International Air Transport Association

Partner Brief
Strategic Partnerships Newsletter

26th Issue • Quarter 3, 2008

IATA Aviation Fuel Forum

From May 20 to 22, 2008, the Aviation Fuel Forum in Athens, Greece, hosted over 440 delegates, including 51 airlines.

The IATA Aviation Fuel Forum is the premier industry event for the world’s aviation fuel community. The forum hosts meetings with technical and commercial decision-makers, experts and IATA Strategic Partners to address matters of common interest to the entire aviation fuel community. Plus, the forum is an excellent place to network. For more information, please visit www.iata.org/events/aff.

IATA Strategic Partners Out in Force

IATA Strategic Partners Airbus, Boeing, Velcon, Chevron, ExxonMobil, Total, Shell Aviation, Société Générale, Lehman Brothers, Air BP, Olympic Fuel Company, Skytanking, Commport, Opisnet, Argus and GE Aviation presented the latest fuel developments while sharing their extensive knowledge. FuelPlus, Varec and Solarc also demonstrated electronic solutions that would help improve operational efficiencies.

Technical Fuel Programme: Future Fuels

Due to increasing oil prices, the airline industry is facing huge financial pressure. A major focus of the Technical Fuel Programme was to investigate how to reduce fuel burn through better design, better performance, optimal routes, and so on, as assigned by IATA’s Board of Governors. The potential savings of such initiatives are listed in the Technical Roadmap now under development at IATA SO&I.

Sessions covered wide-ranging topics such as the fuel supply chain, fuel handling, procedures and safety, microbiological issues, fuel specifications and quality, and fuel filtration. The combined commercial and technical Jetfuel Specification Harmonisation Task Force also developed a harmonisation action plan.

Another outcome of the Forum was a commitment by IATA Member airlines, through its Board of Governors, to support the vision of future second and third generation biojet fuels as a way to address projected air traffic growth and carbon emission trading and penalties.

Commercial Fuel Programme: Cyclical Changes and Biofuels

Keynote speaker for the Commercial Fuel Programme, Momar Nguer, CEO of Total Aviation, presented his company’s forecast of a capacity creep by 2010. During the panel “The Airline Cycle and Structural Changes,” Peter Morris from Ascend suggested hedging strategies to cope with fuel price fluctuations. Adam Pilarski of AVITAS explained that the industry will always be dependent on cyclical changes and reminded the audience that mergers are not necessarily the best solution for restructuring.

Andreas Hardeman, IATA’s Assistant Director of Aviation Environment, who also presented “IATA’s Vision for the Future” in the Technical Fuel Programme, advised that the aviation industry must fight on multiple fronts in order to meet IATA’s goal of a carbon-neutral industry by 2050. With oil barrel prices exceeding US$130, airlines must be ready for ETS (emission trading scheme). At the same time, the industry must resist the imposition of emissions taxes worldwide.

Based on the results of Virgin Atlantic’s biofuel demo flight, Siân Foster advocated the use of biofuel made from the right raw materials, so it can truly be considered a sustainable energy source. Dr Ji-Dong Gu from the University of Hong Kong, who also presented in the Technical Fuel Programme, recommended the use of biofuels be closely monitored, as they can degrade fuel and fuel systems.

The Next Aviation Fuel Forum will take place November 18 to 20, 2008, in Shanghai, People’s Republic of China.

IATA’s Annual General Meeting (AGM) - back to top

The high price of oil is changing everything—for airlines and for their passengers. In 2002, a barrel of oil was US$25. And the total industry fuel bill was US$40 billion. In that same year, the world’s airlines lost US$11.3 billion.

To recover, enormous changes followed. Fuel efficiency improved 19%. Sales and marketing unit costs plunged 25%. Non-fuel unit costs dropped 18%. And airlines rolled-out e-Ticketing to every corner of the planet.

Airlines returned to the black in 2007 with a profit of US$5.6 billion. This was an amazing achievement given that the industry fuel bill has ballooned to US$136 billion based on an average price of oil at US$73 per barrel. For every dollar added to the price of a barrel of oil, industry costs rise by US$1.6 billion. Oil is now in the US$135 range. If this price holds for the next 12 months—as the futures markets tell us—the added burden will be a staggering US$99 billion. Losses in 2008 could reach US$6.1 billion.

