The past twelve months have been eventful for your association. I am pleased to report that the state of IATA is strong. Our 241 members comprise some 84% of global traffic. We have members in 116 countries and with a broad variety of business models.
Our Board Chair will provide full details of the main activities of the association over the last twelve months. This will include a report on our finances, which I am pleased to inform are in good shape. I will focus my remarks on a few key areas where I have been personally involved in driving significant changes.
Let me start by reiterating a commitment to transparency and open communication. IATA is your association. I lead it with the support of your advice and guidance. To this end, I have continued to devote considerable time to meeting as many of you as possible—in your offices, at regional gatherings and at global industry events.
Thank you for taking the time to interact with your association. These encounters help IATA to focus on what is important to you. We understand your priorities—beginning with the most fundamental one of ensuring safe operations while facing the relentless challenge to keep revenues ahead of costs. And IATA is dedicated to delivering value to your businesses. Our aim is to make the world a better place for you to do business.
With that goal in mind, we concluded the comprehensive strategy review that was underway when we met last year.
Our mission is unchanged:
To represent, lead and serve the airline industry
And we have revised our vision:
To be the force for value creation and innovation driving a safe, secure and profitable air transport industry that sustainably connects and enriches our world
This vision provides direction to the association’s efforts on your behalf and gives us a broad mandate to continue to drive change that is focused on your priorities: safety, security, profitability and sustainability.
To define further the scope of our activities, we identified three key areas for IATA to focus on. These are:
- Supporting our members’ financial health through the various financial and other services which you rely on
- Influencing the operations and regulatory environment for our members by advocating and working with governments and partners
- Ensuring IATA’s financial health with relevant products and services. The surplus we generate funds our growing activities on your behalf while keeping membership dues in check
The element that links all three is global standards—the bedrock of the value that we deliver to you. And no other organization can deliver that in the same way and across all areas of your business.
As with any entity, having the right organization, people, processes and culture is also critical to success. It is the foundation on which our strategy is built. Considerable changes are being made in this area.
We invested significant time and effort in this review. And to ensure it delivers immediate results, we committed to a series of projects that will drive its progress.
Organizational Effectiveness and Project Sunrise
One of these is an organizational effectiveness initiative. I inherited a strong organization of very dedicated and skilled professionals. But as we moved through the strategy review it became clear that some aspects of IATA’s organization were hindering success rather than helping it. I came to the conclusion that we needed to find a better structure and way of doing business so that IATA could deliver even greater value to our members.
With the support of the Board of Governors, I engaged Bain and Company to undertake a thorough review of IATA’s structure, organization and processes. Reflecting our high expectations, we named it Project Sunrise. We put very few boundaries on the scope of the project. But let me assure you that it will not impact how the Board of Governors and the Industry Committees operate.
Sunrise is now driving major changes across IATA. Our guiding concept is “global development, regional delivery.”
This means that you can continue to rely on IATA’s unique global expertise. But you can expect that we will become more adept at focusing that expertise on your needs and making it more accessible by bringing IATA nearer to you.
Last year I reported that we were empowering our country and area managers as the primary interface with our members. Their offices are becoming one stop shops. We have over 40 of them, so there is one near you. And they are skilled to lead advocacy activities, connect you to IATA’s many products, programs and services; and ensure that your concerns are known and acted upon. Their job is to deliver value to you. I hope that you will engage and challenge them to do that.
With Sunrise we are ensuring that the important work of our country and area managers is fully supported by our regional resources.
To this end, our resources are being integrated under the management at regional offices co-located with our five industry settlement hubs. As members of IATA’s Senior Leadership Team, the Regional Vice Presidents will be responsible for ensuring both that your priorities are reflected on the global agenda and that the global agenda is delivered in your region.
At the center, we are aligning our organization to interact more effectively with our members and stakeholders.
In essence, from 1 July we are turning IATA around to face you—our members and stakeholders.
I promise that we won’t drop the ball while we are making this fundamental shift. And in the long term you can count on much better value from your association. And please, if you have any concerns about these changes, I am eager to hear them.
Industry Settlement Systems (ISS)
You can also count on IATA’s constant dedication to managing industry money reliably. As our Chairman will report, in 2012 IATA successfully handled $371.5 billion of industry money. The Billing and Settlement Plan (BSP) and Cargo Account Settlement Systems settled 99.98% of funds on time. We are committed to continuing to improve our risk management, controls and service quality while meeting our commitment to reduce total unit cost 27% by 2017 (compared to 2010). System coverage is also expanding. Since the last Annual General Meeting (AGM), BSPs have opened in Georgia and Rwanda.
