IATA WFS September 2017

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 28 SEPTEMBER 2017

WORLD FINANCIAL SYMPOSIUM

Airlines International Daily is sponsored by:

27 - 28 September | Dublin, Ireland

COPING WITH A CHANGING WORLD

I

t has been a busy 12 months for IATA’s Financial Committee since it last met.

The Committee and its working groups have been focused on the delivery of actions highlighted in the Committee’s white paper.

“We’ve seen positive results in avoiding new fees and charges or being able to lower existing ones for our members,” says Michael Doersam, SVP of Group Finance at Emirates and Chair of the IATA Financial Committee.

“In various countries, we’ve managed to clarify and simplify the administrative processes for accounting for and settling airline ticketing taxes.”

Other encouraging developments include the smooth introduction of aviation sector VAT in India. In addition, Billing and Settlement Plan (BSP) and Cargo Account Settlement Systems (CASS) operations worldwide have been further strengthened and processing charges are running below IATA’s five-year target.

The industry continues to face challenges w ith blocked f u nds a nd repatriation restrictions, however. Though solutions were found in some jurisdictions, the situation remains critical in a number of countries.

Another key focus is the automation and simplification of industry-wide fi nancial processes. O ver the past 12 months, enhancements have been agreed, developed and deployed for the IATA Clearing House

Michael Doersam, Emirates

and carriers’ interline settlement procedures, among many other areas.

The Financial Committee continues to discuss whether the white paper actions are challenging enough, from a theme and solution delivery perspective. “There will always will be a difference between an individual company and an industry body like IATA representing all its members,” explains Doersam. “But enabling and driving innovation needs to be a focus of the Financial Committee and our working

groups. We have to get faster. Most likely the industry will see significant changes to its business models, some coming from the inside and some from the outside. We will have to identify solutions very quickly.”

Doersam explains that the theme of the 4th WFS—Innovate – Accelerate – Deliver— provides a clear picture of the financial sector’s intentions. “If we identify with IATA that our current structures don’t allow for such a required change, we will have to discuss and fi nd a solution for it,” he asserts.

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 A T A . O R G

W W W. I A T A . O R G / E V E N T S

2 WILDLIFE TRAFFICKING

15

W W W. I ATA . O R G . U K

DatalexNewsletter01.indd 1

11/09/2017 17:15

17 17:15

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

ONE Order to deliver cost savings, better passenger experience

T

(L to R): Mladenka Vukmirovic, Maureva; Debasish Laha, Accelya; Sezer Tug Ozmutlu, Hitit; Henry Coles, IATA

he opportunities airlines have

ticketing as an example of where huge savings

to make significant cost savings

have been made - the adoption of e-ticketing is

by implementing the ONE Order

estimated to have saved airlines $3 billion per year.

initiative were discussed at the

Total Cost of Distribution track yesterday.

“Advanced technology can drive costs even lower,” said Ozmutlu.

ONE Order is the concept of a single customer

“With ONE Order, all the entities involved

order record. It holds all data elements obtained

will access only one record to get the required

and required for order fulfilment across the air

data and make the necessary updates.

travel cycle, such as customer data, order items,

“The inefficient processes and excessive costs caused by separate records will be eliminated.

payment and billing information.

Sezer Tug Ozmutlu, CFO at Hitit Computer Systems, says modernizing processes is vital for airlines. She highlighted the move to electronic

by having just one reference, this means airlines can increase their ancillary services,” she suggested.

This will help airlines to save money, and greatly simplifies the passenger experience.

“Also, as ONE Order will reduce the cost

On the panel: Henry Coles, Head, Airline Distribution Standards, IATA, • Gianni Pisanello, Head of Airline Channel Management, Global Airline Distribution, Amadeus • Sezer Tug Ozmutlu, CFO, Hitit Computer Systems • Debasish Laha, Head, Mercator Airline PSS, Accelya • Gunther Meyer, Head of Interline, Lufthansa Global Business Services • Mladenka Vukmirovic, Chief Innovation Officer, Maureva • Stephen Luurtsema, Travel Industry Consultant, Travel in Motion

Industry finances strong but risks on horizon Brian Pearce

I

ATA C h i e f E c o n o m i s t Brian Pearce is optimistic the airline industry can continue to flourish fi nancially, but highlighted risks that could curtail profitability.

