Airlines 2022-03

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The airline industry has to play its part in the proper disposal and replacement of single-use plastics IMPROVING CABIN WASTE CEO Interviews Alaska Air Group, Cathay Pacific, Turkish Airlines Cargo safety Lithium battery transportation | Emission reduction The importance of the Long-Term Aspirational Goal (LTAG) airlines.iata.org 03–2022

WITHAHEADLOOKA350F.NEWGENERATIONFREIGHTER

Offering unrivalled operational efficiency, the Airbus A350F is based on the most modern platform ever developed. And with the latest technology to reduce fuel burn and CO2 emissions by up to 40%, it’s helping to keep the world a beautiful place.

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A NEW FREIGHTER FOR A DIFFERENT WORLD. INTRODUCING THE E190F AND E195F. Air freight is vital to the global economy – an economy that is changing rapidly. E-commerce is growing significantly and speeding up how we send and receive goods. Supply chains are shortening and becoming more spread out. New business hubs are emerging as people relocate and work from home. It’s the ideal environment for two new freighter aircraft to enter the market providing operators with the speed, flexibility and lowest cost per trip and volume to deliver round the clock and make the most of every opportunity. embraerfreighter.com #ForADifferentWorld

The

In numbers Industry economic performance CEO Interviews 16 Climate change:

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says the industry must invest in environmental initiatives 20 Make

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diversity

Pandemic

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The safe transportation of batteries by air is a joint responsibility with shippers, manufacturers, and governments Long-Term Aspirational Goal LTAG by ICAO member states is an important step to achieving net-zero goals and ensure that the industry stays on course

EditorEditorialGraham Newton Head of content production DeeDee Doke Production editor Vanessa Townsend Senior designer Gary Hill Picture editor Claire Echavarry ProductionProduction manager Jane Easterman +44 (0)20 7880 jane.easterman@redactive.co.uk6248

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7CommentWillieWalsh, Director General Airport capacity issues mean the airline industry still needs slot flexibility update lessons will restore travel confidence, Incentives to boost SAF production, IATA CO2 Connect tool Data: worse than COVID Augustus Tang, CEO at Cathay Pacific, the most of Prof. Dr. Ahmet Bolat, Chairman of the Board and Executive Committee of Turkish Airlines, says diversity will lead the continued growth of the carrier innovative business Ben Minicucci, CEO, Alaska Air Group, says in-house training will provide an important pipeline of pilot talent regulation hampers single-use plastics common with other industries, aviation must play its part in the proper disposal of single-use plastics (SUP) awareness needed around

10DigestIATAand industry

24FeaturesAssymetric

lithium batteries

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.

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The industry still needs slot flexibility

“At least 30 countries are looking at their regulations. EU regulation 261 on consumer rights already costs the industry $10 billion annually, much of it from disruptions forced upon airlines by other providers, such as air traffic control. The stakes are high.”

On “Governmentssustainabilitydon’tneed to micromanage how airlines buy SAF; they need to incentivize production. With supportive government policies we could see 30bn liters of SAF by 2030. That will still be far from where we ultimately need to be. But it would be a clear tipping point towards our net-zero ambition of ample SAF quantities at affordable prices.”

Willie Walsh: DG Insight

On Dublin airport charges

Willie Walsh, IATA Director General 7 2022 – 03 Airlinesairlines.iata.org

Demand for travel is strong. But uncertainty remains, not least because some airports are capping passenger numbers. And this makes a full return to the 80-20 slot use rule premature. The UK has recognized the need for a resilient recovery, and Heathrow’s continued failure to provide basic services, by putting a pragmatic 70% rule in place. But the EU Commission has not agreed to similar flexibility, proposing a return to 80-20 and many other unnecessary policy changes. We are worried that airports will not be ready in time to service an 80% threshold by the end of October. Airports are equal partners in the slot process—we should not restore the 80-20 slot use rule before they can demonstrate their ability to declare and manage their capacity accurately and competently.

wayalignedatoacrossinvestmentsTheaviation.decarbonizeThat’scritical.significantrequiredthevaluechainachievenetzeroneedsolidpolicyfoundationwithaglobalforward.”

On consumer rights

“We welcome the Irish Commission for Aviation Regulation decision to push back on Dublin Airport’s proposed outrageous average 68% price increase. But even under the regulator’s revised proposal, the average price cap is still some 11% above 2022 levels.”

“The ICAO High Level Meeting’s support of a long-term goal for states that is in line with the aviation sector’s net zero by commitment2050 is a step in the right direction. A formal agreement at the 41st ICAO Assembly would underpin a common approach by states to

oftonnes400maboutisthereProgram,EnvironmentNationsUnitedthetoAccordingareThereeasy.bewon’taviationinplasticssingle-useReplacingyear.everyproducedwasteplasticregulatoryandtechnicalhurdlestoovercome.YetairlinesaredeterminedtoeliminateSUPsandaforthcomingUNagreementtomanageplasticpollutiononalifecyclebasisisapositivestep(p24). 9 2022 – 03 Airlines The Big Picture

IMAGES: ISTOCK/SHUTTERSTOCK 10 Airlines 2022 – 03 airlines.iata.org Digest

Vital pandemic lessons will restore travel confidence IATA has called for governments to apply the lessons learned from the dismantling of global connectivity in response to COVID-19. This will ensure that future global health threats can be effectively managed without closing borders. The World Health Organization (WHO) long advised that border closures are not an effective means of managing a global pandemic. Evidence observed during the pandemic proved the point. Most governments ignored this advice, acted in isolation from the industry and other governments, and put in place measures to restrict travel. This collapsed global air connectivity with massive negative economic and humanMoreover,consequences.therestart of global connectivity has been made more challenging because governments continue to favor local solutions over global standards. Constant policy changes by governments left most of the industry little time to prepare for the ramp-up. And international travelers can only see the global effort to manage the pandemic as illogical and poorly coordinated in the face of vastly different policy responses to a common problem. “It’s vital to restore public confidence in government handling of health crises and border restrictions. Much of the damage was caused not by fear of the virus, but fear of sudden and arbitrary border restrictions imposed by authorities. Understanding the significant lessons from the pandemic will be crucial to managing future health crises in a way that ensures borders should not have to close again,” said Conrad Clifford, IATA’s Deputy Director General.

To fulfil aviation’s net zero commitment, current estimates are for SAF to account for 65% of aviation’s carbon mitigation in 2050. That would require an annual production capacity of 449 billion liters. In 2021, irrespective of price, airlines purchased every drop of the 125 million liters of SAF that was available. And already more than 38 countries have SAF-specific policies that clear the way for the market to develop. Airlines have entered into $17 billion of forward-purchasing agreements for SAF.

A recent IATA survey shows that improving the environmental impact of airlines is seen as a post-pandemic priority for passengers, with 73% of people polled wanting the aviation industry to focus on reducing its climate impact.

IATA has launched IATA CO2 Connect, an online tool that provides the most accurate CO2 emission calculations for any given commercial passenger flight. IATA CO2 Connect responds to the growing demand for CO2 data transparency linked to airline specific and actual fuel burn information and load factors. This sets it apart from the theoretical data models that are already on the market. IATA CO2 Connect is available to companies within and outside the travel value-chain, such as travel management companies (TMCs), travel agencies, airlines, and multinational corporations. They can access the relevant CO2 emissions data and integrate it in a customized manner into their existing flight booking tools. Travel managers or travelers can easily see the CO2 emissions per routing. To aviation’sfulfilnet

IATA CO2 Connect: Accurately calculates CO2 emissions

Incentives needed to boost

CO2 CONNECT TO SUPPORT INDUSTRY SUSTAINABILITY

Sustainable fuel production: Governments around the world need to rapidly boost the production of sustainable aviation fuels

11 2022 – 03 Airlinesairlines.iata.org Digest

IATA called for governments to urgently put in place large-scale incentives to rapidly expand the use of sustainable aviation fuels (SAF) as aviation pursues its commitment to achieving net-zero carbon emissions by 2050.

