Issuu

2018 – 05

airlines.iata.org

AIRLINES.

ENTERING AVIATION’S ELITE CLUB India’s strategy recognizes the economic and social importance of a properly developed aviation industry

2018 – 05

01 OFC_Airlines. 2018-05_Airlines International 1

13/11/2018 11:30

THE GROUND.

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WE MAKE IT

FLY

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Airlines.

Contents 2018 – 05

Comment

26 Good things come to those who wait

9 Alexandre de Juniac, Director General

Ensuring governments play a key role in facilitating strong industry growth

Air Mauritius CEO, Somas Appavou says understanding what the customer truly wants pays dividends in the long run

21 IATA Opinion: Conrad Cliﬀord, Regional Vice President, Asia-Paciﬁc

Dossier

Realizing Asia’s true capabilities through uniﬁed aviation regimes in the region

India’s bright aviation policy is proving an example for others across the globe

Digest

Features

12 IATA and industry update

36 Back to the future

Brexit ‘chaos’ warning, ATAG emissions report, Record passenger numbers, AIR Symposium, senior IATA appointment

RFID has returned to play an important role in improving the consistent delivery of reliable baggage services

18 Data: In numbers

40 Untangling the web of complexity

31 Preparing for take-oﬀ

Global Passenger Survey 2018

CEO Interviews

Ground operations needs procedures aligned under common global standards if air travel demand is to be facilitated

22 Harnessing the potential within

Leslie Thng, Vistara CEO, on how the carrier continues to adapt in a market experiencing untold passenger growth

IATA Corporate Communications Vice President Anthony Concil Creative Direction Richard McCausland Assistant Director Chris Goater www.iata.org Editorial Editor Graham Newton Head of content production DeeDee Doke Assistant editor Patrick Appleton Senior designer Gary Hill Picture editor Claire Echavarry Production Production manager Jane Easterman +44 (0)20 7880 6248 jane.easterman@redactive.co.uk Publishing director Aaron Nicholls

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60 Seconds with...

Advertising Business development manager Nigel Collard +44 (0)20 7324 2763 nigel.collard@redactive.co.uk

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42 Karam Chand, CEO of Royal Brunei

Printed by PCP 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 ISO 4001 environmental management standards and is sourced from sustainable managed forests. All of this publication’s content is subject to copyright, design rights and trademarks of Airlines. and third parties.

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2018 – 05 Airlines

13/11/2018 08:07

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Comment: Director General and CEO, IATA

Making globalization work Realizing the forecast growth of aviation will be challenging, so it is important that governments play a key role in helping to promote the business of freedom

ILLUSTRATION: SAM KERR

viation is full of potential. We were reminded of that with the publication of IATA’s latest 20-year passenger forecast which predicts that 8.2 billion passengers will board aircraft in 2037. It’s an amazing number—more than the number of people that inhabit our planet today. It is also exactly double the number of passengers that we expect this year. That growth will bring tremendous benefits. Employment supported by aviation will grow to 100 million jobs as the economic contribution reaches $5.5 trillion. Behind those big numbers will be a world prospering from greater connectivity and accessibility, enabling all of us to lead better lives. Realizing that growth will be challenging. The infrastructure that supports aviation is already bursting at the seams. Every traveler sees this in crowded airports and when experiencing late arrivals owing to air traffic delays. For the most part, government plans to expand infrastructure are not ambitious enough. The time it takes to pour concrete is also ever lengthening. In key hubs as far apart as London, Mumbai and Sydney, a planning horizon of two decades or more is the reality. And even when projects are decided, political developments can still throw obstacles in the way of completion as we have seen in Mexico City. It’s not much different when modernizing air traffic management. We have been talking about the Single European Sky for decades, but not much has really been achieved. If we don’t have the plans on the books today it is difficult to see how the infrastructure that we will need in 2037 can airlines.iata.org

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materialize. Politicians and governments do have a responsibility to build the foundations on which their constituents can prosper. The challenge is getting politicians to commit their support for developments that take more time to achieve than the political lifespan of most elected leaders. Along with promoting the economic and social benefits of aviation we must get across two other key messages. The first message is that there is no other alternative to making investments to lay foundations, construct terminals and build runways. The second message is that we need borders that are open to people and to trade. That may be a difficult message in these politically-charged times. But there is no denying that globalization has lifted hundreds of millions from poverty. And falling into a reverse globalization scenario would see a 2037 world with 1.3 billion unrealized passengers, ten million fewer jobs and an economy that is $900 billion poorer. Aviation is the business of freedom. Facilitating aviation’s ability to meet growing demand with efficient infrastructure will drive prosperity. That’s something we must hold our governments accountable for.

Alexandre de Juniac: Director General and CEO, IATA 2018 – 05 Airlines

13/11/2018 08:07

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In Asia, as living standards continue to improve, aviation steps up and plays a key role. Offering a greater choice of routes than ever before, India’s strong domestic growth highlights the beneficial role the industry plays in improving the lives of everyone, uniting friends and family, and helping businesses across different sectors to transport their goods throughout the vast nation.

The Big Picture

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2018 – 05 Airlines

13/11/2018 08:08

Digest UK and EU must address looming Brexit ‘chaos’—IATA

IMAGES: ISTOCK

The United Kingdom and European Union must act urgently regarding Brexit contingency plans as the possibility of a ‘no-deal’ situation continues to loom large, IATA has said. Calling on the two parties to bring more certainty to the air transport sector surrounding Brexit, IATA pinpointed three critical issues— continuing air connectivity, safety and security frameworks, and efficient border management—as requiring urgent attention. This follows the release of an IATAcommissioned study on the effects Brexit will have on airlines flying to and from the UK, with IATA Director General and CEO Alexandre de Juniac warning of “chaos” if air transport contingency plans are not discussed in close detail. “These are the most critical areas because there are no fallback agreements such as the WTO framework available in a ‘no-deal’ Brexit scenario,” he said. “Without any contingency planning being made transparent to the industry, the risks of not addressing these issues could mean chaos for travelers and interrupted supply chains.” Airlines have been left in the dark due to a lack of transparency regarding contingency plans, with a ‘hard’ no-deal outcome expected to cause significant

Airlines 2018 – 05

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disruption. Even the more favourable possibilities, such as a transition phase to be agreed following the UK’s withdrawal date in March, hold a high degree of uncertainty and risk for air services. “The EU and UK have a responsibility to millions of their citizens who depend on reliable air transportation. The goal should be a comprehensive air services agreement that does not step backwards from the connectivity existing today,” said de Juniac. “This has to be one of the most important Brexit considerations. A

backstop contingency plan to keep planes ﬂying after March must be published, and quickly.” IATA warned that there must be “no compromise” for keeping people and cargo safe, imploring the UK to remain in the European Aviation Safety Agency, at least as a ‘third country member’, and said all parties should work towards retaining the status quo on security. “We understand the complexity of the political issues at stake. But safety and security should be non-negotiable,” de Juniac said.

airlines.iata.org

13/11/2018 08:10

Digest

“Everyone has to take responsibility [for implementing NDC]. It is about trust and openness. That is what we’re focused on.” Sean Menke, Sabre CEO (see story p13, below)

A call for collaboration How the market evolves is a key consideration for airline chief executives, according to Sean Menke, CEO, Sabre. It is therefore a prime concern for travel technology suppliers too as they look to meet their customers’ needs in an increasingly dynamic industry. Speaking at the AIR Symposium in Rome, Menke cited the rise of low-cost carriers (LCCs) from 10% of the market in the early 2000s to 30% today as a driver of change in recent years. Full-service carriers have gone through a series of adjustments—aided by new technologies delivering greater efficiency—to better compete with LCCs. Oil prices, meanwhile, have a significant impact across the board, whether it is an increase or decrease. For Sabre, such market developments mean advancing technology to deal with the different demands on a modern airline. New Distribution

Capability (NDC) is a cornerstone of what Sabre is trying to achieve with the next generation of solutions. Menke said that collaboration is essential to implement NDC. “Everyone has to take responsibility,” he noted. “It is about trust and openness. That is what we’re focused on.” All this does not mean travel technology companies are resting on their laurels. Sabre has 10,000 employees around the world and is recruiting talent from digital companies and other industries. The executive management team is fresh-faced, with the longest serving at the company for just four-and-a-half years. The aim is to drive Sabre to help customers sell the way they want to sell, be it direct or indirect. And rather than ﬁght for incremental gains in market share, Menke believes the real question should be “how do we make the pie bigger?” That is the best way to serve all parties, including the end consumer.

