2016 iata agm day 1...2016 iata agm, combines reporting from the network’s “power of three”...
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ExecutiveReportPowered by Air Transport World | Aviation Daily | Aviation Week & Space Technology
AviationWeek.com/IATA
June 2, 2016
INSIDE THIS ISSUE
What Alexandre de Juniac will bring to the IATA DG role page 3
Brussels Airlines CEO recalls the air-port terrorist attack page 4
AAPA chief on Asia-Pacific challeng-es page 6
Aer Lingus CEO Kavanagh on oppor-tunities & growth page 7
Latin American carriers on the eco-nomic roller coaster page 8
European SES: still a work in progress page 9
Delta’s new CEO brings change & continuity page 10
Ireland’s pro-aviation policy pays off page 11
Your next leader
Air France-KLM chairman and CEO Alexandre de Juniac prepares to take the helm at IATA. SEE ARTICLE, PAGE 3
Tyler: Airline business still not easyAs he takes the IATA AGM stage for
the last time as director general, Tony Tyler remains all business and dog-gedly determined to continue address-ing those issues that hamper the global airline industry.
Tyler highlighted some of the key issues
he expects to be at the top of the agenda at
the 72nd AGM here in Dublin.
“The biggest issue will be the environ-
ment in the run-up to the ICAO Assembly
in September,” he noted. “There is a huge
opportunity to fix this issue and we need to
do our part to show that this industry is united
and that we will continue to work with gov-
ernments towards market-based measures’
implementation.
“As always, safety is on the agenda, and on
the security side there are clearly challenges.
Most recently, the Brussels [terrorist attacks]
show that public areas are vulnerable. So let’s
do all we can to reduce crowding in public
areas. Let’s get people moving quickly through
airport terminals and through security with-
out long queues. In the US, the TSA conges-
tion is unacceptable; everyone recognizes that
and something needs to be done,” Tyler said.
“We also still need to work on taxes and
get governments to see aviation as a driver of
economic growth rather than a cash cow. And
with infrastructure, there are still significant
problems in China, the Gulf and elsewhere,
while the US is making slow progress with
NextGen. Airport charges are another issue,
particularly as what you see with some large
hubs is that airports are effectively monopo-
lies. So we need effective regulation where
the airport is required to consult with its
customers. It’s important for governments to
recognize that.”
But the “number one priority,” Tyler
believes, is the overall state of the global
economy. “There’s plenty to worry about
there. The way some of the industry is per-
forming right now is somewhat defying eco-
nomic gravity. The figures are pretty good,
but I think airlines are finding out that cheap
oil is nice, but it doesn’t solve all problems.
The strong US dollar has not been good for
all airlines and the big European carriers and
some of the Asian carriers are finding it a very
challenging business. My personal observa-
tion is that labor militancy seems to be up a
bit also. So there’s certainly an improvement
over previous times, but it’s still not an easy
business.”
But it’s a business from which, at least in
the near term, Tyler plans to take a hiatus.
So how will the DG feel as he takes the stage
this year?
“Certainly I have mixed feelings as this will
be my last AGM as DG and prior to that as
[Cathay Pacific] CEO and an [IATA] board
member,” he said. “But I am looking forward
to a new life.”
Karen Walker/ATW
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The Aviation Week Network Executive Report, produced onsite at the 2016 IATA AGM, combines reporting from the network’s “Power of Three” global editorial teams: Air Transport World, Aviation Daily and Aviation Week & Space Technology. Stay connected and informed at AviationWeek.com/IATA.
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An AGM, a handover and a new industry leader
With IATA DG and CEO Tony Tyler to to retire from the position later this year, the 72nd AGM has a particularly important item on its agenda: confirm-ing a successor who can integrate the often differing interests of the mem-bers while promoting key interests of the industry as a whole in front of the world’s governments and other stakeholders.
The IATA board of governors believes
it has found that person in the form of Air
France-KLM chairman and CEO Alexan-
dre de Juniac. De Juniac’s confirmation by
the assembly is expected in Dublin, and it is
anticipated that he will step down from his
current role at the end of July and take up
his new position shortly after. Like Tyler, he
is expected to enjoy strong support from the
board. Nevertheless, there remain issues on
which the IATA membership is divided.