2050

CANADA MUST REMOVE TRAVEL RESTRICTIONS

SAF production

IATA has again called on the Canadian Government to urgently discontinue its COVID-19 related travel restrictions. These are now out of step with the global trend of lifting travel restrictions and are partly responsible for the ongoing delays and disruption affecting air travelers across Canada, said Peter Cerda, IATA’s Regional Vice President for the Americas: “Though governments across the globe are rolling back restrictions, the Government of Canada is reinstating them.”

Thataccountcurrentcommitment,zeroestimatesareforSAFtofor65%ofaviation’scarbonmitigationin2050.wouldrequireanannualproductioncapacityof449billionliters

Artificial intelligence enables a step-change in the airline industry Sam Chamberlain, Product

The Revenue Operating System® from FLYR leverages deep learning technology to provide automated, AI-driven revenue management capabilities that maximize airline profitability and total revenue. With our cloud-native solution, FLYR provides actionable insights for stakeholder management, value realization, and preemptive action. Our platform also helps to align people, processes, and systems to drive improved performance across the organization—not just for revenue Director,

Revenue Management, FLYR FLYR offers a solution that provides automated, AI-driven revenue management capabilities to maximize airline profitability and total revenue. Maximizing the total network: Connecting your revenue and sustainability efforts 12 Airlines 2022 – 03 airlines.iata.org Sponsored Feature: FLYR

In particular, a cutting-edge form of AI called deep learning is helping airlines become more efficient and profitable throughout the entire customer journey.

Despite today’s operational challenges, airlines are looking toward the future, prioritizing sustainability to help ensure a better future for the next generation of travelers. In fact, at the 2021 Annual General Meeting (AGM), IATA airline members committed themselves to achieve net-zero carbon emissions by 2050. Although this end goal may be a few decades away, there are ways that airlines can make short-term impacts using advancedEmbracingtechnology.advanced technologies like Artificial intelligence (AI), airlines can work faster and smarter toward their sustainability targets while also unlocking hidden revenue potential and improving customer experiences. Prioritizing sustainability while maximizing revenue performance With the first sustainability milestone (SAF production to reach 7.9 billion liters) set for 2025, it is important to look to data to help determine the next steps across all business decisions. However, visibility into actionable insights is often limited. Legacy methodologies have hindered progress for airlines, causing them to fall behind compared to other industries. Additionally, decades-old systems were initially designed to support single functions. Now, with more complexities to consider—such as incorporating critical industry sustainability goals—these siloed solutions are unable to give airline leaders a clear picture of what’s to come. The result is major gaps in data that cause airlines to make businessimpacting decisions through guesswork. With a single, common intelligence platform, analysts don’t have to juggle multiple systems and spreadsheets to get the answers they need. Instead, airlines can gain a better understanding of current and future opportunities across their commercial teams—and even see new possibilities for greater impact in adjacent businessAppliedfunctions.toacommon intelligence platform, AI technology can help feed all other areas of the business with critical information for real-time decision-making.

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OperatinginformationIntelligence,’Potential‘Unlockingwhitepaper,YourRevenuewithArtificialformoreaboutTheRevenueSystemfromFLYR. management, but for operational efficiencies and enhanced collaboration across all business functions.

Enhancing customer experiences with reliability Common data, common predictions, and common forecasting models are the tools and processes that will break down long-standing silos across Revenue Management, Network Planning and Scheduling, Sales and Distribution, and Marketing teams, ultimately creating a more optimal and efficient network that provides a frictionless experience for all customers. Alignment across the commercial organization produces efficiencies for the airline. But perhaps more importantly, it establishes optimized customer journeys through reliability management. For example, factoring delay trends into an airline’s forecasting models will increase its reliability and on-time performance, which in turn reduces waste and improves sustainability for the carrier, with the bonus of enhancing customer experience. Paving the way to total network optimization At FLYR, we’re helping airlines unify all These invaluable insights are the lever to sustainability without compromising profitability. 2022 – 03 Airlinesairlines.iata.org

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commercial data under a single repository and data model. This helps automate the more routine pricing decisions the analyst makes and allows them to spend more time performing strategic tasks, leveraging the software to influence broader commercial decisions such as proactive marketing or network strategies. For example, with trusted load forecasts to optimize capacity plans, airlines can determine the size of aircraft type needed for a flight, and whether or not to make a route seasonal. This prevents the aircraft from flying with empty seats, which not only impacts the bottom line but also creates unnecessary expenditures such as fuel burn, maintenance costs, and additional staffing costs. And, where seats may not yet be filled, paid cargo can be added to compensate for open cabin space, ensuring that the flight route and aircraft deliver maximum performance potential. Adopting AI is a major challenge for airlines, but it is a necessary step in navigating through the industry’s complex operating environment. It’s also a fundamental step in bringing a carrier’s data to a single platform where more actionable insights can be discovered and utilized to make smarter commercial decisions, improve business operations, and reach industry and airline sustainability goals.

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201920202021Dedicatedcargoairlines42 59 8 8 12 5 28 3 21 113 29 5357 33 93 156 69140160120100806040200 Aircraft resilience: Airline births, deaths, and dormancy – strong investor interest in aviation tends to revive in times of turbulence Source: IATA using data from FR24, Cirium, public sources BirthsDeathsDormancy Global outlook for the airline industry and how it is improving and developing in the face of turbulent and challenging times The projected volume carried by air cargo in 2022 will be a new record. However, as the trading environment softens slightly, cargo yields are expected to fall 10.4% compared with 2021 of touristsinternational reached their destination by air Source: IATA Economics 58% INDUSTRY ECONOMIC PERFORMANCE 68,40,14 Airlines 2022 – 03 airlines.iata.org Data In numbers

11.8%11.4%76.8% 10.3%12.7%77.0% 11.5%14.0%74.5% 15.5%12.0%72.5% 14.4%36.2%49.4% 12.5%40.3%47.2% 201620172018201920202021 100%80%60%40%20%0%Passenger Revenue Cargo Revenue Other Revenue Source: IATA Economics Airline revenue by source, 2016-2021 % of total Larger share of cargo in airlines’ total revenue is partly a function of the depressed state of passenger travel during the pandemic Worldwide airline industry201920202021e2022f Fuel spend, $bn 19080103192 Fuel use, billion litres 359196229321 Fuel efficency, fuel/100 ATK 22.021.721.721.5 CO₂, million tonnes 905495577809 Fuel spend, $/barrel 79.746.677.8125.5 Industry losses in 2022 will amount to $9.7 billion, a fromimprovementhuge losses of $137.7 billion in 2020 and $42.1 billion in 2021 Passengerrevenues will reach $498 billion this year 9.7 bn Worldwide airline fuel bill In 2021, the airline fuel bill increased by almost 30% due to easing of travel restrictions and initial recovery in passenger demand Source: IATA Economics (Source: IATA, ‘Global Outlook for Air Transport, Times of turbulence’) 498bnNorth American airlines are expected to deliver an $8.8 billion profit in 2022 8.8bn $191bn Cargo revenues are predicted to hit $191 billion in 2022000 15 2022 – 03 Airlinesairlines.iata.org Data 2022

We’ve been working on the recovery for some time and by the end of 2023, we will have recruited an extra 4,000 people 16 Airlines 2022 – 03 airlines.iata.org CEO Interview

The airline will also be more focused and competitive. Our advantage is being able to see what has happened in other regions as they ramp up. And the key to recovering quickly is starting as early as possible in the rebuilding process. So we’ve been working on the recovery for some time and by the end of 2023, we will have recruited an extra 4,000 people. And some of those people will be returning to us after leaving during the crisis. We had a great response when we contacted former staff. People wanted to come back to work with Workingus.with our partners at the airport and in the government is also vital. For example, it is important to let people know that Hong Kong will be open for business, tourism, and friends and families. The fact that I made it to the IATA AGM in Doha shows that we are extremely determined in our ambitions.

IMAGES: PACIFICCATHAY

So, the signs are good. I have every confidence that Cathay Pacific and Hong Kong will bounce back. Don’t bet against us!