FREIGHT VOLUMES CONTINUE TO GROW Freight demand rose again in August despite lingering concerns over trade tensions that could aﬀect the cargo industry. IATA’s latest data shows that demand, measured in freight tonne kilometers (FTKs), rose 2.3% in August, compared to the same period the year before. Demand growth remained unchanged from July’s 2.3%, but was less than half the ﬁve-year average growth rate of 5.1%. For the six month in a row, freight capacity—

measured in available freight tonne kilometers (AFTKs)— outstripped demand as it grew by 4.5% year-on-year in August. However, yields appear to be holding up. Consumer conﬁdence, an upturn in the global investment cycle and rising international e-commerce are supporting capacity growth, but demand suﬀers from weakening export order books, trade tensions, and longer supplier delivery times, which negates air freight’s advantage of speed.

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Events February to June 2019

AVSEC World 26-28 February Miami, USA Legal Symposium 6-8 March Rome, Italy World Cargo Symposium 12-14 March Singapore Aircraft Receovery Forum 2-3 April Montreal, Canada

Safety and Flight Ops Conference 2-4 April Barcelona, Spain Aviation Day Romania 12 April Bucharest, Romania Global Training Partners Conference 10-12 April New Delhi, India CNS Partnership Conference 5-7 May Miami, USA IGHC Conference 26-29 May Madrid, Spain

Optimistic outlook: An upturn in the global investment cycle played a part in helping freight capacity grow again.

Cabin Safety Conference 11-13 June Istanbul, Turkey

2018 – 05 Airlines

13/11/2018 08:10

Digest

IATA APPOINTS NEW CORPORATE SECRETARY Karen Clayton has been appointed as the new Corporate Secretary of IATA. Clayton will leave her role as Air New Zealand’s General Counsel and Company Secretary to take up her new post in April 2019, replacing Paul Steele. Steele will continue to focus on strengthening IATA’s advocacy activities as Senior Vice President for Member and External Relations, a role he has held jointly with Corporate Secretary.

De Juniac: EU must knock down barriers restricting aviation

European transport leaders must “knock down barriers” that hinder the beneﬁts of the continent’s aviation sector, the International Air Transport Association (IATA) Director General and CEO has said. During his speech at the European Aviation Summit in Vienna, Alexandre de Juniac also called for a stronger aviation strategy in Europe, and said areas such as airport infrastructure and regulations are in need of reform. “Two centuries ago, the Congress of Vienna agreed the borders of a new

Europe. Today I call on Europe’s leaders, meeting in Vienna, to knock down barriers that limit the economic and social beneﬁts that Europe’s aviation sector can generate,” said de Juniac. According to IATA analysis, Europe is expected to deal with 1.5 billion travelers in 2036, but IATA believes the continent is currently ill-equipped to accommodate such growth and reap the economic beneﬁts it brings. Addressing the situation, de Juniac called for a strengthening of the European aviation strategy and urged the

current EU Presidency of Austria to facilitate aviation improvements to help increase Europe’s competitiveness. While the EU’s cooperation in handling slot regulation was commended, certain EU regulations, such as the Airport Charges Directive, and the EU 261 passenger rights legislation came in for strong criticism. “EU 261 is still a mess for airlines and passengers, and a bonanza for claims agencies and their dubious practices,” he said. “Reform is needed—taking ample input from airlines and consumers.”

ATAG REPORT PRAISES VALUE AND FREEDOM OF AVIATION

35%

90%

57%

Aviation carries 35% of world trade by value

Airfares are 90% lower than 1950

57% of world tourists travel by air

Airlines 2018 – 05

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Aviation leaders reiterated the need for free-trade agreements following the publishing of a report looking at the social, environmental, and economic impact of the air transport industry. The report—entitled Aviation: Beneﬁts Beyond Borders—released by the Air Transport Action Group (ATAG) looks at the role civil aviation plays in society. Launching the report, Executive Director Michael Gill pointed out that 10 million people work in the industry, serving 12 million

passengers daily, and the sector also supports 65.5 million jobs and 3.6% of global economic activity through the wider supply chain and tourism. His comments were backed by Director General of the International Business Aviation Council, Kurt Edwards, who said sub-sectors working together can improve the industry as a whole. The research shows that an open approach to trade will see growth that supports 97.8 million jobs and $5.7 trillion in economic activity by 2036.

airlines.iata.org

13/11/2018 08:10

Digest

AVSEC World Day

An open approach to trade will support $5.7 trillion in economic activity by 2036

$5.7trillion

Panel debate

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Dealing with the insider threat How does the industry recognize the insider threat? Are screening and monitoring processes robust enough? Such questions were debated by a panel of senior aviation security ﬁgures during the ﬁnal session at AVSEC World Day. Transport Security Administration’s Stacey Fitzmaurice stressed that the consequences of the insider threat could be catastrophic. “You can’t sugar-coat it,” she said. “We must recognize the threat for what it is.” There are a number of challenges to address, however. Many aviation business models use systems provided by third parties, for example. This spreading of risk means any solution to the insider threat must therefore cut across the entire aviation value chain and beyond to governments and law enforcement agencies. The panel also noted that it is possible for an insider to be an unwitting accomplice. This might involve being deliberately misled, poor application of procedures, or not knowing the full implications of their actions—perhaps a small criminal scheme (smuggling cigarettes) is unknowingly used for a more serious activity (smuggling arms).

Alexis Long, London Heathrow’s Head of Security, pointed out that whatever the threat, there must be better mechanisms in place for staﬀ to report concerns. “Posters and phone numbers are out of date,” he said. Heathrow has an app that includes a means to get a report to security in about 20 seconds. The panel, however, were unanimous, in the need to ﬁght against a culture of fear. Evidence is key, they agreed.

THE PANEL Hany Bakr, Acting Vice President Group Security, Qatar Airways Nina Brooks, Director, Security, Facilitation & IT, ACI World Stacey Fitzmaurice, Executive Assistant Administrator, Operations Support, Transportation Security Administration Alexis Long, Head of Security, London Heathrow Airport Harris Markopoulos, Manager Security, Emergency Response & Crisis Management, Aegean Airlines Moderator: Stephen Ackroyd, Buckinghamshire New University

2018 – 05 Airlines

13/11/2018 08:10

Digest

IATA reaﬃrms pledge to reducing emissions IATA Director General and CEO Alexandre de Juniac praised the aviation industry as the organization repeated its pledge to building a sustainable future for the sector. Marking the 10th anniversary of a joint strategy agreement for reducing carbon emissions at the Air Transport Action Group (ATAG) Global Sustainable Aviation Summit in Geneva, de Juniac said the industry could be proud of its eﬀorts in tackling carbon emissions. “That [strategy agreement] was a daring goal. But with hard work and solid commitment of industry and government, carbon-neutral growth from

2020 will be a reality,” he told delegates. De Juniac also said that although reducing emissions to 50% of 2005 levels by 2050 will be challenging, the industry is on the right path to achieving its aim. “Progress in technology, operations, and infrastructure will better our fuel eﬃciency achievements of the past decade. Our 2050/minus ﬁfty goal will test our resolve even more,” he said. “We will not move forward on a consistent glide path, but we are on the right trajectory. The industry is ready for the next step-change in technology in the 2030s: hybrid and electric planes, and the large-scale rollout of sustainable fuels.”

Cleaning up the industry: Reducing carbon emissions is vital as aviation enters a new age of technology and growth

Report to address issues facing women in aviation

IMAGES: GETTY/ISTOCK

IATA has joined forces with four aviation bodies to address lack of female leadership roles in the industry.