The complicated question of liberalization
and government support of airlines, for exam-
ple, is broader than the Gulf carriers. The big
state-owned Chinese airlines want to expand
their international routes much more rapidly
than they have done in the past, but are held
back by restrictive traffic rights in France and
Germany, while the US is now apparently
reluctant to pursue an Open
Skies treaty with China.
Some aviation leaders,
including International Air-
lines Group (IAG) CEO Wil-
lie Walsh, have raised con-
cerns that liberalization is at risk of being
rolled back. Others feel that the Open Skies
template needs to be revisited, citing fifth free-
dom access rights in particular, even though
these are critical to the US cargo operators.
From his own history as an airline CEO, de
Juniac knows well the challenges this industry
faces. During his tenure, Air France was in
constant restructuring mode, capacity was fro-
zen, activities such as the full-freighter busi-
ness disposed of, and the airline was trying to
find answers to counter increasing competi-
tion from low-cost carriers.
De Juniac brings significant government
and industry experience to the DG role.
Before his move into industry in
1995, he was an advisor to Nicolas
Sarkozy during the future French
president’s tenure as French min-
ister of economics, finance and
industry. And after holding senior
positions at Sextant Avionique, Thomson-
CSF and Thales, de Juniac returned to politics
as the chief of staff for Christine Lagarde
during her time as French minister for the
economy, industry and employment.
De Juniac joined Air France as chairman
and CEO in 2011, moving up to oversee the
Air France-KLM Group in 2013.
His next challenge: to represent the indus-
try on the global stage.
Jens Flottau/Aviation Week
IATA
de Juniac knows well the challenges this industry faces.
[ 4 ]
ExecutiveReport
The March 22 terror attacks in the departure hall of Brussels Airport remain
at the forefront of executive minds in Dublin as AGM participants discuss ongoing
security challenges. A despicable act against the aviation industry in general, the
attacks were especially hard on Brussels Airlines, which is based at the airport. CEO
Bernard Gustin is not the type to merely lament, however. A couple of hours after
the dual suicide bombings, he and his executive team had outlined a threefold plan
to steer the carrier, its employees and passengers through the unprecedented crisis.
Executive Report spoke to Gustin a couple of weeks afterward, providing insight into
what it was like to be there and the consequences for his company.
Where were you at the time of the bombings?I was in the office at 7 a.m. I had come early to prepare for a man-
agement board meeting and was in good spirits because on March 17
we had announced our results for 2015, which were excellent, and on
March 21 we had presented our aircraft with the livery of [Belgian
artist] Rene Magritte. I had a feeling of accomplishment. Easter was
coming up, and like so many Belgians, I was looking forward to spend-
ing the weekend at the coast. At around 8 a.m., I received a call on my
mobile phone, but I did not pick up as I wanted to concentrate on the
meeting. But the person called again and again. So I finally answered.
It was Arnaud Feist, the CEO of Brussels Airport.
What was your initial reaction? I immediately enacted our crisis center. My first concern was staff and
passengers. When the first images came through I feared for casualties;
one of the bombs exploded close to our ticketing desk in the airport.
It was a tremendously stressful day
and one of the most challenging
things was not knowing the grav-
ity of the situation and having to
find out who was where, who was
injured, and how badly. We were not
allowed in the building. One of my
employees visited all the hospitals to
try to locate our colleagues.
The speed at which you resumed operations March 24 and set up temporary bases at two regional airports in Belgium, Antwerp and Liege, following the closure of Brussels Airport, surprised even Lufthansa. Would it not have been easier to wait for the reopening of BRU?
We asked them [Lufthansa] for help with information technology
systems and they said, ‘Yes, of course, we’ll have it ready in five weeks.’
We politely, but firmly, answered that that would not work for us; we
wanted it the same day. The opening of two bases was an expensive
endeavor and it would have been financially cheaper to keep all aircraft
grounded and cancel the travel plans of the 22,000 passengers Brussels
Airlines carries daily, but from an ethical point of view it would not
have been correct.
It was logistically very demanding to set up the regional bases—we
needed to establish handling, maintenance, catering and procedures
at two airports we had never operated from. We had to arrange
transport of passengers, crew and aircraft; obtain slots; and inform
passengers of the changed schedules. In the meantime, we had to
deal with injured staff and passengers, lost luggage and so on.