The situation is desperate and potentially more destructive than our recent crises—SARS, terrorism and war—combined. Large parts of the industry are being re-shaped. In the last six months 24 airlines went bust. To keep this vital part of the global economy functioning, extraordinary change must involve governments, industry business partners and labour.

Some issues are quite familiar to travellers. Despite the investment of over US$30 billion since 2001 to improve security measures, the result is still an uncoordinated mess. Fear drives decisions; the infrastructure cannot cope; governments are not co-operating; and nobody is taking leadership. Passengers are suffering because they face a maze of duplication, bureaucracy and hassle. BASTA. Governments must focus on risk management, harmonise global standards, use technology and intelligence effectively and take responsibility for the bill.

Alongside the uncoordinated security mess we have an unregulated mess with monopoly suppliers. Shouting politely, IATA achieved a record US$3.7 billion in cost savings in charges, fees and taxation in 2007. Over the same period airport charges increased US$1.5 billion. Governments have failed to regulate airport monopolies. Too many airports live happy days, isolated from commercial discipline. Look at the UK Civil Aviation Authority’s treatment of Heathrow. Service levels are a national embarrassment but still the CAA increased charges by 50% over the last five years, and plan 86% increases for the next five. This only happens in “Monopoly-land.” BASTA. Enough! It’s time for governments to get serious about regulating monopolies that abuse their position.

The fuel crisis is also a catalyst for governments to deliver results on the environment that reduce fuel burn. Even before the crisis our vision to address climate change set the benchmark for all industries— carbon-neutral growth, leading to a carbon-free future. IATA’s four-pillar strategy is an industry commitment to deliver real reductions in CO2, by investing in technology, flying planes effectively, building efficient infrastructure and implementing positive economic measures.

It’s not just words. With oil at US$135 per barrel airlines have the biggest incentive of any industry to improve environmental performance. Optimising routes and sharing best practices alone saved over 10.5 million tonnes of CO2 last year. And the investments we are making in new aircraft and innovations like biofuels that do not compete with food crops will drive even more progress.

Unfortunately, governments remain fixated on punitive economic measures. In November, the European Parliament voted on a hundred amendments to their emissions trading proposal. For every minute of discussion the cost increased by 1 billion Euros. Fortunately they stopped after 30 minutes. And the European Council limited the madness. Still travel in Europe will have to absorb a 6.4 billion Euros cost. It’s time to say BASTA to politicians who talk green but focus their actions on taking cash. Reckless decisions like these at a time of crisis could have massive impact not only for travellers and shippers—but for the broader economy as well.

Some solutions are obvious. Governments must take politics out of air traffic management. A Single European Sky alone would deliver 12 million tonnes of CO2 savings. And governments need to implement positive economic measures to stimulate innovation from biofuels to radical new aircraft designs.

The oil crisis is also highlighting a desperate need to modernise the 60 year-old-rules. Re-regulation or re-nationalisation is not the right answer. We must redefine the structure of the industry. Airlines fight crisis after crisis with our hands tied because flags, not brands define our business. Airlines cannot serve passengers in new markets without an international agreement.

And, we cannot look beyond national borders to try new ideas, grow our business, access global capital, or merge and consolidate. We must say BASTA to the bilateral system. It’s time to change.

Governments must let airlines move from politics and agreements to brands and business. Let’s rip up the 3,500 bilateral agreements and replace them with a clean sheet of paper without any reference to commercial regulation. Airlines would be free to innovate, free to compete, free to grow, free to disappear, and free to become financially healthy. On that same sheet of paper the role of governments should be clearly outlined—ensuring a level playing field, bringing commercial discipline to monopolies and regulating global standards for safety, security and environmental performance. These are basic business freedoms that almost every other industry takes for granted.

The recent history of the airline industry is like the endless agony of Sisyphus. We push a heavy load uphill only to be knocked back down. Massive change is the only way to break the cycle of crises.

The world’s airlines sounded the alarm bell with an Istanbul Declaration to governments, industry partners and labour. Governments must stop crazy taxation, regulate monopolies effectively, ensure that the cost of energy reflects its true value, fix the infrastructure and change the rules of the game. Other parts of the industry must also change. Labour must understand that jobs disappear if costs don’t come down. And our partners across the industry value chain must recognise that this is an industry crisis—and everyone must participate in the solutions.

Our responsibility is to work together with common goals to build a sustainable future. Thirty-two million jobs, 2.3 billion travellers and US$3.5 trillion of global business depend on our success.

