IATA: Airlines Face Tough Challenges


Bisignani // (c) 2011 IATA

Airline passengers should be able to get from curb to gate with dignity—without stopping, stripping, unpacking, and certainly without groping, argued IATA Director General and CEO Giovanni Bisignani in his annual State of the Industry address at IATA’s 67th Annual General Meeting (AGM) in Singapore.

“We must make coordinated investments for civilized flying,” said Bisignani, calling for security improvements that focus on replacing the 40-year-old airport checkpoint with a modern approach that is risk-based and powered by intelligence and technology.

Urging the development of a Checkpoint of the Future for aviation security, Bisignani said: “Aviation is much more secure today than in 2001, at a cost of $7.4 billion annually. But our passengers only see hassle because governments are not working together. “

In a wide ranging speech to airline executives, Bisignani offered a host of recommendations to improve airline services and performance. “After a decade of crises and shocks, airlines today are safer, stronger, leaner, and greener. But sustainable profitability remains elusive. We expect airlines to make just $4 billion profits this year on revenues of $598 billion.”

“The challenge is to prepare to handle 16 billion passengers and 400 million tons of cargo by 2050 with efficient infrastructure and effective technology, while making sustainable profits and satisfying customer needs,” said Bisignani.

Bisignani’s presentation was his last State of the Industry address as he will retire as Director General and CEO July 1, 2011. Bisignani noted that sustainable profitability would be the biggest challenge for an industry with a net return of 0.1 percent over the last four decades.

“We know what will not work. Cost-cutting alone does not increase long-term profits. Unbundling erodes the value of the base product. And re-regulation would kill efficiency and innovation,” said Bisignani.

To advance IATA’s vision of the future, Bisignani drew three personal conclusions based on industry unity, renewed leadership, and constant innovation.

Unity: Industry leaders must resolve tensions around the rapid growth of the Gulf carriers. “The solution to call in governments as advocates or referees has not worked. And it will not work. As leaders of a global industry, we must find a fair and reasonable way forward ourselves,” said Bisignani.

Leadership: China and India must take on a greater leadership role. “With size comes responsibility. In place of our traditional leaders, I am convinced that China and India will soon become the driving force of aviation in this century. They will grow aviation stronger through change,” said Bisignani.

Innovation: Innovation and openness to change will determine the future. “We must continue the momentum of the last decade to drive change across the value chain, not as a response to crises but as a new way of doing daily business,” said Bisignani.
Bisignani praised the performance of the airline industry over the past decade including gains in airline safety, response to environmental challenges and achieving economies in operations.

“We need efficient processes to cope with the volumes and evolving customer demand. We need technology-based solutions for the environment and security challenges, and we need air traffic management that goes beyond national borders. We need airport development that is smarter in meeting future demands. And we need sustainable profitability to support innovation and reward shareholders,” said Bisignani.

Bisignani cited fuel costs, government taxation and the lack of cooperation as key challenges that need to be addressed if the airline industry is to achieve its full potential as a driver of the world economy.

“We must break down silos in the value chain to rebalance financial reward with risks, and create a new value proposition so that competition is not just based on price. And governments must deliver policy decisions that replace intervention with commercial freedoms, reduce barriers to exit, and allow airlines to restructure like normal businesses,” said Bisignani.

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