You said your action plan—“Caring, Operating, Recover-ing”—helped you manage the crisis.
It helped everybody in our company to deal with the stress and
trauma. We decided to work on all three elements and to be transpar-
ent in our communications, internally and externally. I think people
have appreciated this. Our team spirit is stronger than ever and our
brand is also stronger.
How severe is the financial impact? I anticipate that this event will cost us between €70-100 million
($78.8-$112 million) this year. It is huge, but it will not kill a company
[Brussels Airlines] that has sufficient cash [Brussels Airlines had €189
million in cash at the end of 2015]. Our luck is that we had done a
heavy restructuring over the last three years. We will recover from
this horrible event and put the company back on track to achieve the
goals set in our 2018 business plan.
Cathy Buyck/Aviation Daily
Brussels Airlines: Fighting Back
Bru
ssel
s A
irlin
es
“We will recover from this horrible event and put the company back on track to achieve the goals set in our 2018 business plan.”
—Bernard Gustin
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ExecutiveReport
For Asia-Pacific airlines, a mixture of caution and optimism
For Association of Asia Pacific Airlines (AAPA) DG Andrew Herdman, the IATA AGM is always “a great meeting with key stakeholders and an opportunity to look at the industry from a global perspective.”
Speaking with the Executive Report ahead of the AGM, Herdman
summed up some of the questions that will be on the minds of many of
the Asian carrier CEOs during this AGM.
“Overall, despite concerns about the global economy, the fact is that
passenger demand is continuing to increase. The question is, are we going
to see that continue? Will a slowing economy ultimately affect demand for
air travel? And how do airlines balance those concerns?” Herdman said.
Some airlines in Asia-Pacific are trimming back capacity a little, he
noted, because they are seeing some softness. “Traffic growth in the region
was about 8% last year and continued at about the same rate this year,
but will that be sustained or will there be some moderation, in which
case you have to be very careful about capacity growth.
“It’s also about whether airlines can benefit from lower fuel prices or
whether that all goes to the passenger.”
Herdman pointed out that the strong US dollar has been a headache
for Asia, but that has reversed somewhat lately.
“For many of these questions, the answers are a guessing game. From
an airline point of view, there is a natural hedging process and that’s
reflected in aircraft orders and deferrals. Boeing and Airbus have these
massive backlogs, approaching 10 years. But both manufacturers have also
announced cost-cutting initiatives and that’s interesting from the point
of view of their competitiveness. In terms of net orders, yes, there is a
bit more caution, but the waiting time [for new aircraft] is so long now
that there’s no hurry to join the back of the queue,” he said.
So some aircraft are
being held on to a little
longer, Herdman believes.
“From that side, things
have stabilized, but that’s
not because the long-term
traffic growth predictions
have changed, although
some people who ordered
new-generation aircraft
have discovered that they
no longer need them.”
The transpacific market, meanwhile, remains as competitive as ever.
“From an Asia perspective, it’s an interesting market. The Chinese
airlines are finally making major commitments to these routes where in
the past it was the US airlines that were the major drivers in the market.
Now, it’s the Chinese carriers that are really driving it,” he said. “But
their competition is not just coming from the US carriers; it’s coming
from all the other Asian carriers.
“It’s a big market and very important because it has a strong premium
and they are very long-haul routes. The new equipment now offers the
capability to do very long non-stops that were not even economically
feasible in the past.”
Overall, Herdman noted, premium traffic is holding up, but not as
well as leisure traffic, which is growing robustly.
Karen Walker/ATW
At last year’s IATA AGM in Miami, the tension and talk buzzed about the Gulf carrier “wars.”
In the months leading up to the Miami event, three of the US majors—
American Airlines, Delta Air Lines and United Airlines—built a campaign
alleging illegal government subsidies for the Gulf “big three” carriers.
Delta’s-then CEO Richard Anderson demanded that Gulf carrier traffic
right be frozen pending requested government talks on the US Open Skies
treaties with the UAE and Qatar.
Fast forward one year and the result seems to be little to no change.
Emirates Airline, Etihad Airways and Qatar Airways continue to grow
their presence in the transatlantic market. The US government has made
no public comments of any substance about its position and not set any
agenda for Open Skies talks.