Providing opportunities: IATA is looking at how to get more women into senior roles

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Working with Aerospace Industries Association (AIA), Airports Council International (ACI) World), International Aviation Womens Association (IAWA), and Korn Ferry—Civil Aviation Practice (NYSE: KFY), IATA will help address the issues surrounding opportunity that women face in the industry. ‘Soaring Through the Glass Ceiling’ is due for release in the second quarter of 2019, and will look at why there remains a gap at leadership level, despite women making great strides in many professional ﬁelds and industries around the world in recent times. The report will include: A global survey of women, HR leaders, organization leaders, and education leaders; Interviews around the globe with women, human resources leaders, organization leaders, and education leaders; Case studies on success stories within the industry; Review of prior studies and literature on the advancement of women, both within and outside the industry.

airlines.iata.org

13/11/2018 08:10

Digest

Although reducing carbon emissions to 50% of 2005 levels by 2050 will be challenging, the industry is on the right path to achieving its aim airlines.iata.org

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CONVERSING WITH CUSTOMERS Despite a chequered past, Alitalia is experiencing a successful 2018 with passenger numbers and revenue both growing for the first time in seven years. An important factor in the airline’s turnaround is digital transformation said Fabio Lazzerini, Alitalia’s Chief Business Officer. Speaking at the AIR Symposium in Rome, he described digitization as the fourth industrial revolution. For Alitalia, their digital transformation is based on three main components; digital marketing, e-commerce, and the customer experience. Digital marketing uses data to drive toward segments of one rather than blunt categorization. “We can now have conversations with customers,” said Lazzerini. Alitalia’s efforts performed so well that 41% of targeted email campaigns are converted into bookings even though those emails do not mention the price. E-commerce, meanwhile, involves shifting the channels customers use to buy. Alitalia has changed the way it constructs its website and has seen digital revenue rise accordingly. The new normal for customer experience is personalization and a digital journey, going beyond receiving tailored emails to extend to the end-to-end journey.

Digital love: Embracing digitalization has paid oﬀ for Alitalia and its customers

PASSENGER LOAD FACTOR HITS 28-YEAR HIGH Passenger load factor reached a 28-year high in August following a rise in global passenger demand and capacity. IATA analysis showed that demand, measured in total revenue passenger kilometers, grew by 6.4% year-on-year while capacity, measured in available seat kilometers, increased by 5.5% compared to August 2017. Those results saw load factor climb by 0.7% to 85.3%, a figure which has not been achieved since at least 1990. IATA Director General and CEO Alexandre de Juniac said the results showed airlines were “maximizing” their assets despite difficulties arising from an increase in costs, including fuel prices. International passenger demand rose 5.6% year-on-year in August, with all regions enjoying an increase, led by Asia-Pacific. International capacity climbed by 5.1%, with load factor edging up by 0.4% to 85.0%.

Breakdown by region Asia-Pacific airlines’ August traffic increased 7.5% compared to the year-ago period European carriers saw August demand climb 5.1% year-to-year Middle Eastern carriers posted a 5.4% traffic increase in August North American airlines’ international demand rose

3.7% compared to August a year ago Latin American airlines experienced a 4.8% demand increase in August compared to the same month last year African airlines’ traﬃc climbed 6.8% in August Domestic travel demand rose by 7.7% year-on-year, which was an increase on the 7.2% growth recorded in July, with capacity growing by 6.2% and load factor improving 1.2% to 85.7%.

85.3%

50%

“Progress in technology, operations, and infrastructure will better our fuel eﬃciency achievements of the past decade.” Alexandre de Juniac, IATA Director General and CEO (see story p16, left)

results saw load factor climb by 0.7% to 85.3%

2018 – 05 Airlines

13/11/2018 08:10

Data

In numbers I ATA G L O B A L P A S S E N G E R S U R V E Y 2 0 1 8

Breakdown of respondents by region:

Europe

North America

Asia Paciﬁc

North Asia

Latin America

Middle East

Africa

27%

22%

21%

15%

IATA’s Global Passenger Survey included 10,408 respondents aged between 18 and 65-plus from 165 countries with a 63%-37% male/female split

Airlines 2018 – 05

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2015

2016

Seatback device

2017

36%

54%

42%

45%

51%

39%

Electronic boarding passes are the most popular travel token (36%), especially among 25-44 year olds. Printed boarding passes (30%) are mostly used by 55+ and surprisingly among 17-24 year olds. Almost a fifth of air travelers would like to use biometric identification (18%) as a substitute of the boarding pass, with higher prevalence among passengers with more than 10 flights annually. Just 16% of respondents said they had no preference.

A large share of air passengers would rather watch digital content on a seatback device (54%) than on their own device (36%)

54%

50%

E-ticketing… Travelers prefer electronic boarding passes

2018

Personal device

airlines.iata.org

13/11/2018 08:25

Data

Travel information passengers would like to access for themselves via personal device included ﬂight status, baggage information and wait times at security and border control: Most preferred travel information

Services which passengers said would help improve their experience during travel disruption included more accurate travel notiﬁcations and having a replacement ﬂight booked automatically for them:

Flight status

82%

Most preferred services/compensation

Baggage information and wait time for delivery

49%

Real-time, accurate travel notiﬁcations

54%

Wait time at security/border control

46%

Automatic ﬂight re-booking and providing new boarding passes

46%

Regulations and requirements

45% 43%

Face-to-face interaction with an airline agent who will arrange further travel details for you

39%

Information regarding time/distance to gate Wait time at arrival customs

39%

Receiving hotel accommodation

38%

Enhanced airport services

38%

Receiving meal vouchers

26%

Destination related information

25%

22%

Airline products and services to purchase during the trip

19%

Receiving airport services and restaurant/retail/service concession options (eg massage, pedicure, shops, lounges) Baggage tracking information

17%

Receiving transportation service from the airport

15%

None of the above

16% Preferred options for bag handling services:

68% Drop oﬀ your bag at a location other than the airport

13%

of air travelers use self-service bag drop

of passengers would prefer their bag delivered direct to the ﬁnal destination, provided they are able to track the luggage

51%

56% Track your bag throughout your journey

of passengers would like to see their bags picked up and dropped oﬀ by a robot or drone

Ideal waiting time for the baggage delivery is up to 10 minutes (70%) among passengers. Only 2% would like to wait for their bag at home and/or in their hotel. Being able to book a hotel as an additional part of the ﬂight ticket transaction was a priority for more than half of respondents:

Respondents

53%

Respondents

40%

32%

Hotel

Insurance

Transportation

Car rental

(To final destination)

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2018 – 05 Airlines

13/11/2018 08:26

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31/10/2018 08:37

IATA Opinion: Conrad Cliﬀord

Unleashing the power of Asia The speedy implementation of a unified aviation regime in Asia-Pacific would allow greater airline growth says Conrad Clifford, IATA’s Regional Vice President, Asia-Pacific

ILLUSTRATION: SAM KERR

sia-Pacific is an extraordinarily diverse region. There is a rich variety of cultures and languages, an innovative assortment of airline business models, and infrastructure in sundry states of readiness for the huge surge in air travel demand. That demand is largely coming from a burgeoning middle class. It means air traffic in Asia-Pacific will more than double from some 1.6 billion passengers today to more than 3.9 billion passengers by 2037. During that period, aviation’s benefits will also double from the current 30 million jobs and almost $700 billion of economic activity supported by air transport across Asia-Pacific. One of the keys to unlocking the value of aviation in Asia-Pacific is a unified regulatory regime for the industry, similar to Europe or the United States and aligned with global standards. Distinct national regulations hinder airlines operating across borders, as they mean greater complexity and higher compliance costs. States will come together when they see the value of convergence and harmonization. Distributed multi-nodal air traffic flow management—already in effect between some Asia-Pacific destinations—is a case in point. It allows for better management of precious airspace capacity. The Association of Southeast Asian Nations (ASEAN), an integral part of the region, is well-placed to enjoy the fruits of a unified aviation structure. It already has a Transport Strategic Plan for 2016–2025, which sets out the strategic goals for aviation, including traffic rights, licensing, safety, security, and operating permits. Hence, ASEAN does not need to reinvent the wheel. But closer and speedier collaboration between

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21 Opinion_Airlines. 2018-05_Airlines International 21

ASEAN and the airline industry would ensure greater success in achieving these goals. This is why IATA is proposing an initiative alongside ASEAN, focusing on four priority areas for greater regulatory convergence: the mutual recognition of aviation personnel licenses to help ensure human resources can better meet increasing demand; the mutual recognition of ASEAN airlines’ security programs to allow for a safer, more efficient network; an ASEAN policy on the flexible use of airspace, especially collaboration between civil and military users; the creation of a single sky, including a Seamless ASEAN Sky, to underline the effective use of airspace to meet user demand. The airline industry taking a proactive role in determining the key issues and next steps would bring several, significant advantages. Airlines would benefit from streamlined procedures, for example, while the principle of equivalence, where an application to one State would hold validity in all ASEAN States, would be a notable development to ease compliance issues. Asia-Pacific’s rapid growth in aviation demand means ASEAN should quickly adopt a unified regime. However, this will require significant commitment and effort by ASEAN to look beyond individual national interests and make progress in areas like regulatory harmonization. This will not be easy to achieve, given the existing distinct national regulations and differing levels of regulatory maturity, but the rewards make the effort worthwhile.