17 2022 – 03 Airlinesairlines.iata.org CEO Interview

Climate change: worse than COVID

We all know that Hong Kong is behind in its recovery. But every region has had to deal with restrictions at different levels at various points throughout the crisis. The point is that we will catch up. As Hong Kong’s home airline for more than 75 years, Cathay Pacific has always been fully committed to safely fostering vital connections between Hong Kong and the rest of the world, and to upholding Hong Kong’s international aviation hubWestatus.arealready operating a full freighter schedule again, and we aim to operate passenger flights to more than 60 destinations by the end of 2022—more than double the number we were operating at the beginning of 2022. Cathay Pacific will recover to be a stronger airline than before the crisis and Hong Kong will be a stronger international aviation hub.

W ith the Cathay Pacific motto “Move beyond,” the airline understands the need to meet the 2050 net-zero emissions target, recognizing that climate change could cause even more disruption long term to the industry than the global COVID crisis. Can the airline recover, or will we see a different Cathay Pacific in future?

Augustus Tang , CEO, Cathay Pacific, says the airline industry must invest in environmental initiatives, despite short-term challenges. GRAHAM NEWTON

INTERVIEW BY:

If you want to build a world-class hub and a world-class airline you must collaborate with your partners at the airport and in government. For us, the pandemic helped to cement those close relationships. Our interests are aligned. We have all been fighting the pandemic and we all want to recover as quickly as possible. We need to be competitive in the region and that means creating a valued aviation product. We can’t do that working in isolation. Can the industry afford to be green? We can’t afford not to be. Climate change is a bigger crisis than the pandemic because it threatens the long-term future of the industry. At the very least, it could cause significant disruption unless we make real changes to lower our carbon emissions. We are fully committed to the industry’s net zero emissions by 2050 goal and are exploring all options to reduce CO2. For example, we want to have sustainable aviation fuels (SAF) make up 10% of our total fuel uptake by 2030. And we have a program for our corporate

Yes, there are many countries in the region and probably an equal number of travel policies so there will be a lack of synchronization that will slow progress. But that will be temporary. We are definitely moving in the right direction. How important is cargo and what improvements do we need to see in this sector?

I’m very bullish about the recovery in AsiaPacific. The amount of pent-up demand in other regions has been extraordinary and there is no reason to believe that Asia-Pacific will be any different. In fact, it will be better. It is a bigger market. And at Hong Kong, we will have the new third runway that pushes capacity from 75 million passengers per annum (mppa) to 120mppa. The growth potential afforded by the commencement of the three-runway system at Hong Kong, and the opportunities presented by the Greater Bay Area, will ensure that both Cathay Pacific and the Hong Kong hub will remain competitive when pandemicrelated restrictions are lifted. Furthermore, as an international aviation hub, Hong Kong has a critical role to play China’s development, as outlined in the national 14th Five Year Plan.

Are you equally optimistic about travel in Asia-Pacific or do you expect caution?

Pre-pandemic, we carried approximately 50% of cargo on freighters and 50% in the belly of passenger aircraft. But, of course, passenger flights are down enormously. At one point, we were in single digits percentage-wise compared withHowever,2019. our freighter schedule is full. And we were one of the few carriers that could safely transport the Pfizer vaccine at the low temperatures it required. That was important for us and important for the world. The aim must be to create value for every player in the air cargo supply chain. Digitization will help. Shippers want to know where their cargoes are at any time. They want to book online, see the space available and the rates. This was a major driver behind the launch last year of our Click & Ship digital booking platform, which allows shippers to do just that. We also launched our own fully featured cargo chatbot to offer our customers in Hong Kong a quicker and more intuitive response to their cargo queries. Meanwhile, our 24/7 Operations Control Centre provides proactive monitoring and customer support for highvalue shipments. Has the crisis affected airline relationships?

Hong Kong is the busiest cargo airport in the world. That is still true and that tells you all you need to know about how important cargo is to Cathay Pacific. Despite ongoing restrictions and operational challenges, in the second half of last year we were profitable, and that was due in large part to the exceptional performance of our cargo business.

60 “We aim to operate morepassengerflightstothan60destinations by the end 2022—moreofthandoublethenumber we theoperatingwereatofbeginning2022 ” Augustus Tang, CEO, Cathay Pacific 18 Airlines 2022 – 03 airlines.iata.org CEO Interview

Pre-pandemic, we carried approximately 50% of cargo on freighters and 50% in the belly of passenger aircraft

30%Weexpectsome 30% of our executivessenior to be female in the next few

Interview

50%years

At Hong Kong, we will have the new third runway that pushes capacity from 75 million passengers per annum (mppa) to 120mppa. CEO

120mppa

The talent loss to other industries is something that concerns me. Cathay Pacific is doing well in its recruitment but there will be continuing shortages as the industry recovers. We must think through how we will attract young talent at the industry level. It won’t be easy. Aviation skills can take a long time to master but this is a very volatile industry that can change quickly. The pandemic proves that. And that makes young people wonder whether the commitment to train will be worth it. Even so, I think we can persuade them. But we have to open a dialogue with the younger generation and begin to teach them about the glory of aviation. It offers such an exciting career and is a pillar of the modern world. What are the lessons learned from the past two years? For me, the main lesson is that people make the difference. I can’t thank the Cathay Pacific team enough for the wonderful job they did during such a challenging period. I appreciate that it isn’t just about the job and that the disruptions they faced affected their families and their future. To build on such a dedicated team means that leadership must set the right tone going forward. And then they must trust and empower their team. There is no magic formula. It is about creating the right spirit and that is something for which Cathay Pacific is Therenowned.Cathay Pacific motto is “move beyond.” That has become extremely important and more relevant than ever. We will move beyond our existing challenges and be bigger and better in the future.

customers to reduce their carbon emissions by participating in our SAF efforts. It’s a first for Hong Kong. There is a shortage in SAF supply at the moment though, but I hope that this reflects the uncertainty about these fuels a few years’ back. It takes time for the market to adjust especially when you’re talking about building new refineries. The demand for SAF is clearly being demonstrated now and so there is huge potential. The uptake for our corporate SAF program proves that. It is an attractive market for suppliers now. Of course, governments can accelerate the process with the right policies. It will probably take a mixture of carrot and stick, but incentives for SAF production would be a good start. Governments are talking about this, but they need to act. Will diversity be a source of strength?

I am a firm believer in diversity. A diverse workforce adds to a company’s performance. Cathay Pacific was among the first carriers to sign up for IATA’s 25by2025 initiative. In fact, we expect some 30% of our senior executives to be female in the next few years. We’ve also set up a task force to study the issue and to make sure that we make the right decisions to improve diversity going forward. Are there any other areas in aviation on which we should focus?

19 2022 – 03 Airlinesairlines.iata.org

“ aircraftNewwill be vital. We are investing in787sBoeing and A350sAirbusand these are much more aircraftefficientthan their generations”previous 20 Airlines 2022 – 03 airlines.iata.org CEO Interview

How important is Istanbul Airport to your success and what lessons can the industry learn from your relationship with them? The new Istanbul Airport was a huge A long with encouraging more strategic airline partnerships following the pandemic, such as its relationship with the newly built Istanbul Airport, investing in relevant subsidiaries, and its continued investment in cargo, the airline aims to increase diversity—not because it should but because it wants to succeed. Will the airline resume its strong growth or is this a time for caution? During the first phase of the pandemic, we had conversations with the manufacturers to delay deliveries, and we adjusted some of our orders, such as reducing the number of Airbus A350s.

INTERVIEW BY GRAHAM NEWTON

We had to make sure we didn’t have overcapacity in the market. But we also knew the issues were temporary, and we worked hard not to make cuts that would affect our recovery. It worked. In 2021, we posted record profits. And in 2022, our performance promises to be as good, if not better. This year, we will take delivery of six Airbus A350s and we have Boeing 737 MAXs on order too. The order book is still quite aggressive. So, there is no doubt that we will continue to grow.

Making the most of diversity

Prof. Dr. Ahmet Bolat, Chairman of the Board and the Executive Committee of Turkish Airlines, says diversity will support the continued growth of the carrier.

21 2022 – 03 Airlinesairlines.iata.org CEO Interview

investment, and we recognize that not many governments are willing or capable of spending that much today. There were not many countries building an airport like Istanbul at the time and there will be even fewer in the foreseeable future.

