Press Release No.:
7 June 2004
The Agenda for Change: Part 1-From Fire Fighting to Building New Industry Structures-
In 2003, the industry survived "the four horsemen of the apocalypse—SARS, conflict in Iraq, terrorism and the economy. Now, a fifth horseman—the price of oil—could add up to US$1 billion per month to our costs and deny us profitability yet again. If the average price for the year is US$33 we break even," Bisignani said.
After at least two years of lost growth, traffic is back to pre-September levels in most parts of the world. First quarter 2004 passenger traffic was 6.5% above the same period for 2001 while cargo volumes were 15.5% above 2001 levels.
To cope with the cycles and shocks that challenge the industry, "We must move from fighting fires to designing new industry structures. We must drive rigidity and complexity from our business. Cost flexibility has never been more critical—and this includes labour. And let's remember that consumers pay for value not complexity," said Bisignani.
Bisignani outlined an agenda for building new industry structures with "simplifying the business as the key new design element." Bisignani said, "the term 'low-cost carriers' is dead-wrong. Our future structure is a 'low-cost industry' with some airlines offering network services at a premium the consumer is willing to pay for." The agenda for change includes simplified commercial processes and more effective approaches to safety, security, relationships with industry partners and the role of governments.
Simplifying the Business: "We must chase paper out of our business. We need to simplify our processes and we need to think big," said Bisignani. E-ticketing, radio frequency baggage tags, bar coding technology and common-use self service check-in terminals have been developed by individual airlines. It is now time for IATA to take on the "enormous task of converting these into industry systems to cut costs and improve passenger service."
The AGM approved four specific projects to "Simplify the Business" as follows:
1. e-ticketing: Implement 100% e-ticketing globally and eliminate paper tickets by 2007. When implemented this will save the industry up to US$3 billion in direct costs alone. The future is "paperless" travel.
2. Common-use self-service kiosks: Achieve an industry standard and implementation plan for common use check-in terminals worldwide. The future is the universal acceptance of self-service kiosks rivaling the ubiquitous multi-bank ATM.
3. Bar Code Standards: Achieve an industry standard and implementation plan to replace magnetic stripes with bar codes on boarding passes that can be printed by the passenger. The future is reducing lines at airports and reducing airline costs associated airline check-in processes.
4. Radio Frequency Identification (RFID) baggage tags: Achieve an industry standard to replace bar coded baggage tags with auto-identifying RFID and work together with the airports to exploit this technology for baggage handling. The future is always knowing exactly where your bag is.
Safety: IATA set a global standard and simplified the process for safety auditing with the IATA Operational Safety Audit (IOSA). As regulators recognize IOSA, IATA members set a target that all IATA member airlines would be IOSA registered by 2006.
Security: Bisignani challenged governments to harmonize security measures and take responsibility for the costs. "Two years after September 11, we cannot accept that governments' approach to security is still fragmented. We need to battle terrorism, not paperwork," said Bisignani. The industry's added cost for security since September 11 is estimated at US$5 billion per year. "It is time for Governments to accept responsibility for the costs of national security. Why are citizens who travel by air singled out to pay for their own security?" questioned Bisignani.
Relations with Industry Partners: "Industry partners must change their mindset to realize that the days of cost-plus pricing are over, cost reduction delivers profitability," said Bisignani. IATA's new approach to monopoly service providers hinges on achieving efficiency targets with each partner. Beginning with EUROCONTROL, achieving a 20% improvement in efficiency identified by an external auditor could save the industry US$ 1 billion. IATA will challenge airports and air navigation service providers to change and meet efficiency targets. "Our partners must change with us. We will not stop until the last barrier to change disappears," said Bisignani.
Role of Governments: Bisignani called on governments to stop "mis-regulating the industry". "We don't need rules on seat pitch. We need vision and we need policy," said Bisignani as he criticized the US and EU for focusing on politics rather than commercial imperatives in their current talks on an open aviation area. Bisignani challenged governments to simplify the regulatory framework of the 60 year old Chicago Convention. "We need the freedom to run our businesses, like businesses. There is nothing sexy about it—every other business has access to global capital, freedom to operate where markets exist and the ability to consolidate."
The IATA AGM and World Air Transport Summit is being attended by over 600 delegates representing airlines from around the world. This is the first AGM and World Air Transport Summit to be held in Singapore since 1976. Proceedings and documentation may be viewed at