2018 – 05 Airlines

13/11/2018 08:14

CEO Interview

It is not necessary to be associated with an alliance at the moment. We are still a new airline and when we expand we donâ€™t want to be restricted in our choice of partners

Airlines 2018 â€“ 05

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airlines.iata.org

13/11/2018 08:17

CEO Interview

Harnessing the potential within Vistara CEO, Leslie Thng, tells Tony Concil how anticipating customer requirements is vital for domestic success in India WORDS: TONY CONCIL

assenger numbers alone will not guarantee success for airlines in the booming Indian air travel market, says Vistara CEO Leslie Thng. Carriers will still have to continue working hard to meet the needs of changing customer requirements. How would you describe the Vistara business model?

Vistara started in January 2015 and we have been a full-service carrier focused on high-quality customer service in the Indian market from day one. As we expand domestically and even start international ﬂights, high service standards will continue to be at the core of our business. We have committed to new aircraft orders. The Airbus A320neos will boost our domestic network. We will address feedback from customers for more frequency on key routes.

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And we will feed soon-to-be-launched international services for which we ordered Airbus A321neos and Boeing 787-900s. These will serve medium and long-haul routes to Southeast Asia, East Asia and the Paciﬁc initially. We will look for partners in these regions to help us when we expand. The obvious choice in Southeast Asia is Singapore Airlines—one of our shareholders—but we need partners elsewhere too. Having said that, Vistara is a standalone carrier and we will act as an independent airline. It is not necessary to be associated with an alliance at the moment. We are still a new airline and when we expand we don’t want to be restricted in our choice of partners.

In brief… Leslie Thng Levels of versatility Thng served as Chief Commercial Oﬃcer of Budget Aviation Holdings, an SIA holding company, before joining Vistara in 2017 as CEO

Academic success He holds a bachelor degree in business administration from the National University of Singapore

Vital experience How do you keep your costs down in the Indian market?

India is a very competitive market, which makes life diﬃcult for a full-service carrier. We have a

Beginning his career at SIA in 1999, Thng has held a number of diﬀerent senior roles at SIA before joining Vistara

2018 – 05 Airlines

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572m

CEO Interview

IATA predicts that India will serve 572 million passengers in 2037. The Indian government is estimating that the figure could reach 1 billion

2037

quite diﬀerent cost structure from a low-cost carrier. The service philosophy we have translates to higher cost, so it is important we are cost competitive for our business model. On the one hand, we expect that unit costs will decrease as we scale-up our operations. On the other hand, we are establishing a loyal base of customers that value our product and do not mind paying a premium. We think we have a good value-for-money proposition. We continually work on trimming our non-customer facing expenses and keeping our cost structure leaner. That is where we are today. The Indian customer appreciates what we are trying to do. What must change for aviation to be sustainable in India?

India is full of opportunities for aviation. It is a big country and only a small percentage travel by air today. Demand is not an issue. But doing business in India is tough. It is not one factor that will make an airline profitable and sustainable. It is a combination of many things. I think that the government is coming to understand the challenges aviation is facing and their role in supporting the growth of connectivity that is so important to economic development. The government has been proactive and is looking at how to refine rules to support sustainable aviation growth. One of the key issues is availability of infrastructure. The government is seriously looking at that and what is required to make the supply side work, even collaborating with private partners. There are plans to build secondary airports in many cities, for example. Another is costs. And the cost of doing business is made higher by tax obligations. The government is looking at this. But it is a complex issue that needs the cooperation of different levels of government to address high taxes on jet fuel, for example. And, of course, the airlines have a role. Airlines must understand what customers want and design products that respond to these needs.

Airlines 2018 – 05

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There are always things that we can do better. We want to be more responsive, more spontaneous, and more eﬃcient in the internal processes that deliver our products. Does it worry you that the government is preparing for 1 billion travelers in 20 years’ time when the industry predicts just over half of that?

IATA’s prediction is for 572 million passengers in 2037. Well below what the government expects. What that shows is that everyone is optimistic about Indian aviation. The government has a sense of what is needed, and their forecast is not impossible. The economy is growing and the population is growing. That will translate into a lot of travel. And if suﬃcient infrastructure is there, travelers will come. Only 5% of the population travel at the moment in India. Imagine if that becomes 10% or 15%. Indian travel has already come a long way from a small base. There is still an enormous potential waiting to be harnessed. Will the inclusion of private partners put the cost of infrastructure up?

India can be a hub if it has the right infrastructure. That means new airports, which requires lots of investment. And it must be of a good standard. So, private involvement is necessary. But it is important for the government, airports, and airlines to have regular dialogue about the cost of an airport. Airlines must be able to generate positive returns just like the government and airports. There must be a sustainable model when it comes to airport development. We need infrastructure that all stakeholders find efficient and effective. Is the cultural diversity in Vistara management a strength?

India is very diverse in itself. It is full of diﬀerent cultures and religions. At Vistara, we welcome this diversity. But the key is to be a team regardless of our individual backgrounds. Whether someone is from Singapore, like me, or from India, the important thing to note is that airlines.iata.org

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CEO Interview

5% Only 5% of the population travel at the moment in India. Imagine if that becomes 10% or 15%. Indian travel has already come a long way from a small base. There is still an enormous potential waiting to be harnessed

we all have our expertise. That is where the strength of Vistara comes from. That goes right up to the CEO. I am a Singaporean leading an Indian airline. It is nothing new to have colleagues from different backgrounds in aviation. Nor is it new to have colleagues from different generations and of a different gender. It is the culture of Vistara that is important. There is strength in diversity. If you could change one thing tomorrow, what would it be and why?

Changing one thing would not give you an advantage for long in this industry. What I would wish for is the ability to anticipate better. It would be like having a magic wand. We do lots of research to try to anticipate trends. Vistara is here for the long run so it is important to understand what the future may airlines.iata.org

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India's domestic market enjoyed its 50th consecutive month of double digit year-on-year growth in October 2018

$21 billion

The value of aviation tourism in India is $21billion, with 6.2million jobs supported by tourism in the country

look like. That is critical for investment purposes. Always be aware of short-term situations but plan for the long term. Vistara won’t be a global airline overnight. We plan ﬁve years ahead in terms of aircraft orders and so forth, but we look further than that when we think about what the customer of the future might want.

70%

How would your staﬀ describe you?

I think they see me as person who is very focused on making sure that our strategy is aligned with what it takes to be successful. And the role of the CEO is to articulate that in a vision that is understandable to all. I think they understand that I believe in my team and trust them to excel in their job. Finally, I know I must be patient. In aviation and in India particularly, it is not always easy to get the job done.

The bulk of India’s international traffic is to the Middle East and Asia, together counting towards 70% of the total 2018 – 05 Airlines

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CEO Interview

Good things come to those who wait Somas Appavou, CEO of Air Mauritius tells Tony Concil that patience is vital in building a sustainable strategy WORDS: TONY CONCIL

omas Appavou, CEO of Air Mauritius, understands the airline’s importance to the nation’s economy. But he insists that every carrier is unique and each must adapt its strategy to stay competitive in a dynamic market.