Giovanni Bisignani
Director General and CEO
International Air Transport Association (IATA)

Partners’ Corner - back to top

Navtech Inc.
Integrated flight operations solutions

In spite of the rapid rate of technical development in the geo-spatial field, aeronautical charts are still the mainstay of air navigation, whether for navigation at or close to an aerodrome, or en-route between aerodromes. There is a simple reason for this: an aeronautical chart has a very high information density, often in a very small format.

Navtech bought European Aeronautical Group in 2005, and among the assets were two aeronautical charts available as traditional paper charts and in electronic versions for Electronic Flight Bag (EFB) use.

In 2006, Navtech made the decision to merge the two formats into one. Needless to say, this was not an easy decision; management was well aware of the risks involved. In order to mitigate the risk, it was decided at a very early stage to involve airline customers as much as possible in the development process.

Airline customers are key to the development process of aeronautical charts, as efforts to reduce emissions and to lower fuel costs had led to a much higher degree of tailoring in the presentation of information on an aeronautical chart, i.e. tailor-made approach procedures and approach minima calculations.

Further input and development have resulted in a completely new Navtech chart format, based on the most recent findings and Human Factor analyses of pilots’ interaction with information in a flight deck environment, tested by pilots and flight operations staff.

The first aerodrome chart was distributed in November 2007 and the new Navtech aerochart was formally launched at a customer event in June 2008.

Gunnar Öhrn
gunnar.ohrn@euronautical.com
www.navtechinc.com

Certicom™
Two-dimensional bar code technology:
new efficiencies for the travel experience

While many airlines today use two-dimensional (2D) bar codes on boarding passes, the technology has not been universally implemented. To expedite this migration, IATA has set a deadline for the end of 2010 for full implementation of 2D bar code technology. One major objective is for airline passengers to check in and board flights using their secure mobile devices, such as cellphones or personal digital assistants (PDA).

Having a smaller, more secure bar code based on Elliptic Curve Cryptography (ECC) is important for mobile device check-in and boarding because small bar codes scan more reliably, reducing scan errors and saving valuable time at security checkpoints. A more efficient digital signature in the bar code requires less “real estate” on printed tickets or mobile device screens and provides more room for secure passenger and airline data. Airlines will be able to deliver a consistent, reliable experience to all customers using mobile boarding passes.

Two-dimensional bar code technology is rapidly growing in popularity because it is inexpensive to implement and provides much more security than one-dimensional bar codes, which are commonly used for product identification. This technology could be used in a wide range of travel industry applications, including mobile and web-based ticketing. The benefits extend beyond travellers to other areas of the air freight industry, such as baggage carriers, because bar codes can contain private passenger or shipment information.

In April 2008, Continental Airlines, the world’s fifth largest airline, selected Certicom to provide their 2D bar code technology based on ECC technology, making a smaller, more secure bar code possible.

John Callahan
jcallahan@certicom.com
www.certicom.com

ExPretio Technologies
The management challenges of loyalty programmes

Now an integral and successful part of many air carriers’ business strategies, frequent flyer programmes foster client loyalty that translates directly into increased revenues.

However, this success comes with its share of challenges, such as managing a diverse and complex membership and the financial liabilities associated with reward and redemption policies.

While loyalty programmes have increased in strategic importance to the point of becoming profit centres, revenue management tools, similar to those available for ticket sales management, remain unavailable, thus preventing air carriers from making the most of these programmes.

At a recent IATA Loyalty Work Group, ExPretio Technologies introduced the concept of a revenue optimisation and intelligence tool specifically designed to help air carriers leverage their loyalty programmes.

For example, with such a tool, air carriers can segment memberships based on observed behaviour. Through modelling of member-choice behaviour, carriers can:

  • anticipate choices based on reward and redemption alternatives.
  • estimate demand elasticity and members’ willingness-to-pay.
  • predict demand for future rewards.
  • optimise rewards pricing dynamically based on a behaviour model.
  • optimise rewards to match member willingness-to-pay.
  • maximise miles burn rate.
  • minimise future liabilities.

Additionally, carriers can model member lifecycle, anticipating future accumulation and redemption activities for each member or reward, estimating member lifetime value to the programme, and anticipating and optimising unredeemed mile rates.