T h e a i rl i n e i ndu s t r y i s expected to post earnings of $31 billion in 2017, on total revenues of $743 billion. This comes against the backdrop of a strong global economy.

“We’ve got booming markets, said Pearce. “If you combine the cargo and passenger businesses, we’re going to see about 7% or 8% growth this year, perhaps even higher.”

This is compared to a 20-year growth rate of 5%. But Pearce warned that although profit

margins remain at historic highs - and almost double their level of five years ago - they are being squeezed as costs rise.

“We’re probably past the peak [margin rate],” says Pearce.

“Margins remain high, but the best improvement was in 2016.

“We’ve seen costs accelerate qu ite sha rply thoug h. Th is was initially from the rise in fuel prices, but also in labor costs to o. T he i nc rea se i n infrastructure costs is also providing a challenge. Cost control is goi ng to be ver y important.”

Pearce also highlighted the fact that trade levels have not recovered si nce t he g loba l fi nancial crisis. He says this,

W W W. I A T A . O R G

coupled w ith a n u nstable pol itica l la ndscape, cou ld threaten profitability.

“The world is very different now in terms of cross-border trade a nd i n terms of the openness of borders, than before the global fi nancial crisis,” he said.

“The good news is over the last six months we haven’t seen the threats of an outright trade war in terms of tariff s. That’s been averted, at least so far. “ We ’re a n i n d u s t r y t h at fl ourishes with open borders.

And I think we need to make sure our governments are aware of the ability we have as an industry to bring economic growth and support jobs.”

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

(L to R) Singapore Airlines CFO Stephen Barnes, Steve Priest, CFO and EVP, JetBlue and Pekka Vähähyyppä, CFO, Finnair

Digital mindset key to driving innovation

C

reating a culture that encourages innovation is vital for airlines, says Singapore Airlines CFO Stephen Barnes.

Barnes was speaking at the Airlines Leaders on The Grill! panel yesterday, alongside Steve Priest, CFO and Executive VP, JetBlue, and Pekka Vähähyyppä, CFO, Finnair. They discussed how innovation and technology can improve efficiencies.

“You need to have leadership from the top,” Barnes says.

“We are very blessed that our CEO [Goh Choon Phong] has an IT background. He is enthusiastic about the

opportunities it offers and he is therefore very much out in front trying to help us generate ideas.

“At the moment we are planning to bring in processes that shorten the decisionmaking processes. Fewer people will be involved in actually identifying and giving the green light to a particular project, and this can drive efficiency.”

The key to Singapore Airlines’ strategy, Barnes says, is to create a “digital mindset” throughout the airline. Central to this is a new staff training initiative. While having technology experts is vital for any airline, Barnes says Singapore Airlines is

encouraging all its staff to be innovative and develop fresh ideas.

“We have made available a series of externally-provided innovation and digital-focused training courses,” he says.

“The idea is to try and ensure that we have - throughout the organisation - not just the occasional champion, but that everybody is thinking of using the tools, and feeling free to come up with ideas.”

And while developing successful, innovative programs and processes is the main objective in creating this culture, Barnes says it’s equally crucial the airline learns from mistakes.

W W W. I A T A . O R G

“We need to identify champions, we need to identify the successes, but we also recognise that we need to celebrate failures - at least heroic failures,” he says.

“We need to learn when to kill those ideas quickly, and what the lessons for the next idea are.”

Steve Priest of JetBlue summed up the importance of being ahead of the curve when it comes to new technologies.

“We have to know what is around the corner,” he said.

“The speed of technology, the speed of innovation, is happening around us. We want to be on the bus rather than getting hit by it.”

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

WFS Gala Dinner

Gala Dinner at the Royal Dublin Society

W W W. I A T A . O R G

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

Financial Solutions for InsightsDriven Airlines An Interview with John Johnston, CEO of Accelya What has the combination of Mercator and Accelya achieved?

The combination of Accelya and Mercator, announced back in March 2017, has created a leading global technologyenabled solutions provider to airlines, travel agents and shippers. As our industry goes through significant change, our customers will need ‘best in class’ technology to help them be efficient, agile, and secure. This means we need to innovate to meet the future needs of our customers. One of the main drivers for bringing Accelya and Mercator together is to fuel this innovation by combining our technology, services, and expertise to provide the best possible solutions to our customers.