IMAGES: ALAMY

How is the airline performing?

Demand is good, and we have the infrastructure and resources to cope with growth. More people will certainly want to come to our beautiful island. That is good news. But cost is becoming an issue. Mauritius is a premium holiday destination—competing with the likes of Bali and the Caribbean. But the price elasticity of leisure travelers can be quite high. We need to compete, and it is hard to pass on cost increases. Fuel is the biggest worry right now. It is about 30% of our costs. We expected oil to be in the $65-$70 per barrel range. But now it is trading at around $80 per barrel. This is hurting. And it is a diﬃcult challenge to balance. Absorbing the increased costs hits the bottom line pretty quickly. And passing it on to travelers impacts demand. So, we need to be creative. There is the possibility to absorb some of that shock by shaving a little bit of cost here and there. But it is not easy, and we are looking at more serious mitigation eﬀorts. That means postponing Airlines 2018 – 05

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Directly and indirectly, Air Mauritius supports about 30,000 jobs nationally

some projects and perhaps accelerating others. Another potential fix is in tapping into regional markets for demand. For us, regional flying is up to six hours. That definition includes dense markets like India and some Asia-Pacific destinations. Just considering the fuel bill, it costs us less to bring passengers from these destinations than from our traditional longhaul European destinations. Our re-fleeting airlines.iata.org

13/11/2018 08:18

CEO Interview

“The aim is to give customers the service they expect. You have to be patient. You can’t get everything perfect right away”

airlines.iata.org

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2018 – 05 Airlines

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CEO Interview

program is also helping. Our Airbus A350 fleet burns 5.7 tonnes of fuel per hour, which is better than the 6.5 tonnes burnt by A340s. It will take us a while, however, to fully replace the less fuel-efficient parts of our fleet. The discussion about the airline’s vulnerability to rising costs exposes the need to better balance risk and reward across the supply chain. The businesses around the airline are not as sensitive to fuel price increases as airlines. As part of our shock mitigation strategy we are exploring closer cooperation or even involvement in some of these other businesses. How important is the airline to the national economy?

The airline started in 1967—one year before Mauritius gained its independence from the UK. There is a strong correlation between the development of the airline and the country. Air Mauritius is the island’s unique bridge to the world. The destinies of the airline and the country are aligned. Directly and indirectly, the airline supports about 30,000 jobs nationally. And we have about a 50% share of the travel market. So, the airline is very important for tourism revenues—a critical part of the economy. And, although we serve a tourism destination, the airline’s role goes well beyond that. We are critical to freight and business connectivity. The overall impact on GDP is 14%–17%, depending on how you measure. Does the Mauritian government understand the value of aviation?

They appreciate and expect our positive impact on the economy. But governments look at everything from a macro point of view. We need to ensure they have all the elements to gear Policy decisions that enhance the value the national economy can derive from aviation. When it comes to the challenge of fuel, for example, some of our stakeholders assume it affects all airlines the same and expect Air Mauritius to get through it as other airlines do. But every airline’s mix of fleet and traffic is unique. Airlines 2018 – 05

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24 15 26

destinations served by Air Mauritius across four continents

aircraft make up the Air Mauritius ﬂeet

destinations are served by the airline’s cargo division using high cargo hold capacity on A340 and A330 long-haul aircraft

2015 Air Mauritius is part of the Vanilla Alliance, joining as one of ﬁve founding members in September 2015

And given our specific situation with many long and thin routes, fuel price increases have a big—disproportionate—effect on Air Mauritius. Similarly, some quarters may also not fully appreciate the impact of running an airline with a unionized workforce when some of your competitors don’t. But regardless of any unique situations, we need to be competitive when passengers are choosing their travel and vacation options. To do that we need to be financially viable. Is there a future for airlines based on small islands?

It depends on the geography and demographics. Look at Singapore. That’s a very small island, but its demographics and [geographical] position make it an ideal place for an airline. Mauritius is between Africa and Asia, and we have to exploit this. Other airlines are doing this, but they do not go to smaller hubs. We need to put a network and fleet in place to make that vision work. It will also take partnerships where we feed each other’s hubs. It is always better to have two bridges. Some partnerships work when both partners serve the market. Others work when partners are given the capability to tap into a new market. We’d like to feed passengers into African hubs that can then allow our customers easy access to points beyond on the African content. Is there sufficient human capital to fulfil your growth plans?

We are being prudent with growth at the moment in order to contain costs. Finding potential employees is not an issue. And we place a lot of emphasis on developing our people to ever higher standards through training. In fact, we think that this could be a business opportunity. There is an ambition to provide training for other airlines, but ﬁrst we must make sure we get it right at our airline. Being ﬂuent in both English and French means we can provide manpower across Africa. airlines.iata.org

13/11/2018 08:19

CEO Interview

Is digitalization just for major airlines?

We are a smaller airline and digitalization is in our plans. And it sits with our Customer Analytics department. Their mission is to bring value to the data that we have. Like any airline competing in the market, we need to get closer to our customers. That means understanding who they are and ﬁnding ways to meet their needs throughout the travel process. We know for example that many passengers want to do as much as possible on their smartphone. In essence the smartphone would become their ticket to travel. We also know that not all customers want this. Our aim is to give customers the service they are expecting. This is a huge undertaking and you have to be patient. You can’t get everything perfect right away.

1967 The airline started in 1967—one year before Mauritius gained its independence from the UK. There is a strong correlation between the development of the airline and the country. Air Mauritius is the island’s unique bridge to the world 29 product that will be interesting to the prospective market. Mauritius is a sun and sea destination. But many places in Africa have lots of sunshine and beautiful beaches. So we need to try and understand what the customer is looking for and cater to it. SAATM is an important development. But it is not a silver bullet.

Is the Single African Air Transport Market (SAATM) an opportunity to unblock aviation’s potential in Africa?

It is an opportunity, but we need to have realistic expectations. The volume of traffic within Africa is small. Although the continent is gaining in prosperity, the population that has the economic means to fly is limited. And the economies of the continent are still developing. Implementing SAATM across Africa is very different than the European Single Market. While Europe is propelled by domestic demand, when you look at who is traveling within Africa it is very often international tourists. For the potential of Africa to be unlocked, Africans must have the ability to travel. It is not just about money. Solving visa issues is equally important. Although Mauritius is very open, most destinations in Africa require visas even for visitors from within Africa. And the infrastructure needs to develop in tandem. The deficiencies at many African airports are well-known. But infrastructure concerns go beyond that to hotels and other facilities that a traveler needs. And lastly, with specific reference to Mauritius, we need to make sure that we have a airlines.iata.org

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What is the best thing about being the CEO of Air Mauritius?

30% Fuel is the biggest worry right now. For Air Mauritius, it is about 30% of total cost

First, being in Mauritius! Also, it is a very interesting job. The trouble is I am always busy and so I don’t get as much time to enjoy Mauritius as I would like. Before, when I was working with Airbus, I traveled a lot and didn’t get to see a lot of Mauritius. Now I am here but I still don’t get to see it. Being an airline CEO ties you to a desk more than you would expect. What are you like as a boss?