But from a global perspective, it is probably too soon to claim the
debate is over.
The European Commission late last year presented its new aviation
strategy, which includes language about its intention to negotiate EU-wide
air service agreements with various countries, including Gulf states. “While
the additional connections provided by the Gulf airlines are welcome—
there are concerns regarding the conditions under which they operate,”
the Commission wrote.
“Comprehensive aviation agreements between the EU and the GCC
States would be the right way forward to bridge the interests of both sides
by creating conditions that will allow further market development and
growth based on common rules and transparency.”
Those agreements will include clauses on what constitutes fair competi-
tion and mechanisms that could be activated if one side believes the other
is in violation of the deal.
Jens Flottau/Aviation Week
‘Gulf wars’ dispute loses heat but still bubbles
Bar
ry C
roni
n
AAPA DG Andrew Herdman
AviationWeek.com/IATA [ 7 ]
ExecutiveReportJUNE 2, 2016
AGM host Aer Lingus is in growth mode
Aer Lingus is the host airline of the 72nd IATA AGM here in Dublin. International
Airlines Group (IAG) acquired Aer Lingus in September, bringing it under the Group umbrella
that includes British Airways and Spanish carriers Iberia and Vueling. Stephen Kavanagh
joined Aer Lingus in 1988 and was appointed CEO in March 2015. He talked with the
Executive Report.
A prestigious role to be this year’s AGM host airline … Yes, Aer Lingus is celebrating its 80th anniversary this year, so it’s quite
a significant milestone in the company’s history. But it’s also important for
Ireland and for how it has developed and highlighted the positive impact of
aviation. So we are delighted to showcase both Aer Lingus and Ireland and
its aviation and airline businesses. We’ve been a very long standing member
of IATA and we last hosted the AGM in 1962, so we are delighted to have
this opportunity.
What issues do you expect to see raised at this AGM?Because we are in Europe, I think we will see a focus on the infrastructure
issues in Europe, whether it be Single European Sky, runways or regulation.
As an industry, we are highly regulated and some of that regulation is nec-
essary, but not all of it adds value. That has been on the IATA agenda for
some time and I can see it being echoed within [Ireland], a very liberal and
deregulated marketplace.
How do you take advantage of Ireland’s geographic location?
It’s often seen that the geographic location of
Ireland, on the periphery of a major market, is a
strategic weakness. For example, the Irish govern-
ment was obsessed with us maintaining connections
with Heathrow. In fact, we see opportunity to grow
from Dublin. Our geographic location gives us the shortest crossing over the
Atlantic and that’s an advantage for any airline. That is something we are
keen to continue to communicate. It underpins our strategy. IAG has a three-
hub strategy—Heathrow, Madrid and Dublin—and each plays a part in the
system. It’s a mindset change, to see opportunity where others see weakness.
What’s it like working with the other IAG airline CEOs?As the operating companies retain their autonomy as airlines, the value is
not just in what the Group offers and in the guidance from IAG, but also in the
debate and discussions from within the companies. I have to say, there’s a little
bit of competitiveness. We are delighted to deliver a return on capital against
expectations from year one and now we’re striving to become the most profit-
able operating business within the Group. It’s very healthy competition. It’s
in the right spirit. There are mutual learnings, which are shared, and there’s
a lot of cooperation. So it’s been a very comfortable in terms of not just the
structures, but also the personalities. It’s a very impressive team to be part of.
What are your growth focus areas?We have seen some recovery in the Irish economy; we are just beginning
to see that drive our short-haul performance. Obviously, short-haul is where
most of our volume is and it’s also where our most intense competitor is and
so we continue to develop and that business. But our focus in terms of ASK
growth has been across the Atlantic. We’ve grown at a compound rate of
12% since 2010 and we’ve continued that in 2016 under IAG’s ownership,
where we’ve accelerated our growth and added three new destinations. We’ve
commenced Los Angeles; we will start [New York] Newark and Hartford,
Connecticut, in Q3. That will bring us to 10 gateways in North America.
We are starting to get double dailies on our core gateways in North America,
which allows us to maximize our efficiencies out of Dublin without compro-
mising the efficiencies of our short-haul operation.