What can we expect from Accelya’s financial portfolio moving forward?

As airlines seek to increase profitability, they need to adapt quickly to changing market conditions, customer demands, and regulatory measures. Innovation is critical for success, but there is also a need for integrated and actionable financial and commercial insights. We’re leveraging our

extensive industry experience and market leading solutions to access insights that help airlines answer strategic questions, build better processes, and make decisions that drive real improvements.

How is Accelya uniquely positioned to help airlines drive efficiency, ensure compliance and make data-driven decisions?

Accelya has been at the forefront of travel and transport for more than 40 years, helping 350+ airline fi nancial departments to minimize revenue leakage and optimize costs in their order-to-cash and procureto-pay processes using a combination of expertise, industry best practices and automated proprietary software.

Accelya’s blended approach to analytics harnesses data analysis, industry knowledge and a consultative framework.

Given our deep understanding of airline processes and our vast industry expertise, we are uniquely positioned to bring benefits to our customers quickly.

To learn more visit www.accelya.com

W W W. I A T A . O R G

Finance app drives industry agenda forward

T

he IATA Financial Community app has been created to support High Performing Finance Organizations (HIPO) in our industry by connecting the IATA Airline Finance Community with each other and delivery of sustained financial health.

HIPO is one of the five pillars that the Financial Committee has identified to support sustained airline financial health in its White Paper. It is an online forum for IATA member airline finance professionals to access and exchange information about industry activities and the Financial Committee working groups.

The enhanced visibility the app provides will help accelerate delivery of the industry agenda. Areas covered in the app range from industry taxation to payment methods, and from agency credit risk management to commercial fuel. This broad scope will enable the app to become a comprehensive communication platform for the airline finance sector. Importantly, discussion forums will allow users to comment on their activities to stimulate constructive discussions.

The app will rapidly evolve with new features, such as development opportunities for industry top performers, and tools to attract top students to the airline finance function.

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

Innovate faster

T

he invitation-only Strategy Summit, which took place yesterday, focused on building and sustaining a highperforming fi nance organization.

Well done

M

ichael Stulpe (Lufthansa Group), Chairman of the IBS OPS Working Group receiving from Juan Antonio Rodriguez (IATA) a small token of the Interline Billing Community’s appreciation for three decades of dedicated service, loyalty and commitment to the airline industry.

Prepare for the inevitable

A

irlines must be proactive in cybersecurity. Partnering and sharing information with companies across the entire supply chain, as well as with governments, is essential to managing cyber risk.

The potential damage, if this issue is not given priority, has become all too clear.

On 12 May 2017, for example, there was a significant global cyberattack using the so-called WannaCry ransomware. This blocked access to users’ fi les until a payment had been received. The attack used sophisticated hacking tools and more than 300,000 computers worldwide were infected, including those used by the UK’s National Health Service and FedEx. Companies and individuals in Russia, Taiwan, Ukraine and India were hit especially hard, providing evidence of the global nature of the threat.

According to the Economist Intelligence Unit, cybersecurity is now “a top concern for all businesses” with the annual cost predicted to reach $6 trillion by 2021, up from $3 trillion in 2015.

Stephen Darnley, IATA Corporate

W W W. I A T A . O R G

Treasurer, says there are several ways for airlines to protect their fi nancial systems against a cyberattack.

“Airlines may seek to protect themselves through having a clear understanding of their risk profi le, derived from a rigorous evaluation of operations and their data universe,” he says. “They would then need to implement a comprehensive Enterprise Risk Management strategy with committed engagement from C-Suite executives to ensure understanding and adoption throughout the whole organization.”

Darnley adds that appropriate measures are needed to protect the company from the fi nancial consequences of a cyberattack, for example through the use of insurance arrangements.

IATA is working on the topic from different angles. These involve data security, understanding and promoting best practice in Enterprise Risk Management and solutions that will help to protect airlines from the fi nancial consequences of cyber events.

8 WILDLIFE TRAFFICKING

W W W. I ATA . O R G . U K