I am very direct. When we have an objective, I want everything done to achieve that objective. And I want to see it happening. So, I am the ﬁrst Air Mauritius CEO to have an oﬃce at the airport. I talk to the engineers, the crew, the pilots. Communication is a big part of the job. 2018 – 05 Airlines

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31/10/2018 08:38

Dossier: India

Dossier 31

Preparing for take-oﬀ As India’s population skyrockets, a broad aviation policy, biometrics, and airspace and infrastructure developments are setting a path for other states to follow

IMAGES: GETTY/SHUTTERSTOCK

WORDS: GRAHAM NEWTON

By 2037, India will be the third largest aviation market in the world, behind only China and the United States. More than 572 million passengers will travel to, from, or within India at that time, a tripling of 2017 traﬃc. That ﬁgure is a middling estimate. Infrastructure constraints and restrictive regulations could reduce the number of travelers to 450 million while the right stimuli could do the opposite airlines.iata.org

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and push passenger numbers over 926 million. Current trends suggests the latter is more likely. India celebrated 50 consecutive months of double-digit growth in October 2018, and domestic load factors are high, hitting a record 90% in February 2018. This incredible traﬃc boom is largely due to an increase in connectivity—there are now 700 domestic airport pairs, a 50% increase on 2015 levels—and a

decrease in fares. After adjusting for inﬂation, average domestic fares have decreased more than 70% since 2005. International destinations have also risen to 304, up from 230 a decade ago, and the outbound cargo market has topped one million tonnes, growing almost 17% year-on-year last year. “Domestic travel will grow because of rising income and international travel will grow because of the increasing business 2018 – 05 Airlines

13/11/2018 08:20

Dossier: India

Akbar Al Baker, CEO, Qatar Airways

41%

“India’s middle class is 100 million more than the entire population of the United States. So, you can see the potential”

About 41% of India’s direct international connectivity is to the Middle East—much of it to super-connector hubs of United Arab Emirates and Qatar. Source: IATA

32 Ajay Singh, Chairman and Managing Director, Spicejet

“India needs its own global hubs. We need to carry our passengers directly to the destination [and] have the ability to bypass other hubs”

links,” says Suresh Prabhu, India’s Minister for Civil Aviation, speaking at IATA’s International Aviation Summit— India, jointly organized with the Ministry of Civil Aviation (MoCA) and the Airports Authority of India (AAI). “We would like to work with all the airlines to understand their issues and put in place a policy to facilitate the growth of the industry. We would like to make sure there is a level playing ﬁeld and transparent processes.” Positive trends

Alexandre de Juniac, Director General and CEO, IATA

“Creating a better environment for aviation will progress India’s day-to-day development” Airlines 2018 – 05

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Some important fundamentals underpin India’s growth. By 2036, India’s population is expected to reach 1.6 billion and average incomes should rise to almost $5,000 per capita, a ﬁve-fold increase on 2006. That means the number of middle-class households will make up 20% of the population by 2036, up from 2% in 2006. “India’s middle class is 100 million

more than the entire population of the United States,” notes Akbar Al Baker, CEO of Qatar Airways. “So, you can see the potential. India will be important not just for Indian and Gulf carriers, but for all international carriers because of this growing middle class.” Other positives include a wide-ranging aviation policy, still a rarity in global terms. “India launched its aviation strategy in early 2016,” says Alexandre de Juniac, IATA’s Director General and CEO. “This recognized the importance of aviation and established a policy framework intended to maximize its beneﬁts. It enters India into an elite club. Few states have understood that aviation is an economic catalyst and taken such a comprehensive approach. And because there is an established policy, we can be objective when looking for ways to improve.” airlines.iata.org

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airlines.iata.org

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100 40

India has risen from 132 (2013) to 100 on the World Bank’s Ease of Doing Business survey

risen from 52 (2015) to 40 in the 2017 World Economic Forum’s Travel and Tourism Competitiveness Index

Dossier

One enhancement already in the bag is more flexible airspace, achieved through cooperation between civil and military authorities. A conditional airway has been opened through restricted airspace over Bhuj, for example, shaving 10 minutes off journeys between East Asia and the Middle East. Such upgrades will be key to hub aspirations and accommodating future growth. Then there is DigiYatra, an industryled initiative coordinated by MoCA. DigiYatra uses biometrics to provide passengers with a seamless journey through the airport. India already has the largest biometric program in the world. Its Aadhaar card—a unique 12-digit number issued to every Indian resident based on their demographic and biometric data—is used by some 1.2 billion people. DigiYatra will give passengers a unique ID at the time of booking tickets, and Indian residents will be able to use Aadhaar as proof of identity. “We have high hopes for the DigiYatra initiative,” says de Juniac. “It could transform processes and leap-frog India to top of the league. The initiative’s pillars of connected airports, passengers, systems, and flying align with innovations in IATA’s future vision. Imagine the benefits to terminal capacity if technology shortens passenger processing at an airport from 30 minutes to 10 minutes. You can see why we are very excited about this program.” Biometric trials have taken place at Bangalore airport and IATA is continuing to work with the government, other airports, and stakeholders to make India an example for others to follow. It’s not just about squeezing more passengers through the same footprint either. More fundamentally, there has been some significant infrastructure

Discussion on… Climbing the rankings Over the last five years, India has risen from 132 to 100 on the World Bank’s Ease of Doing Business survey. Continued improvement in this area will be critical to the sustainable growth of aviation in India. The country has also risen from 52 (2015) to 40 in the 2017 World Economic Forum’s Travel and Tourism Competitiveness Index. Improvements in visa policies, infrastructure, and the preservation of monuments have assisted this rise. Continuous improvements in these areas as well as in human resources development, airport infrastructure density, and tourism infrastructure are among the areas that could further enhance India’s competitiveness. “The broader business and policy environment should not place hurdles, which inhibit growth and reduce the level of benefits that aviation can deliver to the nation,” says Brian Pearce, IATA’s Chief Economist. “The industry, its supply chain partners and the government and policy makers have a clear mandate to work in collaboration towards the common goal of ensuring that aviation’s economic and social benefits are fulfilled.”

development that has given India the space to grow. Delhi is perhaps the best example, although there have been notable upgrades throughout the country in the past decade. Ajay Singh, Chairman and Managing Director at Spicejet, says the correct infrastructure is essential to Indian airlines properly beneﬁting from the increasing propensity to travel. “India needs to create its own global hubs,” he believes. “We need people to be able to ﬂy into and out of India. We need to carry our passengers directly to the destination. We must capitalize on this massive market and have the ability to bypass other hubs.” Fuel fees

Aside from issues surrounding 2018 – 05 Airlines

13/11/2018 08:20

In 2010, 79 million people traveled to, from, or within India

573m

By 2017 that doubled to 158 million

Aviation in India supports 6.2 million jobs and contributes some $35 billion annually to India’s GDP

$35billion

Dossier: India

Airlines 2018 – 05

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60m

That number is expected to treble to 573 million by 2037

In 2017 there were about 60 million international journeys to or from India

Source: IATA

79m

158m

2010

2017

2037

infrastructure (see panel on p35), fuel is probably the biggest headache for the industry in India. Whereas fuel is about 24% of costs globally, it soars to 34% for Indian carriers. There are several reasons for this. A lack of competition for fuel suppliers at airports is one, meaning there is little commercial incentive to keep fuel prices low. The airport then takes a fuel throughput fee, something that is prohibited in Europe because no work is involved on the airport’s part. To add insult to injury, a goods and service tax (GST) is applied to the throughput fee, the infrastructure fee, and the into-plane service fee.

Finally, on domestic flights, fuel is subject to excise duties and state taxes of up to 30%. MoCA is moving in the right direction. It made a strong case for excise duty cuts on jet fuel that resulted in the government reducing it from 14% to 11%, a move that was instantly reflected in the rising value of shares in Indian airlines. The aviation industry has welcomed the development, but it also continues to fight for the fuel throughput fee to be removed and competition created through open-access infrastructure. “There are many priorities in fostering the economic and social development of India,” says de Juniac. “Fundamental issues of eradicating poverty, ensuring

Fuel is about 24% of costs globally for airlines, but it soars to 34% for Indian carriers

24%

Source: IATA

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Dossier

Discussion on… Airport development

“You cannot keep a project in your pocket and take your time. It is in the national interest to grow infrastructure”

Suresh Prabhu, India’s Minister for Civil Aviation

“We would like to work with all the airlines and put in place a policy to facilitate growth of the industry” quality education, providing healthcare and safe drinking water are massively important agenda items. Creating a better environment for aviation to do business can and will progress the nuts and bolts of India’s development day-to-day. “Safe, secure and sustainable air links make our world a better place. That is why I call aviation the business of freedom. And the government and industry share a privileged responsibility to work together for its success.” The exhilarating prospects for Indian aviation must also be seen in a broader industry context. “Aviation is not just about ﬂights,” says Singh. “India has great potential to be an engineering hub too, serving aircraft from around the world. We have some great young engineers in India so why should we send our aircraft to other parts of the world to be serviced?” Furthermore, a possible global shortage of trained aviation professionals could be averted if India’s potential is fully leveraged. “And India has a great ability to produce other trained manpower, such as pilots, cabin crew, and airport staﬀ,” he adds. “We can train them and send them throughout the world.” airlines.iata.org

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35 India holds great potential for aviation, but enthusiasm must be tempered. The fact is India’s airlines have long struggled despite strong demand. High growth has been accompanied by low profitability. Although some infrastructure development has been timely, one of the country’s principal hubs, Mumbai, continues to be heavily congested. Navi Mumbai, a new airport, will operate alongside the existing facility but has suffered delays and isn’t expected to open in 2019 as planned. As the existing Mumbai airport cannot accommodate further growth, the regional Maharashtra economy—the largest state economy in India—cannot perform to its full potential. “The authorities must do all in their power to eliminate further delays,” says IATA Director General and CEO Alexandre de Juniac. “India’s financial capital urgently needs expanded connectivity to drive India’s economy forward.”