We have double daily now on Chicago, JFK and
Boston and we will look to increasing frequencies
on our other gateways. We are also looking at future
aircraft types and how aircraft such as the Airbus
A321LR may fit into a revised hub strategy where
frequency is invested in, but not at the expense of
cost per seat.
Norwegian, the low-cost, long-haul carrier, plans to start service to the US from Ireland, pending regulatory approval. How do you view the new competition?
Every airline wishes for a monopoly in its home market. But life doesn’t
work like that. Competition is good. Level competition is healthy and it
stimulates the marketplace and we respond accordingly. We are in business
because of extremely low entry fares. We operate a high volume, high load
factor transatlantic operation. We compete on the basis of value and price
is a key component. So we keep focused on our cost reduction and on the
guest experience and we believe that we can retain our competitiveness.
Please share your thoughts on Tony Tyler’s IATA leadership and his named successor, Alexandre de Juniac?
We have been truly blessed with Tony for a number of years. He has that
great balance of diplomacy and industry knowledge and he has been key
to identifying the issues that IATA should focus on, reinforcing IATA’s core
mandate. And the delivery over the past years has been exceptional and we
look forward to that continuing. I think IATA has chosen very well.
Karen Walker/ATW
Aer
Lin
gus
“As an industry, we are highly regulated and some of that regulation is necessary, but not all of it adds value.”
—Aer Lingus CEO Stephen Kavanagh
[ 8 ]
ExecutiveReport
Bleak economic times make hard-going for Latin American carriers
For most Latin American carrier CEOs coming to the IATA AGM, the prosperity of their continental neighbors in North America seems a distant dream. Political instability in two of South America’s largest countries is adding to airlines’ woes in the region, as economic travails continue.
Brazil and Venezuela are facing political crises, while the International
Monetary Fund (IMF) predicts the region’s economy will contract by
0.5% this year, more than expected, marking the first two-year period of
contraction since the economic crisis of 1982-1983.
Brazil’s political uncertainty continues as the country’s legislature in
May suspended President Dilma Rousseff and appointed a caretaker
government headed by interim President Michel Temer. Rousseff faces
impeachment proceedings in the Senate later this year, and the appoint-
ment of a caretaker government has eased some of the more pressing
political concerns; yet, the country continues to face political uncertainty,
analysts say.
Continuing recessionBut more pressing for Latin America’s largest economy is its continu-
ing recession, as global demand for natural resources and commodities
remains soft. The IMF reports the country’s GDP contracted by 3.8%
last year and will contract by 3.8% this year.
Unemployment rose to 11% by the end of
March, and the real has devalued by 47%
against the dollar. This has had a direct effect
on airlines in the country, GOL CEO Paulo
Kakinoff said. Rising unemployment and
economic softness has led to softer domestic
bookings, and business travel has fallen by as
much as 58% in the industry.
And for airlines based in Brazil, which col-
lect revenues in reals, but whose costs are in dollars, the devaluation of
Brazil’s currency has led to a sharp increase in costs. Kakinoff noted that
GOL’s CASM ex-fuel rose 16% in the 2016 first quarter over the same
period last year.
Panama-based Copa Airlines, a barometer for Latin America demand,
cut Brazil capacity by 30% in March compared with 2015, CEO Pedro
Heilbron said during the company’s recent first-quarter earnings call. And
demand is not expected to pick up until at least until the second half of
next year, analysts predict.
Venezuela’s social and political chaosBut nowhere in the continent is as badly affected as Venezuela, which
is facing social and political chaos even as its economy founders and infla-
tion rises at the fastest pace in the world. Low crude oil prices have cost
Venezuela’s economy significantly, because petroleum is its main export
and the country sits on some of the world’s largest petroleum reserves.
But economic mismanagement has played as large a role. The govern-
ment’s response to the currency’s collapse in value has been to refuse to let
companies repatriate revenues earned in bolivars at a realistic exchange
rate. Using the official exchange rate would return airlines only a fraction
of what they earned in the country. IATA estimates the world’s airlines
have $3.8 billion trapped in the country as of May 2016.
Carriers have responded to this by slashing capacity to the country.
American Airlines and Delta Air Lines in 2015 cut most of their flights to
Venezuela. American, which had the largest exposure of any US airline to
Venezuela, in January wrote off $592 million it had trapped in the country,
according to a filing with the US Securities and Exchange Commission.