The new airport made travel much easier, and it is a huge boost for our business. Essentially, it has allowed us to double our operations. It also reduced queues everywhere—at check-in, immigration, even for taxis. We didn’t have enough gates before and now we have 143 with bridges. If you’re transiting, you don’t want to be getting on a bus back to the terminal and then bussed back out again. The vision for the airport was excellent and it is vital to our growth.

The industry is still in recovery mode, which is why partnerships and deals are a little slow at theButmoment.Idon’t think the crisis has affected airline strategies. It still makes sense to partner with an airline that can complement your network. Everybody benefits, including the passenger. They get access to more destinations, and they get a lower fare too because an airline won’t have all the costs associated with setting up new destinations. How important has cargo become and what changes do we need in this crucial sector?

IMAGES: SHUTTERSTOCK 1.4 bn

22 Airlines 2022 – 03 airlines.iata.org CEO Interview

Let’s face it, even if you did want to build an airport like that today, it would cost you at leastTheredouble.isno secret to this. We had a vision and we worked very closely with everybody involved in building the new airport. We were consulted at every stage. Our airline represents about 80% of traffic at Istanbul Airport, so all parties understood that collaboration on every aspect of the facility was essential. Are airline partnerships back on the agenda or has the crisis forced more isolated thinking?

We’ve always invested in cargo. On the freighter side, we have Airbus A330s capable of carrying about 80 tons from Istanbul to New York, and Boeing 777s that can get more than 100 tons to Los Angeles. We also have the premier cargo facility in Europe and the fifth largest in the world. We invested $400 million in the facility and are already thinking about expansion. The $1.4 billion profit in 2021 was made possible in part by our cargo arm. In that sense, cargo’s importance isn’t new. It has always been high on our agenda. Going forward, we are making progress on digitization, but regulations must keep pace with new technology, otherwise a lot of the potential is wasted. And we should anticipate future crises and look closely at the temporary conversion of passenger aircraft into cargo aircraft. There is work to be done there to ensure safety and efficiency for all parties.

The $1.4 billion profit in 2021 was made possible in part by our cargo arm. In that sense, cargo’s importance isn’t new. It has always been high on our agenda.

What are you doing regarding diversity and inclusion?

We are committed to ensuring at least 25% of our managers are female by 2025 in line with the IATA program. Already, in 95 of our international destinations there are women at manager level. There are several female senior vice presidents too and we have almost always had at least one female board member. Our plans are to naturally increase the number of women in the years ahead. This all seems very normal to me. I have five children, including four daughters, and I know the value they can bring as they’re all extremely capable and well educated. It is not about diversity of perspective. It is about intelligent insight and excellent business decisions and accessing that wherever it is available. We are not doing diversity because we should. We are doing it because we want to succeed. Can we reach net zero emissions by 2050? We have to if we want to continue growing. For two years now, we have had a unit focusing on CO2 reductions and an EVP in Investment and Technology responsible for initiatives that make emission reduction possible. Global

and

Interview

I think we can do more from a humanitarian point of view. Aviation says it delivers social and economic benefits—and it does—but we must make sure that we reach everybody. There are a lot of unfortunate people in the world. We are working with non-governmental organizations to deliver food, medical supplies, and other Aviationessentials.wasvitalduring the crisis and has been instrumental to humanitarian efforts at other times. But we can and should be doing more every day. I feel passionate about this. We say we are a global industry and connect the world. So let’s have global awareness and reach every single person. We can’t ignore those parts of the world where we don’t fly. Aviation cannot just be about connecting those who can afford it. Let’s truly deliver on our message of connectivity and being a force for good.

airline alliance Star Alliance also has its own targets and programs. We must continue to do our homework and study appropriate technologies. New aircraft will be vital. We are investing in Boeing 787s and Airbus A350s and these are much more efficient aircraft than their previous generations. That makes a big difference. Less fuel burn means less emissions, so investing in new fleet is vital. Besides utilizing new generation aircraft, sustainable aviation fuels (SAF) production and usage are significant elements for decreasing carbon emissions. We have also teamed up with the local universities to study SAF and decide on the best way forward. We are also eager to reduce plastics. We looked at the items least used in our amenity kits, for example, and have taken them out. It shows the level of commitment that airlines must have to preserve the environment. It’s only right. We have to be conscious of the world we are leaving for our grandchildren. What technologies excite you? Digitization is the future. We have a thriving information technology in our country, and we will look to exploit that. In particular, customers should be able to buy a ticket at any time through any channel. Anybody in the world can buy a household item that is made in China with just one click. Why shouldn’t they be able to buy a ticket on our airline in the same way? Aviation is behind the curve in retailing, and it has to catch up fast. We have invested in a technology company and are excited about the potential. It will explore technologies that are suitable for our airline initially, but the plan further down the line is to expand its operations into general consumer technology. Are there any other areas of the industry that demand our attention?

reduction

What more do you want to achieve at the airline?

For

that make

25%possible.We are committed to ensuring at least 25% of our managers are female by 2025 in line with the IATA program 50%

“At the moment, about 15% of our profit is generated by our subsidiaries I want to reach 50%” 23 2022 – 03 Airlinesairlines.iata.org CEO

I have been at Turkish Airlines for 17 years and I have a professional, motivated, senior team, most of whom are also long-serving. Together with all the staff, we have built one of the biggest and best airlines in the world. And in the future, we are only going to get better. We have put ourselves in a situation where we have managed to invest in many different subsidiaries. The challenge is to make those subsidiaries as good and as successful as the parent airline. At the moment, about 15% of our profit is generated by our subsidiaries. I want to reach 50%. That doesn’t mean we will forget our core business though. Carrying passengers and cargo around the world is what we do, and we will never forget that. That will always be the focus of our strategy. two years now, we have had a unit focusing on CO2 reductions and an EVP in Investment Technology responsible for initiatives emission

20% It is about moving away from using fossil fuels to produce plastic. One estimate suggests that 20% of the world’s oil could be used to produce plastic by 2050 24 Airlines 2022 – 03 airlines.iata.org Sustainability

Furthermore, aviation security mandates the use of certain SUP products including resealable plastic bags for liquids, aerosols, and gels (LAGs) and secure, tamper-evident bags (STEBs) for duty-free products.

To further complicate matters, airlines are being challenged by asymmetric SUP regulations.

Airports, regional authorities, and national governments around the globe are rushing to introduce SUP rules. In the absence of coordination and cooperation, this has left airlines with a problem. Do they comply with the restrictions at the airport of departure or arrival?

hampersAsymmetricregulationSUP

including being safe, hygienic, and lightweight, over the last five years at least 27 IATA airlines began SUP replacement initiatives. The pandemic reversed this trend with regulators mandating the use of SUP masks and sealed food and drink.

Sustainability

Moreover, there is no evidence that regulations are taking transport-related emissions into account on a lifecycle assessment (LCA) basis, since replacement with reusable products invariably lead to enhanced CO2 generation. In effect, airlines could inadvertently contribute to pollution displacement, from a perceived marine issue into a climate change one. T he inappropriate disposal of single-use plastics (SUP) and its impact on the marine environment is a key challenge for our times.

Like other industries, aviation has to play its part in the proper disposal of single-use plastics. Graham Newton reports 25 2022 – 03 Airlinesairlines.iata.org

According to the United Nations Economic Program (UNEP), there is about 400 million tonnes of plastic waste produced every year. Research by the World Economic Forum (WEF) indicates that plastic production will double in the next 20 years and with low global plastic recycling rates, much of this could end up in the oceans. Worse, plastic in the oceans decomposes slowly and will represent a threat to marine life for hundreds of Evenyears.though cabin waste is subject to strict controls that minimize the risk of plastics from aviation being dumped in the sea, airlines stand ready with passengers to take on the challenge of replacing SUP with more sustainable alternative inflight products. However, a number of regulatory and technical barriers are impeding progress. SUP replacement Although SUP products are widely used in aviation, offering a wide variety of benefits

Jon Godson, IATA’s Assistant Director, Sustainability, says, that “inappropriate and asymmetric regulations are the main challenge on improving cabin waste performance, contributing to the circular economy and replacing SUPs with sustainable alternatives.” Airlines and their service providers need to coordinate actions to promote regulatory change, provide demand signals to the emerging market for sustainable products, and encourage the development of appropriate recycling, reuse, and recovery infrastructure.