There is also a more general question of infrastructure funding. India has used private capital to good effect with much-needed airports and upgrades built under a public-private partnership. But this too has timing issues. “People who get concessions from civil aviation must have a timeline in which to deliver that project,” says Qatar Airways CEO Akbar Al Baker. “You cannot keep a project in your pocket and take your time. It is in the national interest to grow infrastructure. When you apply for slots at an Indian airport they are not always available. We need rapid investment in infrastructure to make it easier for aviation to do business in the country.” And that investment must be overseen by an independent regulator to stabilize and monitor costs. To date, no privatization project is fully living up to airline expectations for sufficient capacity, service quality, and affordable costs. An IATA resolution at the last AGM backed up this sentiment,

calling on governments to be cautious when considering privatization. MoCA has released a preliminary transaction structure for greenfield airports and IATA will provide detailed comments. Two concerns with MoCA’s initial proposal are immediately apparent: It is wrong to establish a fixed per passenger yield at the outset of a concession contract that is set to run for four decades. Selecting the company that proposes the highest concession fee is also misguided if positive long-term results are to be achieved. “Airports are important to passengers, airlines and the community,” notes de Juniac. “Dialogue is at the foundation of IATA’s position on privatization. Decisions must balance the interests of all three stakeholders. That can only happen with robust dialogue. And we are eager to work with the government on the concession structure to define the next steps in India’s airport development.”

2018 – 05 Airlines

13/11/2018 08:20

Baggage

Back to the future RFID has returned as a cornerstone for improvements to baggage delivery services WORDS: GRAHAM NEWTON

he transformation of the passenger baggage experience is gathering pace. By 2020, many airline customers will notice significant changes that will take the hassle out of managing their bags. Self-service options will increase, off-airport baggage provisions will proliferate, and transparent, real-time tracking solutions will make for a more relaxing customer journey. The backdrop to the future is IATA Resolution 753 that came into effect on 1 June 2018. It mandates bag tracking at four key data points in the journey. Driven by both IATA and Airports Council International, Resolution 753 has benefits for all stakeholders along the aviation value chain, including the end customer. Having tracking points makes it much easier to identify where and how mishandling may occur and allows for a more targeted service by airlines. In addition to providing extra information on the baggage journey, the tracking points will also Airlines 2018 – 05

36-39 Article 01 Baggage_Airlines. 2018-05_Airlines International 36

$2.3bn Mishandled bags cost the industry an estimated $2.3 billion in 2017. But this represents a 46.2% reduction since 2007 airlines.iata.org

13/11/2018 08:21

Baggage

enable a faster process when bags do miss their intended ﬂight—reducing the delay in returning a bag to the passenger. Alitalia implemented Resolution 753 at Rome Fiumicino in November 2017 and Gianluigi Lo Giudice, Vice President, Alitalia Ground Operations, reports that “baggage management has signiﬁcantly improved.” He adds: “The mishandling rate has been reduced by more than 40% compared to 2015. We have recorded days where the mishandling rate in our hub was only just above two bags for every 1,000 carried passengers.” For Giudice, the results prove that “Resolution 753 compliance is essential.” Alitalia’s aim is to extend that compliance to the majority of its key airports within the next couple of years.

37 The return of RFID

Resolution 753 is also a key driver behind radio frequency identification (RFID) for baggage, which is enjoying a renaissance in the industry. Although RFID technology and the business case has always been there, the need to track bags brings added value to the RFID proposition. Andrew Price, Head, Global Baggage Operations, IATA, explains that when RFID was first being touted as a panacea for baggage woes, airlines had no money to invest in such areas. The financial crisis had cast its global shadow and survival was the name of the game. “That has changed,” he says. “But it is also true that the cost of tags is nowhere near the $1.50 that was previously the case. And there is much greater collaboration within the industry now, which is necessary for projects of this size and scope.” Indeed, the industry appetite for paradigm shifts—which large-scale RFID adoption certainly represents—has improved enormously. It is also the case that the customer experience has risen up the investment priority list. Service quality is a differentiator and passengers now often pay for—and always expect—a great baggage service. Because of fare airlines.iata.org

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IATA.OCT18.038.indd 36

13/11/2018 08:16

Baggage

unbundling, customers paying for baggage expect it to be delivered on time. And if there is a delay, they expect to know why. The right choice

Business case aside, RFID is also the right technology at the right time. Reader ranges and reliability have increased significantly, and RFID readily scales up. The technology has been deployed successfully in many other industries, including retail and health, providing close-to-perfect accuracy in real-time inventory information. Speaking at IATA’s Global Airport and Passenger Symposium, Brandon Woodruff, Delta Air Lines’ Baggage Implementation Manager, said that barcode scanning was giving the airline a 97% success rate. That 3% gap, however, represented some four million bags a year. Delta evaluated a range of technologies to plug the gap and Woodruff explained that it came down to Bluetooth or RFID. Other technologies either had issues with their applicability to the range of tough environments in which they would need to work or appropriate tags couldn’t easily be attached to bags. There was also a cost issue, which eventually ruled Bluetooth out. “There are other options out there to explore,” Woodruff admitted. “But I’m not sure there is something out there that beats RFID for the price. It is a great all-round option.” What are the next steps?

Implementing RFID can be complex. Every reader installation point has to be examined as they are often airside or in remote locations and the whole must be viewed in network terms. Moreover, other stakeholders, including airports and ground handlers, might be involved. If so, they need to know the airlines’ requirements. Bring in technical challenges such as Wi-Fi connectivity and it is easy to understand why tracking will take a few years to implement globally. Nevertheless, progress is an almost daily airlines.iata.org

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occurrence. Recommended Practice 1740c— which refers to the IATA standard for the use of RFID inlays in baggage labels—has recently been updated thanks to considerable industry input and a complete performance speciﬁcation for the inlays from Auburn University. The update ensures that all RFID inlays in baggage will perform in a consistent manner. Additionally, IATA member airlines are considering mandating an RFID inlay for all bag tags manufactured after 2020. IATA is gathering evidence on the topic. Looking further ahead, the introduction of RFID infrastructure to airports will eventually lead to reusable RFID. Although Qantas oﬀers this with their Q-Tag, there was a need to make changes to messaging standards to support the interline use of reusable RFID. The idea is a simple one; add RFID to a suitcase and there is no further need to tag the bag. The RFID identity is a unique and permanent link back to the journey. It will take several years before this is commonplace, but the RFID group at IATA is already working on the processes and principles for reusable RFID.

Spotlight on... How RFID works A reader—which can be either ﬁxed or handheld to help overcome irregular operations or diﬃcult location—sends a signal to an RFID tag that activates that tag to provide data. The tag is passive until it is probed by the reader. A reader can add to the information on the chip or overwrite existing data, a process known as encoding. Importantly, RFID can work in parallel with current technologies and systems. In essence, baggage sortation systems won’t care whether a bag is RFID or barcode-enabled. Most experts agree that airlines will use both technologies for the foreseeable future. That means an airline can implement RFID as slowly or as quickly as it pleases. Obviously, the faster the implementation, the faster a return on investment will be achieved.