Copa has ceased taking ticket revenue in bolivars and is now accepting
payment in Venezuela only in dollars. The company recently repatriated
$18 million from Venezuela—the amount owed Copa for sales in just
March 2013—and wrote off the balance of the $430 million it is owed.
The worst may be comingAnalysts fear worse could be in the offing. The administration of Presi-
dent Nicolas Maduro is being challenged by the opposition, which has
a majority in the legislature. Social unrest looms as the economy teeters
and political factions take their disagreements to the streets. Industry
insiders interviewed for this story said the outlook for
Venezuela airline demand remains parlous.
The outlook for Colombia, which also depends on
commodities exports, remains bleak as well. Airlines
that serve the country say yields remain depressed
and are not likely to recover this year. Chile, too, is
expected to remain weak this year as its mining indus-
try suffers from decreased demand. Argentina may
have turned the corner with the election of President
Mauricio Macri last year, a development that boosted
investor confidence in the country.
Good newsIt isn’t all doom and gloom. The IMF notes that Mexico and Central
America are benefiting from the relatively strong US economy and low oil
prices, with GDP growth rates forecast to be 2.4% and 4.25%, respectively.
Mexico’s thriving airline industry, with its burgeoning ultra low-cost car-
rier sector—led by airlines such as Interjet and Volaris—is transforming
the way people travel in that country. The number of people traveling
by air is growing, or, in other words, airlines are competing with each
other for a growing market, which is not a bad position to be in, Volaris
chief commercial officer Holger Blankenstein said in May. To illustrate
this, he noted that Volaris saw its main competition as not airlines, but
the intercity bus sector.
Madhu Unnikrishnan/Aviation Daily
It isn’t all gloom and doom. The IMF notes that Mexico and Cen-tral America are benefiting from the relatively strong US economy and low oil prices.
AviationWeek.com/IATA [ 9 ]
ExecutiveReportJUNE 2, 2016
IATA seeks to invigorate SES project The European Single European Sky (SES) initiative aimed at
streamlining and upgrading the air traffic management (ATM) hodgepodge that bedevils the 28-nation bloc was launched more than a decade ago. But progress is frustratingly slow. A new report commissioned by IATA highlights the enormous benefits that would accrue if European airspace were modernized.
SES, or lack thereof, has been one of the most unsatisfying files of Tony
Tyler’s tenure as IATA DG and CEO, he told the Executive Report. SES
targets include a reduction in environmental impact of 10%, a threefold
increase in capacity, and a reduction in costs of 50%.
But discussions on new EU-wide cost-efficiency targets for air naviga-
tion service providers (ANSPs) and endorsement of the so-called SES II+
legislative package in the European Council have remained at a complete
standstill for several years because of the dispute between Spain and the
UK over Gibraltar. But the problem has deeper roots.
EU member states do not want SES enough, Tyler says, while stress-
ing he acknowledges the repeated efforts by the European Commission
to get traction.
“The stumbling blocks are the individual member states who are holding
Europe to ransom with a misguided perception of what is in their national
interest,” Tyler said. The implementation of SES is “not a political priority
for them. You can see congestion on the ground, but airspace congestion
is not tangible.”
Tyler said he wishes his successor at IATA, Air France-KLM CEO
Alexandre de Juniac, “extreme stamina in reminding member states of
what is at stake when they pander to self-interested, highly-compensated
ATC. For too long they have isolated themselves from change—and the
European economy can ill afford to continue to pay the price.”
IATA commissioned a study on opportunities that airspace modern-
ization would bring. The report calculates the impact if the inefficiencies
in European air traffic management (ATM), which include unnecessary
route extensions of up to 50km and delays of around 10 minutes per
flight, were eliminated.
The study revealed that a fully implemented SES in 2035 (compared
to a “do nothing” scenario in which the status quo prevails) would create
1 million jobs and boost the region’s GDP by €245 billion ($273 billion)
through improved productivity from time saved, more connectivity options,
and lower costs from improved efficiency.
“The hope is that €245 billion is a hard number to ignore,” Tyler
concludes. “My message is that Europe will be a more prosperous place
if we can achieve SES.”
The release of the study marks the launch of a Europe-wide campaign,
in which IATA will be calling on consumer groups and business associa-
tions to recognize the broad importance of efficient air connectivity to the
economy, productivity and quality of life at the national level.
