without government approval. By 2013, approvals to repatriate funds from Venezuela were not keeping pace with the amount of funds requiring repatriation and significant airline revenue accumulated in the country. In 2015, only one request to repatriate funds was approved and there has been only one approval to date in 2016. “Carriers have been forced to cut back services in light of blocked funds issues,” de Juniac added. “That, unfortunately, limits the important role that aviation could play in reviving Venezuela’s economy.” “To be clear, we are not planning to do anything that is anti-competitive,” he continued. “On the contrary, we are seeking to agree a global approach to allow our member airlines to keep Venezuela connected to the world and do business normally in a country that is not meeting its international obligations.”
In its most basic form, Blockchain records ownership of a given asset in a “block” and historical transactions in a “chain”, across a wide network of computers,” says Juan Ivan Martin, Head of Innovation, IATA Financial and Distribution Services. “With this digital medium, money, stocks, bonds, and so forth can be moved, stored and managed securely and privately”. Blockchain has the potential to disrupt a number of industries, as it generates by design trust without a third party. This is a paradigm shift that is creating opportunities for disintermediation, the emergence of new business models and industry solutions. IATA is studying the potential application of Blockchain to support air transport industry objectives. The assumption is that it would enable innovative and customer-centric products, for example, as well as promote lean, seamless end-to-end industry processes. The global nature of the latter would assist with the push for smarter regulations. Security and confidentiality are also listed among Blockchain’s attributes. “Blockchain is an exciting new technology with the potential to reduce cost, increase security, automate processes and accelerate flows, that’s why we are studying potential use cases to support aviation,” Martin adds.
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7 I ATA W O R L D F I N A N C I A L S Y M P O S I U M t Stepha n Co pa rt, m from left to righ WFS org anizing tea sen ior VP Aleks Popovich, A, IAT at y teg hea d of stra Ruba Ab dul Aziz, vice at IATA and ser n utio trib dis fi nancia l & events , at IATA sen ior ma nag er
Your IATA WFS team Asia Pacifi c regional team
Session leaders
Com mercia l tea m
Communications team
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8 WILDLIFE TRAFFICKING
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