Back to business

“Baggage is a business, bringing in vital revenue for airlines,” Price sums up. “But the costs of baggage handling in the existing environment are high, from advanced technical systems to human labor. Take a look at any aircraft and the challenges of the baggage business can immediately be seen. Capacity is either under or over-utilized, regulations prevent the efficient movement of bags, and processes impose on the passenger. “In short, the way baggage is handled today is not a sustainable commercial model for an airline, even though they get it right 99.5% of the time. Though RFID has long suffered from fears about cost, ease of deployment, global standards, and effectiveness, the facts are different,” adds Price. “RFID is cheap, it can be used globally, and it provides a hugely effective tracking solution.” 2018 – 05 Airlines

13/11/2018 08:21

Ground Handling

Untangling the web of complexity Ground operations must align on global standards to facilitate air travel demand WORDS: GRAHAM NEWTON

ir travel demand is expected to lead to a doubling of passengers within the next 20 years. At the same time, airport infrastructure is struggling to keep pace. Trying to accommodate more traffic in the fixed confines of an airport creates two challenges—maintaining safety and improving efficiency of ground operations. “Innovations in passenger processing are exciting, but unless we have improvement in aircraft time at the gate, we will just be moving the congestion to a different part of the journey,” says Joseph Suidan, IATA’s Head of Ground Operations. Complex environment

The ground handling sector has challenges to solve before it can even begin to think

Airlines 2018 – 05

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Hard to handle London Heathrow, for example, has a complex ground handling operational environment; 86 airlines operating over 70 aircraft type and sub-variants, two major self-handling airlines, six main ground handlers and over 130 other companies directly contracted to support aircraft turnaround operations.

about innovation. Complexity is a major concern. There is limited space for the parking of aircraft or ground service equipment and a bewildering array of procedures adapted to each airline and aircraft type (see boxout below left). “There is no direct ICAO or state regulation of ground service providers (GSP) regarding ground handling safety, so each GSP creates its own manual and then uses its customer’s ground operations manuals (GOM) to create airline-specific standards and procedures to fulfil their contractual terms,” explains Les Freer, Heathrow’s Head of Ground Handling, Strategy and Licensing. “GSP staff are then trained in each one of these procedures.” This leads to another fundamental issue in the sector; a high staff turnover rate. The idiosyncratic nature of the sector conspires to create a spiral of decreasing interest among staff as innovation becomes difficult, leading to low morale. Moving jobs within the sector is equally problematic due to the need for unique training specific to one GSP or airline. “There needs to be a shift in thinking,” says Liam Bolger, London Luton Airport’s Head of Airside. “Partnerships need to be developed that are built on shared common goals. What opportunities exist for anyone entering ground handling to develop a career, to innovate or express themselves in a meaningful and worthwhile way? This is why a partnership approach is needed, so we can invest in those people.” The bedrock for a partnership approach and greater innovation in the ground handling sector is IATA ground operations

airlines.iata.org

13/11/2018 14:08

Ground Handling

integrated solutions where the IATA Ground Operations Manual (IGOM), the Airport Handling Manual (AHM), the IATA Safety Audit for Ground Operations (ISAGO), and the Ground Damage Database (GDDB) are blended to provide the industry with the essentials for safety and eﬃciency. “Standardization is the only route to improved service and safe common operations,” Bolger says. “Just because you are compliant doesn’t mean you are safe.” Standardization would also lead to additional advantages, such as a GSP training manual and a set of training standards. It would also provide the plan for a GSP safety management system. Bedrock for success

Suidan says that following “the change of governance structure and the establishment of the Ground Operations Group (GOG), there has been a considerable increase in the drive toward global implementation of IGOM.” With alignment now achieved between IGOM and the IATA Safety Audit for Ground Operations (ISAGO), the next step is to align the safety critical IGOM procedures within the IATA Operational Safety Audit (IOSA) structure. “By standardizing the procedures IGOM makes it easier to train and interchange staﬀ on the ramp because the critical procedures are now common,” says Suidan. There is a continual increase in the number of airlines implementing IGOM, with Emirates and Qatar Airways the latest additions to the list. More signiﬁcant is that

airlines.iata.org

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airports have now joined the bandwagon. Airports have no visibility of airline-GSP contracts and so cannot know if the service level agreement calls for operational procedures that are not aligned with common standards. IGOM can mitigate this problem. Heathrow is looking to establish a partnership approach to collaborate with airlines and GSPs to agree which chapters and sub-sections within IGOM should be adopted to set a single way of operating on the ramp at Heathrow for all parties. Meanwhile, IGOM has been adopted by all the ground handlers at London Luton Airport. “It made no sense to try and introduce a new set of standards,” says Bolger. “We chose IGOM to enable us to set a single standard, reducing the risk of error and reducing the number of audits. The data is equally relevant to all the ground handlers turning a particular aircraft type, therefore placing the emphasis on quality and not quantity.” Suidan urges the aviation value chain to accelerate the global adoption of the IGOM to ensure a level of operational consistency and safety across the industry worldwide. “Aviation can grow safely when global standards are consistently applied,” he concludes.

As of August 2018, IGOM implementation status was as follows: IATA members:

120 38 118 Non-IATA members:

Ground Service Providers (GSPs):

2018 – 05 Airlines

13/11/2018 14:08

60 seconds with...

Karam Chand, CEO Royal Brunei Airlines

“Every day we are focused on what matters to our guests most” Tell us about your strategy for the next 2–5 years?

We have successfully transformed Royal Brunei into a servicefocused company: the high quality of our service is our point of diﬀerentiation. We will continue this strategy with further innovations in products and services, by leveraging digital marketing and by becoming a four-star airline this year. Our plan for the next 2–5 years is to expand our network. This is already underway with the launch of our new daily non-stop service from London Heathrow to Brunei. This development will mean that Royal Brunei will have one of the fastest journey times between London Heathrow and Melbourne.

In brief… Royal Brunei As the ﬂag carrier of Brunei, the airline currently serves 19 destinations across four continents Operating out of Bandar Seri Bagawan, Royal Brunei has one of the world’s youngest ﬂeets with the latest technology onboard Royal Brunei was founded in 1974 as an independent corporation owned by the Brunei government

19 4

destinations across

continents

How will you help increase the number of visitors to Brunei?

How important is it to promote gender equality in aviation?

We will take a leading role in destination marketing with support from M&C Saatchi and Brunei Tourism. This includes strategy development, funding, and implementation of various campaigns in key markets. Also, we plan to expand our presence in existing markets, open new routes in North Asia and increase our footprint in China. We will encourage our connecting guests to consider stopovers in Brunei by marketing it as an exciting destination in which to break up a long journey. We are also undertaking a project to increase connectivity within Borneo.

We are committed to encouraging and supporting women at Royal Brunei and are proud to have good female representation in different positions. In our succession plans, we have identified a high number of women to fill leadership roles in the future.

Is there still room for smaller niche carriers in the modern aviation market?

Absolutely. We are a boutique airline focused on a particular geographical scope and market segments. Every day we are focused on what matters to our guests most: good service, on-time departures and great value. Our guests’ feedback and recognition, which has resulted in us receiving various awards, shows we are key players in the modern aviation market. Airlines 2018 – 05

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What do you think are the biggest challenges and opportunities ahead for aviation in general?

The biggest challenges continue to be costs—especially fuel— cyber threats, uncertain economic climates, and having airline capacity that is out of sync with demand. The opportunities, especially in Asia, include the growth of middle class and the use of digital technologies to reach customers. Do you prefer a window or aisle seat and why?

I prefer a window seat. When you are traveling often over long distances, gazing out of the window and reﬂecting on life becomes a habit. I have come up with some great ideas and solved diﬃcult problems sitting in the window seat. airlines.iata.org

13/11/2018 08:22

TWO UNRIVALED FAMILIES ONE WIDEBODY LEADER

The 777X is generations ahead of its class in both efficiency and passenger experience. The same is true of the 787 Dreamliner. Combine these two twin-aisle families—the opportunity for greater network versatility is undeniable. That’s what you can expect from Boeing, the widebody leader.

boeing.com/widebody

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31/10/2018 08:40

EMPOWER AIRLINES. WE CARE FOR YOUR CREWS. UNIFORM DESIGN - PRODUCTION - LOGISTICS - DIGITAL WWW.WEARSKYPRO.COM/CORPORATE

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31/10/2018 08:41