400 m

“There is a lot that can be done with the lifecycle of plastic,” she said. “The agreement would start the transition to a circular plasticUpstream,industry.”itis about moving away from using fossil fuels to produce plastic. One estimate suggests that 20% of the world’s oil could be used to produce plastic by 2050.

“The lack of a global product sustainability standard, which can be used to demonstrate not only product integrity, composition, and hygiene but also environmental benefits, including emissions, biomass certification, and recycled content, will impede investment and replacement,” Godson concludes.

Sustainability

400 million tonnes of plastic waste is produced every year, according to the United Nations Economic Program 26 Airlines 2022 – 03 airlines.iata.org

“Inappropriate and asymmetric regulations are the main challenge on improving cabin waste performance”

There are additives in the plastic production process too. Some will be necessary— enabling the plastic to be shaped, for example—but others may be superfluous or have sustainable alternatives.

IMAGES: ISTOCK/SHUTTERSTOCK International Catering Waste (ICW) regulations add an additional layer of complexity. Waste from international flights is often labelled biohazardous, requiring incineration, sterilization, or deep landfill burial. This means that alternatives to SUPs, including biodegradable crockery and cutlery, can’t be recycled or re-used.

The situation could be improved in 2024. That is when the UNEP has committed to finalize a legally binding agreement on the lifecycle of plastics—from production to disposal. At the 78th IATA AGM in Doha, Qatar, Sheila Aggarwal-Khan, Director of the Economy Division, UNEP, explained the importance of the proposed agreement.

UNEP agreement

Jon Godson, IATA’s Assistant Director, Sustainability

Airlines are reporting that alternative products are expensive, not available at scale or have dubious sustainability benefits.

Mid-stream, it is about re-use. This is most often seen in plastic bottles, but the concept could be Downstream,extended.itis about having recycling options. A major problem is the chemicals released. Dealing with these is not only very expensive but comes with its own, huge carbon footprint, defeating the purpose. Best practices Aggarwal-Khan suggested that the industry should set itself targets to push governments into setting the appropriate policies to help them achieve those targets and to contribute to the plastic treaty negotiation process to ensure its concerns about asymmetry areAlready,addressed.the Sustainability and Environment Advisory Council (SEAC) has formed a Sustainable Cabin Working Group that aims to identify and review cabin waste and SUP issues and emerging legislation and technology. The Working Group will provide a platform for airlines to share best practices and advise on areas that require technical support, research or regulatory engagement. Guidance on the harmonization of SUP regulations for regulators is already available.

GE: Sponsored Feature 27 2022 – 03 Airlinesairlines.iata.orgGEislooking at a mix of technologies to improve engine efficiency and ensure compatibility with alternative fuels to help aviation achieve net zero GE: POWERING THE FLIGHT TO NET ZERO

CFM’s RISE technology demonstration program, unveiled in June 2021, has a series of new innovations including advanced engine architectures like open fan, compact core, hybrid electric capability, and SAF and hydrogen fuel compatibility. Ongoing development of the open fan engine design has been enabled with GE’s advances in acoustics that have led to significantly lower noise levels from previous tests with unducted engine fans. This has resulted in noise levels below today’s engines. including CFM International, have more than 39,000 engines in service in the commercial airline fleet. In 2021, GE spent some $1.6 billion on aviation research andKeydevelopment.tosuccessin achieving net zero by 2050 is a highly efficient, low-emission propulsion system. Already, GE aircraft engines today are more fuel efficient than their predecessors, as illustrated by the GE9X engine, which is up to 10% more efficient than the GE90, and CFM’s LEAP engine, which is 15% more efficient than the CFM56. CFM is a 50-50 joint company between GE and Safran Aircraft Engines. Both GE9X and LEAP contain such advanced materials as heat-resistant ceramic matrix composites and lighter parts made using Airlines 2022 – 03 airlines.iata.org 28

A chieving net-zero emissions by 2050—the ambition of the aviation industry and of GE— won’t be achieved through one mechanism alone. A medley of developments, from greater uptake of Sustainable Aviation Fuel (SAF) to more efficient aircraft engines and improvements in air traffic management will be Arjanrequired.Hegeman, General Manager of Advanced Technologies for GE, stresses that no stone can be left unturned. “The 2050 commitment is do-able, but we can’t afford to waste time and we can’t afford not to challenge what is possible. We must find new efficiencies and make a generational change.” GE Aviation, which is becoming GE Aerospace, has arguably one of the most active and robust innovation pipelines in the business. GE and its joint ventures, the additive manufacturing process, helping cut fuel consumption.

CFM proposals for the next generation aim to achieve even more, with at least another 20% increase in fuel efficiency over engines available today.

Sponsored Feature: GE

INNOVATING A MORE FUTURESUSTAINABLE OF FLIGHT Arjan

29 GE: Sponsored Feature

and separate flight tests of a hydrogen powered engine. GE is also partnering with NASA and Boeing to develop and fly a megawatt-class hybrid electric propulsion system. These demonstrators are on track for their first flights in the mid-2020s. Hydrogen does have its challenges and Hegeman admits that he was sceptical at first, fearing the technology would not be economically viable and prove too technically challenging. The cost of producing green hydrogen is an unknown, for example, and airports are not equipped for this type of fuel, requiring whole new fuel infrastructures. In addition, hydrogen would require larger and different fuel tanks in the aircraft, posing some aircraft integration challenges. Despite these concerns, GE evaluated what it would take to address some of these challenges. “We now believe it is technically feasible to have something safe, light, and cost-effective,” says Hegeman. “We think “Our open fan engine design is a breakthrough for propulsive efficiency,” Hegeman says. “By using a single stage, variable pitch open fan design with stationary outlet guide vanes and removing the fan case, we can reduce weight, decrease drag and generate greater airflow than the most advanced high-bypass ducted engines today. This means we can get very high propulsive efficiency at the same flight speeds as current turbofans while significantly reducing CO2GEemissions.”isrunningnumerous demonstrations on the technologies mentioned above, including open fan, compact core, hybrid electric, and hydrogen combustion. This will build up to ground demonstrations of new technology systems and will be followed by test flights to prove everything works at the part, system, and aircraft levels.

Airbus and CFM are collaborating to conduct flight tests of the open fan engine CFM’s RISE program CFM International, a 50-50 joint company between GE and Safran Aircraft Engines, is pursuing CFM RISE (Revolutionary Innovation for Sustainable Engines). The RISE program aims to develop technologies such as open-fan designs and hybrid electric systems that could help improve fuel efficiency in new engines more than 20% by the middle of the next decade.

Arjan Hegeman, General Manager of GE’s Advanced Technologies, says highly efficient, low-emission propulsion systems are key to achieving net zero by 2050 Hegeman, General Manager of Airlinesairlines.iata.org

Technologies,AdvancedGE2022–03

Sponsored Feature: GE

The open fan design CFM* is developing through its RISE program isn’t the same unducted fan flight-tested in decades past. Here’s how it has evolved: 1970 s: GE has been developing technologies to enable open fan for decades, beginning with the 1970s Quiet Clean Short-Haul Experimental Engine (QCSEE) demonstrator with NASA, the first high-bypass geared turbofan engine. 1980 s:

2010 s: In 2017, Safran Aircraft Engines successfully performed a CounterRotating Open Rotor (CROR) engine ground test as part of the European Clean Sky initiative, demonstrating a 15% improvement in fuel consumption and CO2 emissions compared with today’s engines. GE’s Avio Aero business was part of that program.