Cathy Buyck/Aviation Week
Iranian airlines return to international scene
Western sanctions against Iran have left Iranian carriers isolated for
many years and lacking sufficient access to aircraft, spares and technol-
ogy that is taken for granted by the rest of the industry.
Since the lifting of sanctions in January, aircraft manufacturers have started re-
fleeting talks with Iranian airlines. The planned revival of Iran Air, in particular, opens
up opportunities for commercial cooperation in fields such as maintenance, repair and
overhaul.
Few doubt that Iran is an emerging air transport market with big potential. The
country’s geography and inadequate ground infrastructure makes air travel a sensible
option even inside Iran. The country is rich in natural resources and could base an
economic recovery on oil income once the price of crude increases in the coming years.
But Iran’s airline landscape is extremely fragmented. Fourteen airlines operate on
domestic routes, three of which were launched only last year. Domestic capacity has
been shrinking by around 20% since 2011, according to a recent OAG schedule analysis.
Iran Air controlled 68% of the domestic market in 2000, but that fell to 33% in
2010. Five years later, the airline offered just 22% of the industry’s overall domestic
capacity in a shrinking market.
Other carriers have seen similar swings. Mahan Air held 16% of the domestic market
in 2010, but offers no domestic routes today. Iran Aseman Airlines and Iran Air Tours
have significantly contracted flying within Iran. Zagros Air, Kish Air and Ata Airlines
now have market shares of around 14% each.
Mahan Air was the main driver of international growth among Iranian carriers,
increasing capacity by 22%. Conversely, Iran Air’s international capacity declined by
9% in 2015. Overall, Iranian airlines held a 43% market share on international routes
to and from their country.
Of the 65 airports in the country, only 10 do not have to be upgraded for the
expected influx of additional capacity.
But Tehran is well located in the middle of important and fast-growing traffic flows
and has the potential to be developed into a major hub. Imam Khomeini International
Airport, the country’s main gateway, will be expanded into a facility to handle around
45 million passengers.
Jens Flottau/Aviation Week
[ 10 ]
ExecutiveReport
Bastian takes the captain’s seat at Delta
After nine years serving as president of Delta Air Lines and being CEO Richard Anderson’s most trusted advisor, Ed Bastian officially assumed the CEO’s role from Anderson on May 2.
The handover was carefully orchestrated and planned for months; Ander-
son moved to Houston and let Bastian move into the CEO’s office at Delta’s
Atlanta headquarters weeks before Bastian formally accepted the CEO title.
Bastian is walking a fine line between pledging allegiance to many of
Anderson’s positions, some of which have generated a fair amount of con-
troversy, and declaring his independence as CEO. Anderson has become the
company’s executive chairman, indicating his role will be more than chairing
board meetings. “He’s still my boss,” Bastian said of Anderson, noting that
the two men speak two to three times a week.
“Richard is a very close friend and close partner,” Bastian said. “We’ve
worked closely for the last nine years and every decision we’ve made, we’ve
been together on the decision-making process.” But he added, “I am a dif-
ferent person than Richard. I’ve got a different voice and a different style …
I view my style as collaborative … Richard was a lawyer and I come from
the financial side. I’m more analytical.”
Still, on several key issues, Bastian is largely sticking to Anderson’s line.
Asked whether the Delta/American Airlines/United Airlines campaign
against alleged Gulf airline subsidies—on which Anderson has played a
very vocal role—will be one of his priorities, Bastian said, “I’m absolutely
right alongside Richard with his views on the Gulf carriers. We believe that
these subsidies are not just real, but distorting … I’m equally frustrated and
equally engaged in the debate.”
On another controversial issue, Delta’s divergence from the rest of the
US airline industry on the push to have air traffic control (ATC) separated
from FAA and moved to an independent organization, Bastian’s view is “very
similar to Richard’s,” he said, explaining, “We think the air traffic organiza-
tion being split off from FAA is not in our interest or in the interest of our
customers … It is by far the safest [ATC] system in the world. It is by far the
best operating system we see anywhere. Why is it not working for others? I
can’t tell you that, but I can tell you it works for Delta.”