Gilles Gagnon
gilles.gagnon@expretio.com
www.expretio.com

Lufthansa Systems
Flight-planning solutions

To calculate an optimal route for each flight, a variety of parameters has to be incorporated and optimised in regard to costs, flight time and fuel efficiency. Airlines are also required to check their routing for a particular flight against the latest ATC rules. These highly complex rules, also known as Traffic Flow Restrictions (TFR), are set by air traffic control authorities in order to guarantee smooth traffic flow while at the same time maximising ATC capacity and safety.

Croatia Airlines and Lufthansa Systems started their successful co-operation in the field of flight planning in 2005. After searching for a means of generating further fuel savings and addressing the complex issues facing flight planning, Croatia Airlines found an IT solution with Lufthansa Systems. This tool permits the airline to select the most effective combination of airway segments by automatically considering even partly restricted airways and suggesting by-passes where legally permitted. Common examples for flight planning with a focus on Traffic Flow Restrictions (TFR) include temporary restrictions of certain flight paths, restrictions for certain aircraft, flight levels or routes, as well as restrictions for take-off and landing.

Irena Petrin, Head of Flight Operations Services at Croatia Airlines, explains: “When Lufthansa Systems introduced the new TFR module, we were impressed by the results of benchmarks which show that the tool can generate savings of up to two percent in fuel burn. The solution enables us to further enhance our ecological and economical efficiency and so far fulfills our expectations.”

Lufthansa Systems continues to find ways to partner with network carriers and regional and budget airlines to save costs and reduce emissions.

Sandra Hammer
publicrelations@LHsystems.com
www.LHsystems.com

The Middle East and North Africa (MENA) - back to top

In this interview, Majdi Sabri, IATA Regional Vice-President based in Amman, Jordan, shares his observations on the excellent opportunities in the high-growth MENA region, which includes the Gulf Area, Saudi Arabia, Jordan, Kuwait, Lebanon, Egypt, Morocco, Tunisia, Libya, Algeria, Sudan, Iran, Iraq and Yemen.

Describe the challenges of, and opportunities for, exceptional growth in the MENA region.

Since 2002, the region’s aviation industry has been growing at prodigious rates. Some years, this rate has tripled the industry average. The region’s share of global air traffic increased from 5% in 2001 to nearly 9% in 2007, the result of rapid growth. Last year alone, air transport saw a 17% increase of cargo and passenger traffic. Economic activity in the region is increasing at an average annual rate of 6%, with some $3 trillion in the investment pipeline.

Airlines have responded to this growth by ordering an additional 700 aircraft for Middle East carriers, at a cost of $160 billion, and by expanding their networks and hiring more people, using the opportunity to restructure and re-evaluate their operations.

Expansion plans at airports in the region amount to $50 billion. It is expected that in four years time, the 10 leading airports in the region will have a combined capacity of 320 million passengers. The new airport in Jebel Ali, Dubai, will handle 130 million passengers.

This exceptional growth is expected to continue in the next two or three years, because of the rapid increase in economic activity in the region. Of course, this is giving the airlines an opportunity to establish themselves on the global scene. Some airports in the region, like Dubai, are establishing transit hubs to serve global traffic, taking advantage of the low rate of infrastructure expansion in Europe and the rest of the Western world.

Many people thought that this rapid rate of growth would result in excess capacity, but up to now this has not been the case. So far, airlines are managing to fill up to capacity at high load factors. However, excess capacity could become a problem if the present growth rates drop for any reason.

How is IATA helping airlines to deal with this unprecedented growth?

Our main concern is safety. To help airlines maintain safety standards, IATA has mandated that all airlines be IOSA-certified by the end of 2008.

For this region, most airlines are on the IOSA registry. The safety record in the region has been really good. In 2006, we had no accidents. In 2007, we had a good record, with few accidents, below the industry average. We are supporting IOSA by holding seminars to increase safety awareness and by offering courses free of charge for airlines that require safety training.

In addition, we have helped the airlines upgrade their systems in terms of Simplifying the Business (StB). The region was a bit late starting e-Ticketing (ET), but we have managed to increase ET penetration from 23% at the start of 2007 to 88% at the end of the year. Now, at 95%, we are very close to our target. With Bar-Coded Boarding Passes (BCBP), we have 13 airlines in the region capable of using BCBP. Overall, the region has responded positively to the StB initiatives.

On the operating cost side, we are helping airlines to reduce fuel consumption by negotiating shorter air routes with civil aviation authorities in the region. We also have a team of experts to advise airlines on the best operational practices to rationalise fuel consumption.

How does the IATA MENA team approach the various stakeholders in the region?