Evolution of open fan

The GE36 or Unducted Fan (UDF) was developed and tested, flying at the 1988 Farnborough International Airshow. 2000 s: GE and Safran conducted significant aero and acoustic testing that advanced the technology.

there can be hydrogen-based solutions in the near future for specific applications.” Through NASA’s Electrified Powertrain Flight Demonstration (EPFD) project, GE is also testing multiple hybrid electric engine configurations, including systems with and without energy storage. These electrified technologies are more mature than hydrogen-based systems. Disruptor Though the exact solution is yet to be determined, for Hegeman the point is that GE is fully committed to being a disruptor. Incremental improvements in the range of 10% are always welcome but won’t be good enough to achieve the 2050 goal. “The target in the next round of changes has to be at least a 20% efficiency gain for the aircraft propulsion systems,” Hegeman notes. “Remember, there will likely be only one new model of aircraft in the narrowbody workhorses in the next 30 years. We need to be ready for new aircraft with revolutionary technologies in our engines, otherwise the fleet in 2050 will still be stuck with old technology, and the industry won’t be net zero by 2050.” GE and CFM’s path is to demonstrate the technologies through flight testing this decade, after which these technologies will be worked into viable product designs ready for certification and everyday use in the next decade. Game-changing engines could enter service in the mid-2030s. “It is less than 30 years to achieve net zero for a global industry that uses millions of gallons of fossil fuel every day,” Hegeman sums up. “That is why the time for words is over. At GE, we know there is a long way to go, but we are learning fast. We are testing our technologies and designing our demonstrator engines to be able to certify and produce future of flight engines which will make net-zero aviation possible.”

TODAY: CFM has introduced the single stage, variable pitch open fan design with stationary outlet guide vanes. The outlet guide vanes help direct air flow so the open fan can fly at speeds consistent with conventional turbofan engine architectures, while improving energy efficiency at noise levels below current generation turbofans. 30 Airlines 2022 – 03 airlines.iata.org

* CFM International is a 50-50 joint venture of GE and Safran Aircraft Engines

The efforts to get to 100% synthetic fuels, including SAF, are focused first on drop-in fuel considerations. There are hurdles in the form of standardization nuances but, says Andac, these should be overcome.

As for non-drop-in fuel, there are pros and cons. The biggest challenge is that Dr Gurhan Andac, Engineering Technical Leader for Fuels, GE Dr Gurhan Andac, GE’s Engineering Technical Leader for Fuels, says ongoing and further government support is critical to produce sufficient SAF to reach net-zero by 2050 AVIATIONSUSTAINABLEFUEL

31 2022 – 03 Airlinesairlines.iata.org GE: Sponsored Feature

There are seven production process pathways to achieve SAF and these are approved for use in blends of up to 50% with Jet A/A-1. That means all aircraft engines made by GE and CFM International, GE’s joint company with Safran Aircraft Engines, can operate using SAF today.

Evaluations are taking place to approve 100% synthetic fuels that don’t require blending and final allowance is probably a few years away. “SAFs are the biggest lever we have right now,” says Dr Gurhan Andac, GE’s Engineering Technical Leader for Fuels. “GE has tested them thoroughly for engine material and performance compatibility. They are ready for use. They reduce the industry’s carbon footprint. What we now need is government assistance and industry collaboration at a larger scale to ensure they are produced in sufficient quantity to power the drive to net zero.”

However, Andac—who also chairs a 100% drop-in synthetic aviation turbine fuel task force at ASTM International, a standards-setting body—believes it is important to remember that not all synthetic jet fuels are created equal. Synthetic fuels must meet certain criteria for sourcing feedstocks and production methods to be considered SAF. “There are also both drop-in and non-drop-in varieties,” Andac adds. Drop-in SAF is chemically identical to Jet A/A-1. In essence, the molecules and hardware don’t care how the same fuel end-product is derived so everything behaves as it would with Jet A/A-1. Currently, approved SAF blends are drop-in.

Sustainable Aviation Fuel (SAF), synthetic jet fuel made from more sustainable feedstocks than fossil fuels, is a proven technology. To date, there has been more than 430,000 flights that have used SAF since it was first approved more than a decade ago. And new aviation technologies in development—including hybrid electric and hydrogen-powered engines—will help reduce but won’t replace the significance of SAF in achieving net-zero emissions by 2050.

2050 TARGET RELIES ON

“One good question is whether we can remain within drop-in parameters and also get some of these benefits,” says Andac.

areAviation“SustainableFuelsthebiggestleverwehaverightnow”

these fuels are chemically similar but not identical to Jet A/A-1 and therefore not necessarily compatible with the entire fleet, fueling infrastructure, and storage. It would mean heavy investment in new, segregated infrastructure and possibly aircraft certification or some level of substantiation withButregulators.thereare some indications that these fuels could provide noteworthy benefits.

Gurhan Andac, GE’s Engineering Technical Leader for Fuels 32 Airlines 2022 – 03 airlines.iata.org GE

The first 100% SAF flight with passengers United Airlines operated the first experimental flight with passengers on board using 100% SAF in one of two CFM (a GE joint venture) LEAP-1B engines. Collaborating with airline customers GE has also announced plans to test 100% SAF with Emirates and Etihad Airways. KLM also used GE engines running on SAF as part of SkyTeam’s Sustainable Flight Challenge. Joining the Roundtable on Sustainable Biomaterials (RSB) By becoming an RSB member, GE is collaborating on standards-setting and policy discussions that incentivize greater production of SAF. GE’s Passport engine tested with 100% SAF GE has completed a 100% SAF ground test of its Passport engine, a long-range business aviation engine, its most recent 100% SAF testing. GE also powered the industry’s first 100% SAF commercial airliner flight in 2018 with GE90 engines. US Secretary of Agriculture stops by GE US Department of Agriculture Secretary Tom Vilsak visited GE headquarters in late 2021, highlighting the importance of the SAF supply chain. SAF is a synthetic fuel that can be made from many different feedstocks—among them plant oils, algae, greases, fats, waste streams, alcohols, sugars, captured CO2 and other alternative feedstock sources and by many distinct production processes.

For example, there may be fewer emissions of particulate matter, which are believed to be tied to contrail formations. Advantages could also include better fuel burn figures and greater availability. The truth and the extent of these claims are under evaluation.

“Or if the benefits get proven and are large enough, then we may decide the transition to a new non-drop-in jet fuel is worth the cost. Only time will tell.” Work is also ongoing on 100% non-drop-in synthetic jet fuel evaluations and standardization. Five fuelsustainablenoteworthyaviation(SAF)efforts

Sponsored Feature:

“We will at some point reach a cusp,” concludes Andac. “In about 10 to 15 years, the impact will really accelerate when we have good fuel technologies in place, the right policies in place, the best airframe and engine technology in place, and more SAF will be used without the need for blending.”

33 2022 – 03 Airlinesairlines.iata.org Sponsored

SAF is safe and available now, with qualification of unblended use on the horizon. But the right policies and regulation are needed to help bridge the price gap between SAF and fossil-based jetAndacfuel. calls for a balanced approach that encompasses both mandates and incentives. “We can’t have a distorted market as that would only complicate efforts to ramp up SAF production and use,” he says. “If mandates are not aligned with production capacity, for example, then you may see airlines having to reduce service, which reduces demand for SAF and potentially increases the local price. The sector wants investors and investors want the right regulatory framework.”

“Our customers can be confident that GE’s Passport engine can help meet their sustainability goals to reduce CO2 emissions in flight, thanks to the Passport’s more fuel-efficient technologies compared with previous-generation business jet engines and ability to operate on lowercarbon fuels,” says Melvyn Heard, President of the Passport Engine Program for GE. GE’s Passport engine, which entered service in 2018, has 3% lower fuel consumption compared to other engines currently operating in the 18,000-pound thrust class and 17% lower fuel consumption compared to the CF34-3 engine. Blisk fan blades, a high efficiency compression system, rich-burn combustor, proprietary turbine system, and high efficiency mixer help enable the Passport engine’s improved fuel efficiency.

Whereas traditional SAF is normally described as reducing CO2 emissions by as much as 80%, PtL-based SAF potentially offers close to 100% improvement. There are challenges with PtL, including cost and the maturity of carbon capture techniques, but Andac describes the approach as a promising longer-term option.

The right policies Whatever forms SAF ultimately takes, the fact remains that they will form the bulk of the solution to get to net zero by 2050, with most experts believing they will represent 65%-70% of the targeted carbon reduction.

