A global mindset for commercial aviation’s next century
Monday, 9 June 2014 00:00
Partnerships and global standards
Doha: The International Air Transport Association (IATA) last week called for airlines, governments, and industry stakeholders to guide the development of the commercial airline industry into its next century with a global mindset and based on a foundation of global standards.
“The key to unlocking aviation’s future potential is a global mindset supported by strong partnerships. Aviation connects people and business to make ‘global’ possible. Securing aviation’s future begins with some immediate challenges. Airlines must be profitable, safe and secure businesses. We need to provide efficient, customer-focused services. And sustainability must be integral to everything that we do,” said IATA Director General and CEO Tony Tyler.
Tyler’s comments were made in his State of the Industry address to the 70th IATA Annual General Meeting and World Air Transport Summit in Doha, Qatar. The meeting takes place as the industry commemorates the 100th anniversary of scheduled commercial flight.
“Scheduled commercial aviation began with a single passenger on a 23-minute journey across Tampa Bay, Florida on 1 January 1914. Since then, aviation has changed the world immeasurably for the better. This year, airlines will connect 3.3 billion people and 52 million tonnes of cargo over 50,000 routes, supporting 58 million jobs and delivering goods with a value of $ 6.8 trillion. In a team effort of committed partners, aviation literally moves the global economy. And by working together with a global mindset, there is enormous potential still to be achieved,” said Tyler.
In his keynote address, Tyler discussed several challenges that industry and government partners face as commercial aviation begins its second century.
Profitability and Structure
“Our financial performance does not yet match the value that we deliver. Airlines are expected to achieve a global net profit of $ 18 billion in 2014. That’s a net profit margin of just 2.4%, or less than $ 6 per passenger carried,” said Tyler.
The industry’s profitability has strengthened from the $ 6.1 billion net profit earned in 2012 and the $ 10.6 billion earned last year. An improved industry structure is among the factors supporting strengthened performance. “Our customers expect efficient global connectivity. But the regulatory structure prevents the global consolidation that has happened in other industries. By creatively working together with a global mindset – through alliances, joint ventures, franchising, and domestic consolidation – we are now seeing some significant results,” said Tyler.
Airlines continue to deliver great value to consumers. Over the last two decades, the number of city pairs served has doubled while the real cost of travel has halved.
Tyler reiterated the industry’s commitment to working together and with governments in the constant pursuit of improved safety. That commitment is bearing results in aviation’s safety record. In 2013 there were 29 million flights with Western-built jet aircraft and only 12 hull losses. “Flying is incredibly safe. And we are determined to make it safer,” said Tyler.
“The loss of MH370 points us to an immediate need. A large commercial airliner going missing without a trace for so long is unprecedented in modern aviation. It must not happen again. IATA, ICAO, and experts from around the world are working together to identify the best recommendations for improved global tracking. By September, we will deliver draft options to ICAO,” said Tyler.
Comprehensive data is now guiding safety improvements. IATA’s Global Aviation Data Management (GADM) project is building the world’s largest resource of operational information with data from a global spectrum of industry and government contributors. “Our ultimate goal is to predict the potential for accidents and so ensure that they don’t happen. This is not science fiction. Each new data contribution and every improvement in our analytical capabilities moves this closer to reality,” said Tyler.
A global approach to improving security is also needed. “The industry is secure, but passengers still say that security remains their biggest travel hassle. Inconsistencies across jurisdictions defy understanding. The focus on prohibited objects sees law-abiding passengers treated with criminal suspicion. There is waste and inefficiency. We must do a better job. There is plenty of opportunity for the second century mindset of global collaboration – both among governments and with industry – to make a positive contribution to our efforts to keep flying secure,” said Tyler.
IATA is partnering with the Airports Council International (ACI) and others to change this. The goal of the Smart Security program is to improve effectiveness, efficiency, and the passenger experience.
Governments are often challenged in being able to provide the critical building blocks of global connectivity: cost-efficient airports and air traffic management infrastructure.
“In Europe, there is paralysis on the Single European Sky. While the European Commission is pushing, member states are more interested in protecting revenue streams and government jobs. So passengers, the environment, and the European economy all suffer,” said Tyler.
Tyler also drew attention to the concerns over airspace congestion in the Gulf, the structuring of public-private partnerships for airport development in Asia and Latin America, and the failure of the US government to prioritize investments in the NextGen air traffic management initiative.
Tyler urged governments to abide by ICAO principles and advocated for effective economic regulation of infrastructure. “The market power that most airports have needs a counter-balance with effective independent regulators applying well established international norms. That will bring about fair charging regimes, which will facilitate the enhanced connectivity that communities everywhere are seeking,” said Tyler.
“The basic vision for the customer experience is the same for both shippers and passengers: a hassle-free journey with empowerment to customise and control their experience,” said Tyler.
IATA is promoting global standards for self-service in its Fast Travel program, which covers check-in, bag-drop, document checks, flight re-booking, boarding, and baggage recovery. “By year end, we will have the full suite of IATA Fast Travel self-service options available to a quarter of all travelers. Customers not only take this for granted, they want more,” said Tyler.
“Today’s travelers expect to be constantly connected with wi-fi everywhere. And they also want all the touchpoints along their journey to be connected and focused on giving them a door-to-door seamless experience. It will take significant collaboration with a global mindset among the industry players – airports, airports, hotels, hire cars, and so on – to satisfy this need,” said Tyler.
“The expectations of shippers, who are paying a premium for speed, are also high. E-freight will help improve industry processes and is critical to the industry’s goal of reducing average shipping times by 48 hours before 2020,” said Tyler. The current average air cargo shipment takes 6.5 days door-to-door.
Aviation is an intensely regulated and highly taxed industry. Tyler noted that the aviation industry can better fulfil its potential if governments regulated it with a long-term view, aided by global standards and focused on taking the best advantage of aviation’s role as a global economic catalyst. “If we can establish this global mindset approach with all our government partners, we will be on solid footing for aviation’s second century,” said Tyler.
The government of Venezuela was highlighted as a particular concern. “The Venezuelan government takes the top prize for willful irresponsibility. It is wrongly withholding some $ 4.0 billion of airline funds and putting the country’s connectivity at risk. It’s not surprising that some airlines have stopped flying there.
Airlines cannot provide a service if they don’t get paid. The government has responded with more promises than action. In the meantime the country’s connectivity declines and the economy suffers. I again urge the government to resolve this quickly and fairly,” said Tyler.
The last twelve months have seen landmark advances in the industry’s sustainability agenda. In 2013, IATA’s 69th Annual General Meeting resolved to ask governments for a mandatory carbon offset scheme as the preferred global market-based measure to assist in meeting the industry’s commitment to carbon-neutral growth from 2020. At the 38th ICAO Assembly, governments agreed to develop a proposal for such a measure by 2016.
“A global mindset allowed us to take an industry-wide approach to sustainability. That has put aviation at the forefront of industries in managing its environmental impact. Airlines will support ICAO in the challenge of turning the Assembly’s laudable intention into a more specific agreement on an actual mechanism. A global mandatory carbon offset scheme is just one transitional element of our strategy. The ultimate goal is to achieve sustainability by reducing carbon emissions through improvements in technology, operations, and infrastructure,” said Tyler.