But Bastian emphasized that “anytime you see a leadership change at the
top of a company,” it provides an opportunity for reevaluation. “I do have
different ideas and different thoughts,” he explained, noting in particular that
Delta has a “changing customer demographic” and needs to increasingly
focus on “a new generation” of passengers.
Bastian is scheduled to speak as an IATA AGM panelist on Thursday.
Aaron Karp/ATW
AviationWeek.com/IATA [ 11 ]
ExecutiveReportJUNE 2, 2016
Aviation-friendly Ireland reaps the benefits
The Irish government and the Irish civil aviation authority (IAA) have adopted a more forward-thinking orientation on aviation than most of their, often much larger, counterparts in Europe. The policy is paying off—big time.
Ireland is one of the smallest countries in Europe, with just 4.6 million
inhabitants, yet about half of the world’s leased aircraft are registered in
the country and the world’s first duty-free shop was established here. It is
also home to Europe’s largest airline by passenger count and the world’s
largest airline in terms of international enplanements: Ryanair.
Aviation executives in Ireland commonly joke that it took an Irishman
to get International Airlines Group (IAG) off the ground and grow it into
an agile, profitable and diversified airline group: IAG CEO Willie Walsh,
born in Dublin and a former Aer Lingus CEO. Aviation is central and
strategic to the Irish economy, IAA CEO Eamonn Brennan noted. “We
live on an island; we don’t even have bridges. This is a key thing.”
A high-value sectorAviation contributes just over €4 billion ($4.3 billion) directly to the Irish
GDP, comprising €1.9 billion from aviation, €1.3 billion through the supply
chain and €0.9 billion from associated spending by people employed in
aviation. It supports 26,000 jobs directly and a further 16,000 in the supply
chain. Ireland’s tourism industry, which is dependent on aviation, accounts
for another €5.3-billion
GDP contribution and
180,000 jobs.
The Irish govern-
ment has earmarked
aviation—along with
information technology
and the pharmaceutical
industry—as high-value
sectors to the Irish econ-
omy. It launched a new
aviation policy in 2015, after two years of consultation. “This govern-
ment policy says that we have to make the industry more competitive
and innovative. The global aviation industry continues to expand and is
estimated to double over the next 20 years. This presents opportunities
for Ireland in virtually every area of aviation such as airlines, pilot train-
ing services, satellite-based air traffic control services and aircraft leasing
services,” Brennan said.
Embracing deregulationAer Lingus CEO Stephen Kavanagh told the Executive Report that
Ireland’s embracing of deregulation and liberalizing access had paid off.
“It’s a very small economy in the global context, but it’s a very open
economy, one of the most open economies and on a par with Singapore,”
he said.
“Ireland has recognized the requirement for connectivity and, as an
island, sees that air transportation is how that’s delivered. We have very
strong indigenous competition with Ryanair, but there’s the ability for us
to compete not only in the Irish market but also across the Atlantic and in
Europe. Deregulation has allowed us to grow scale. Deregulation, competi-
tion and liberalization have brought out the very best in terms of behaviors
and competitive response. We’re efficient, we’re focused on returns, and
the Irish economy has benefited and the consumer has benefited.”
Competition rewardsKavanagh also believes competition reaps its own rewards. “Com-
petitiveness has fostered demand,” he said. “We see a higher propensity
to travel than in most other nations and that’s because we’ve created an
opportunity for competitive airfares.
“We are one of the two largest Irish airlines, but there are others and
the aviation eco-system, including airlines, lessors, MROs and travel tech-
nologists, has prospered because it’s been open to competition. To remain
relevant, we have to remain competitive and everyone has reaped the
benefits.”
IATA DG & CEO Tony Tyler told the Executive Report, “the Irish
government has taken a very pro-aviation strategy for some years now,”
pointing out that the country reduced its departure tax to zero in 2014.
With the growth and planned second runway at Dublin Airport, there are
“clearly signs that the tax policy is bearing fruit and near neighbors should
take note,” Tyler said. Irish Transport Minister Shane Ross is scheduled to
speak during the AGM’s opening sessions on Thursday morning.
Cathy Buck/Aviation Daily
By Barry Cronin
“Ireland has recognized the requirement for connectivity and, as an island, sees that air transportation is how that’s delivered.”
—Aer Lingus CEO Stephen Kavanaugh
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