One type of SAF that has grabbed attention is a power-to-liquid (PtL) approach. PtL is a way to make SAF using renewable hydrogen and captured atmospheric or waste CO2.

Passport to success GE has completed successful testing of its Passport engine, a long-range business aviation engine, using 100% SAF.

The industry is targeting SAF to reach 2% of total fuel uptake by 2025, an aggressive target given that they represent just 0.1% today. Individual countries and regions have their own ambitions. The United Kingdom plans for 10% synthetic fuel use by 2030, the European Union is introducing ambitious SAF blending mandates, and the United States is working on a progressive tax credit system. The latter aims to support 3 billion gallons of SAF production by 2030 and 35 billion gallons by 2050.

Feature

A newer approach

GE:

Because we believe the world works better when it flies.

Our change.passionunrelentingfuels

Having researched and tested Sustainable Aviation Fuel (SAF) for over a decade, GE’s cutting-edge technology research and development has already enabled at least one engine. With the commitment, determination, and scale to play our part in the industry’s goal to achieve net-zero, we’re not stopping there. As well as ensuring that all GE and GE partnership engines can operate with approved SAF today, we continue to innovate and bring to market changes in propulsion on our journey to net-zero carbon emissions. See what we’re doing today for the GEtoNetZero.com

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This is due to the accelerating rate of improvement in the energy density of a battery. Consumers are demanding more from their battery life and capability, and manufacturers are working hard to deliver. Regulations cannot match this pace of development, rarely proceeding at anything other than a glacial pace. “This issue is not getting the attention it deserves,” said Andres Bianchi, CEO LATAM Cargo, at the 78th IATA AGM in Doha. “It is my first concern from a safety perspective.” he carriage of lithium batteries on air transport continues to present a significant safety risk for airlines. In March 2022, for example, Qatar Airways diverted a New Delhi-Doha flight to Karachi in Pakistan following the detection of smoke in the cargo hold. The incident is thought to have been caused by lithium batteries. Unless remedial action is taken, the risk caused by the transport of lithium batteries will only increase.

More awareness needed around lithium batteries The safe transportation of lithium batteries by air lies not solely with the airline industry but is a joint responsibility with shippers, manufacturers, and governments WORDS: GRAHAM NEWTON 35 2022 – 03 Airlinesairlines.iata.org Cargo safety

Better information sharing on lithium battery incidents among governments is essential to help manage risks effectively 36 Airlines 2022 – 03 airlines.iata.org Cargo safety 30%

“Airlines, shippers, manufacturers, and governments all want to ensure the safe transport of lithium batteries by air. It’s a joint responsibility. The industry is raising the bar to consistently apply existing standards and share critical information on rogue shippers. But there are some areas where the leadership of governments is critical. Stronger enforcement of existing regulations and the criminalization of abuses will send a strong signal to rogue shippers. And the accelerated development of standards for screening, information exchange, and fire containment will give industry even more effective tools to work with,” said Willie Walsh, IATA’s Director General. ISTOCK The lithium battery market is growing 30% annually, bringing many new shippers into air cargo supply chains

IMAGES:

The second step is appropriate standards, processes, and regulation.

Actions have included: Updates to the Dangerous Goods Regulations and the development of supplementary guidance material, The launch of a Dangerous Goods Occurrence Reporting Alert System that provides a mechanism for airlines to share information on events involving undeclared or misdeclared dangerous goods, The development of a Safety Risk Management Framework specifically for the carriage of lithium batteries.

IATA has called for the development of outcome-based, harmonized safetyrelated screening standards and processes for lithium batteries. This would support the safe transport of lithium batteries and provide an efficient process for compliant shippers of lithium batteries.

Safety data collection and sharing information between governments is also critical. Without sufficient relevant data there is little ability to understand the effectiveness of any measures. Better information sharing and coordination on lithium battery incidents among governments and with the industry is essential to help managing lithium battery risks effectively.

Governments must develop a testing standard for fires involving lithium batteries that can be used to evaluate supplementary protection measures over and above the existing cargo compartment fire suppression systems.

The aim is to help shippers understand the potential risk and whether there are dangerous goods in what they are trying to ship.

Action to date Airlines, shippers, and manufacturers have been working hard to ensure lithium batteries can be carried safely.

The launch of CEIV Lithium Batteries to improve the safe handling and transport of lithium batteries across the supply chain.

But just as important as the regulations are the tools for enforcement—the third process step—should shippers disregard the rules. IATA has long suggested that there should be stiffer penalties for rogue shippers and the criminalization of egregious or wilful offenses. Enforcement is difficult, however, because of international jurisdictions and, of course, there can be genuine mistakes. Nevertheless, governments need to ensure that rules are followed and effective deterrents for potential offenders are in place. Finally, there needs to be better protective measures if there is a lithium battery incident. Qatar Airways is reported to be investing in fire resistant aircraft containers, for example. Airlines need to know they can contain a fire involving lithium batteries in aircraft cargo compartments. Fire-resistant aircraft containers, fire containment covers for aircraft pallets, and fire containment bags are all possibilities. The development and implementation of a fire-testing standard is vital.

Four steps A four-step process will go some way to mitigating the danger. The first step is creating awareness. The lithium battery market is growing 30% annually, bringing many new shippers into air cargo supply chains. But compliance with existing regulations is difficult as they are complex and can be hard to understand. This creates an evolving risk of undeclared or mis-declared shipments.

2022 – 03 airlines.iata.org CEO Interview

Alaska Airlines has come through the past two years in better shape than most. What factors contributed to this outcome?

An innovative business

INTERVIEW BY PERRY FLINT IMAGES: GROUP/ISTOCKAIRALASKA

laska Air Group is known for being innovative, such as bringing AI, technology, and machine learning into its operations and introducing a pilot training academy to attract a more diverse and highly trained tranche of pilots.

When you look at the history of Alaska Airlines and the way we’ve run our business, it was always run in a way that meant we could withstand external shocks. When we went into the crisis, we had a strong balance sheet and were profitable. In the last almost 20 years, our pre-tax margins were leading the industry. So that financial strength and financial performance over the least two decades really helped us head into the crisis in a good position. But, of course, it was the most devastating, catastrophic crisis we have seen. When the Federal Government provided the industry with funds that was a huge help. We were the first airline to stop bleeding cash and the first to get to profitability. We will be profitable in the second quarter 2022 and for the whole year, despite all of the external headwinds, especially the cost of fuel being so high. There is no doubt that our low-cost business model helped us but most importantly, the wrapper around that is our people and our culture of care. I am always amazed at how much our people love our company and are willing to step up in a crisis.

And we are celebrating our 90th anniversary this year—with celebrations in Anchorage, which is where it all began, and Seattle, and Los Angeles. One of the special things we did is we gifted our employees 90,000 miles. That allows them access to wherever Alaska flies but now that we’re part of oneworld, 90,000 miles will take them anywhere in the world.

A

We will be profitable in the quartersecond2022 and for the whole year

Ben Minicucci, CEO, Alaska Air Group, says in-house training will provide an important pipeline of pilot talent. 38 Airlines

“The regionals are down 20%–30% in capacity so we had to develop a pipeline for pilots” airlines.iata.org 2022 – 03 Airlines 39 CEO Interview