The IATA MENA Team is member- and customer-oriented. We are co-operating very closely with all Member airlines, airports and civil aviation authorities in the region, performing the dual roles of co-ordinator and facilitator between these authorities to ensure that our Members have more air space and shorter air routes.

This is made possible because of our new approach. Each country office operates as a focal point for aviation stakeholders to deal with IATA, co-ordinating various issues. This in turn helps us in the regional office co-ordinate our regional strategy and prepare and implement our yearly action plan for each country. In addition, we hold IATA Aviation Days to address the main concerns of Member airlines and civil aviation authorities and to help governments and authorities formulate policies that address the challenges facing the industry.

To find out more about the opportunities in the MENA region, please contact Majdi at sabrim@iata.org or at +962 (6) 593 9944.

Simplifying the Business - back to top

Celebrating ET while continuing efforts to reduce costs and improve service

Around the world at midnight on May 31, travel agents stopped issuing neutral paper tickets. On Sunday, June 1, the industry moved to 100% e-Ticketing (ET).

We would like to take this opportunity to express our sincere appreciation to our StB Preferred Partners for their participation in this landmark project. Together, we have moved an entire industry from the paper age fully into the electronic era.

As the ET project ends, IATA’s Simplifying the Business (StB) programme continues to find ways to improve customer service and reduce costs. Two new projects, the Baggage Improvement Programme (BIP) and Fast Travel, have recently begun.

Addressing baggage mishandling and reducing an annual price tag of US$3.8 billion

IATA has launched a comprehensive Baggage Improvement Programme (BIP) to provide a range of solutions, including Radio Frequency ID (RFID), to airlines and airports.

BIP addresses all potential causes of baggage mishandling: identification, people, processes, IT systems and infrastructure. While RFID can solve 20% of baggage mishandling issues, BIP addresses all of them, and is actively seeking out airlines and airports to validate solutions.

BIP is currently conducting pilots with four carriers: Delta, Emirates, LAN Chile and Lufthansa. The purpose of these pilots is to identify and validate solutions before finalising the approach and rolling it out to the entire industry. The latest airline to join the programme is Air France, and we will recruit more partners later this year.

Fast Travel: Self-service in the airline industry

Passengers want more self-service. IATA’s Fast Travel programme will enable travellers to experience self-service in six areas:

  1. Check-in
  2. Bags ready-to-go (bag registration)
  3. Document scanning
  4. Self-boarding
  5. Flight re-booking (IRROPS)
  6. Bag recovery (lost bag registration)

Thirteen pilot projects are now being conducted in each of these areas.

In both the BIP and Fast Travel pilots, StB looks at the issues and recommends approaches for implementation. We therefore seek out products and solutions that are aligned with our project objectives and act as a showcase for them, be they conveyors, label stock, printers, handheld devices, MIS systems or RFID implementations.

For more information on Simplifying the Business, please visit the StB homepage at www.iata.org/stbsupportportal.

Events Calendar - back to top

For a complete list of upcoming events, visit: www.iata.org/events.

IATA Sponsorship and Exhibition Opportunities

Sponsoring and exhibiting at IATA Conferences and Events provides an ideal opportunity to present your products and services to a focused and targeted audience. These events provide outstanding networking opportunities as well as an association with the IATA brand, a world-class global endorsement.

For more information please contact:

Philippe Guertin
Manager, Sales
Tel.: +1 514 874 0202, ext. 3495

New Partners - back to top

A/S Global Risk Management
www.global-riskmanagement.com

Ceylon Petroleum Corporation (Ceypetco)
www.ceypetco.gov.lk

Corporate Research and Investigations (Pvt) Limited
www.cri.com.pk

Finnish Security Projects Ltd
www.finsecpro.com

Hitit Computer Services
www.hititcs.com

JSC Gazpromneft-Aero
www.gazprom-neft.com

Maureva Ltd
www.maureva.com

Network Telex (South Africa) Pty Ltd
www.telex-net.com

OOO Lukoil-Aero

PTT Public Company Limited
www.pttplc.com

Tradition Aero
www.tradition.com

For a complete list of Strategic Partners, visit our online directory at: www.iata.org/sp/partners.

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Table of Contents
IATA Aviation Fuel Forum
IATA’s Annual General Meeting (AGM)
Partners’ Corner
The Middle East and North Africa (MENA)
Simplifying the Business
Events Calendar
New Strategic Partners
Partner Brief (PDF)
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