So, the huge run-up in fuel prices hasn’t affected your outlook for this year? We burn almost 1 billion gallons of fuel a year, so every 10-cent increase in the price of a gallon of fuel costs us an additional $100 million. Fuel is now about $3.80 a gallon, up 65% compared with Q2 2019 so you can see that it is a significant cost headwind. Fortunately, the demand environment has been amazing. If you had asked me in January given the COVID headwinds, the high fuel, and the geopolitical environment around the world, I would have said it was going to be a tough year. But demand and yields have been high, and we have been able to offset the high cost of fuel. We also have an established hedging policy. About half our fuel use this year has been hedged, which will save us about $200 million. We use hedging as insurance. The recovery in leisure travel has outpaced the recovery in business travel. Is that trend continuing in 2022? Leisure travel is over 100% of 2019 levels; we’re seeing business travel recover to about 80% of 2019 levels with revenues over 90%. I think a lot of that is due to companies returning to offices and simply getting back to visiting customers. There is a thirst to get out there and make physical contact with suppliers and customers. Will we see the same sort of business trips as before? I’m not so sure we will see someone make the one-day trip from the West to the East Coast just for a meeting, but I do think business is coming back strongly. Alaska recently announced the launch of a pilot training academy. Does this signal a fundamental shift in pilot training and recruitment? Airlines in the United States are taking control of pilot training. Everybody in the country is doing much the same as we are in starting pilot training in-house. We have been talking about a pilot shortage for a decade in the United States. The crisis made the situation worse. Reducing cash burn was paramount during the pandemic and all airlines tried to stop bleeding cash as we had no idea how long the pandemic would last. That meant we saw lots of senior pilots taking early outs. We all lost a lot of pilots. Then the crisis came to a speedy end and growth returned quickly. This created a dynamic for airlines to attract and train pilots. We saw the problem most clearly in our subsidiary, Horizon Air. At Alaska, we started hiring Horizon pilots and so did other airlines because that’s where you traditionally went to hire—to the regionals. I think the regionals are down 20%–30% in capacity so we had to develop a pipeline for pilots. We took matters into our own hands and partnered with a school in Oregon. Still, it’s hard to get a pilot license and it can cost up to $100,000. We wanted to provide financial assistance and especially attract those who are under-represented and couldn’t afford the cost. The school should produce about 200 students a year for Horizon. We’re really SAF will be 60%–70% of our 2040 solution. SAF doesn’t require any change in infrastructure and can be used in our aircraft and stored at fuel farms. Other options don’t have that ability, which makes SAF the best solution available to us. We are pushing reforms to get SAF production moving. licensepilotcan cost up $100,000to . We wanted to provide assistancefinancial and representedarethoseattractwhounderand couldn’t afford the cost”

2040 “A

40 Airlines 2022 – 03 airlines.iata.org CEO Interview

excited about it. It helps Horizon Air and then the pilots can progress to Alaska. I think everyone will continue with their own pipeline until the situation stabilizes and we’re probably going to be talking about a pilot shortage for the next five years at least. How important is it for airlines to achieve net-zero carbon emissions by 2050 and what steps are Alaska Airlines taking to support this target? This is a high priority for us. Sustainability is part of our brand and caring for the earth and our communities is the right thing to do. There is a climate issue, and we are in a business where we burn fuel for a living. We’ve set two goals. Our long-term goal is to be net zero by 2040 and the short-term goal is to be the most fuel-efficient airline by 2025. The long-term goal is not about crossing our fingers and hoping everything turns out. It’s a deliberate five-path goal. One was to create a culture of efficiency in the airline from single-engine taxiing to electrifying ground support equipment to using new technology, such as artificial intelligence (AI) to manage flights. We are using the Airspace Intelligence Flyways AI platform, and it has saved us millions of gallons of fuel already. We are also renewing our fleet. Our A320s are being phased out for the 737 MAX. The new aircraft is definitely producing fuel efficiencies and we are pleased with that. It is also important that we maximize sustainable aviation fuels (SAF). SAF will be 60%–70% of our 2040 solution. SAF doesn’t require any change in infrastructure and can be used in our aircraft and stored at fuel farms. Other options don’t have that ability, which makes SAF the best solution for us. We are pushing reforms to get SAF production moving. We are also exploring new technology, such as hydrogen or electric. We are investing in companies researching these novel technologies. One company is working to convert one of our planes to hydrogen.

What does being named the Air Transport World Airline of the Year mean to you? We were blown away, especially given the backdrop of what has happened over the past couple of years. All the hard work being recognized was a huge honor. We couldn’t be more humbled by the award. It reinforces the phenomenal work our frontline staff do every day running operations and taking care of our guests. Running an airline is about taking care of each other, of our guests, the communities we serve, and the owners. It is about balance.

And we just announced we are introducing electronic luggage tags later this year. In general, it is about bringing AI and machine learning into business. Technology will enable us to be better and more efficient in every aspect of operations. “We burn almost 1 billion gallons of fuel a year, so every priceincrease10-centintheofagallonoffuelcostsusanadditional$100million”

100 m 41 2022 – 03 Airlinesairlines.iata.org CEO Interview

The last point is credible carbon offsets. They must make a difference. We are also looking at offsets for passengers. We will be working all those levers and doing that for the next 15 years will get us to our 2040 goal. We have a plan, and we are working on it.

Alaska is known for being an innovative airline. What aspect of operations do you think is ripe for change ether through technology or a revamp of existing processes? We are huge on innovation—our team is just wired that way. It is about using new technology to solve an existing problem. We invented Required Navigation Performance, for example, because we couldn’t get into Juneau (Alaska), the state’s capital, in bad weather. We have an innovation hub in San Jose, California, and one of the areas being explored is check-in: how do we reinvent the check-in experience? People are anxious so long as they are landside, but that anxiety drops airside. We want to get people through check-in in under a minute. They need to be recognized, drop their bags and go. It would bring guest anxiety down, create less friction, and offer higher throughput.

The Long-Term Aspirational Goal (LTAG) by ICAO member states is an important step to achieving net-zero goals and ensure that the industry stays on course 65% SAF is critical as it will comprise some 65% of the industry’s drive toward net zero

“We are optimistic,” says Sebastian Mikosz, IATA’s SVP, Environment and Sustainability. “The support from the HLM is an important step. Its support is fundamental though we are not there yet. We still need a positive vote from ICAO member states.” An LTAG agreement at ICAO will provide a platform for the right policies and regulations to be put in place and further help airlines to make good on their 2021 resolution. It will give a strong signal to the market—airlines adopted the 2050 target and governments are reinforcing this commitment. The path to net zero involves a combination of sustainable aviation fuels, new propulsion technology, infrastructure and operational efficiencies, and carbon offsets/capture.

42 Airlines 2022 – 03 airlines.iata.org Emission reduction

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Sustainable aviation fuel (SAF) is critical here as it will comprise some 65% of the industry’s drive toward net zero. Best estimates for hydrogen or hybrid electric propulsion suggest that these are at least a decade away and won’t be fully net zero.

All require significant investment that, in turn, relies on a solid regulatory framework to provide investor confidence.

Political complexities However, complex political arguments rear their head at state level. An agreement on the LTAG at the 41st ICAO Assembly would represent years of hard work and a smoothing of muddy waters. “There is a variety of timelines and ideas to assimilate,” explains Mikosz. “All countries have different priorities and different needs, and you cannot disconnect aviation from national policies. The obvious example is developed and developing countries.” Though recognizing that each country has unique circumstances, an LTAG agreement would showcase a collaborative spirit and respect for diversity. It would also support an equitable transition to the decarbonization of international aviation. This dimension is fundamental as it recognizes and balances different levels of aviation maturity while achieving a common goal. Critically, the 2050 date was supported at the HLM and has become a worldwide standard. There will be early movers but for aviation 28 years is a tight deadline. It is roughly the lifetime of one generation of aircraft, meaning the next generation of narrowbody and widebody designs must accommodate the latest technologies that make net zero possible.

“We have high hopes for an agreement at the 41st ICAO Assembly,” concludes Mikosz. “It’s been a huge effort by a global team of experts and that work should not be jeopardized. The industry is committed and will honor its 2050 pledge. Now, the industry—and the public—expect states to be equally responsible. “It’s also important that the LTAG is reviewed by ICAO every three years at the Assembly. The initial LTAG agreement will set us on the right path and constant review as we move forward will ensure we stay on course.”

I n 2021, at the 77th IATA Annual General Meeting, the airline industry passed a resolution to achieve net-zero emissions by 2050, in line with the temperature goals of the Paris Agreement. Eyes are on the 41st ICAO Triennial Assembly to follow with a commitment at the state level—the Long-Term Aspirational Goal (LTAG).

The prospect received a recent boost when an ICAO High Level Meeting (HLM) on the feasibility of a LTAG for international aviation CO₂ emissions reductions recommended that member states should support its adoption.

The LTAG should promote policy harmonization worldwide and support airlines in achieving a net-zero future.

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