As with any business activity, we must constantly focus on delivering even better value. And so I would like to highlight two key projects for our Industry Settlement Systems, or ISS:
- In March the Cargo Agency Conference approved the direction of a joint effort with the International Federation of Freight Forwarders Associations (FIATA) to modernize the Cargo Agency Program
- In April we launched a New Gen ISS to improve efficiency, accommodate new payment methods, accelerate cash flow and further improve controls
Helping Me to Help You
When you confirmed me in this position, I made a commitment to focus on delivering value to our members. The changes we are implementing and the faithful stewardship of ISS are aligned with that commitment.
IATA is your association. Its ultimate potential rests on the strength of commitment and common purpose that exists within our membership to engage actively in the work of their association. In that spirit, two years ago I asked that you help me to help you. I appreciate your support which has underpinned our many successes.
A good example is the commitment to the IATA Operational Safety Audit (IOSA). IATA facilitates and manages the system. But it is your hard work to comply with IOSA’s standards that is driving improvements in safety performance. This year marks a decade since the first audits were conducted. And it is fitting that we are marking that with a commitment to an Enhanced IOSA standard by September 2015 (1). Today IOSA is a biennial snapshot of safety performance. With Enhanced IOSA we will have a real-time program requiring continuous conformity with the audit standards.
As we look ahead, I would like to outline four critical areas where working together will drive success:
The first is Direct Data Service (DDS) (2). This is a community business intelligence product. All legal issues over IATA’s rights to use our BSP data have now been closed. And we have data in DDS covering 87% of global agency sales. Additionally and uniquely, DDS also includes a growing amount of direct sales data.
So, how can you help me to help you?
Quite simply, join the 47 airlines that have already committed to provide their data. If you then subscribe to DDS, you will have access to the richest air-travel business intelligence data available in the world. And even if you don’t subscribe, you should still benefit. A more competitive market for business intelligence products should result in more competitive prices.
The second is e-freight. We launched it nine years ago. But, to be frank, progress is way short of what we had hoped. And that means you are missing out on significant savings and efficiencies. We are working with the Global Air Cargo Advisory Group (GACAG) to align stakeholders with an e-freight roadmap.
And you can help me to help you by pushing e-air waybill (e-AWB) in your home markets.
Four airlines (3) have successfully driven e-AWB penetration to 75% in their hubs. But globally we are at 8.5%. So there is a lot of ground to cover. The Multilateral e-AWB Agreement should accelerate the adoption rate towards our 20% target by year-end. And we are focused on 100% implementation by 2015. But don’t do it just because of the targets. The benefits cut across cost-savings, operational efficiency and security so you will recover your investment quickly.
Montreal Convention 1999
The third area is a key enabler of e-freight—Montreal Convention 1999 (MC99). This establishes a legal framework which facilitates the use of e-AWB and modernizes rules governing airline liability. You won’t be able to realize the cost savings of e-freight without ratification of MC-99. And we will all be stuck with the complexity of multiple liability regimes until adoption is universal.
Some 103 countries have ratified MC99. But 88 have not. These include some important players in aviation such as Ethiopia, Indonesia, Mauritius, Russia, Sri Lanka, Thailand, Philippines, and Vietnam. We are campaigning to encourage ratification.
And you can help me to help you with local and regional support for this and other industry campaigns.
Cost Efficient Infrastructure Campaigns
And the last area that I would like to highlight is our agenda to promote cost efficiency among our infrastructure partners. This includes pushing forward the Single European Sky, finding solutions to airport cost problems like the big issues at Indian airports, optimizing capital expenditure on development, and fighting tax increases as cash-strapped governments look for new sources of income.
Controlling infrastructure costs and limiting the damage from taxation is in every airline’s interest. IATA’s voice in these issues is strong.
But you can help me to help you by making that voice stronger—engage in the campaigns and amplify the messages.
IATA is fully prepared to represent our membership. And I know that these are tough times with limited resources. But airport and air navigation charges account for about 11% of your cost base. And we always get a better deal for everybody when the airport or air navigation service providers looks across the table and sees you – the customer – sitting next to the IATA charges expert.
In asking for your support, I am not seeking to shirk IATA’s duties or shift its responsibilities. I am encouraging your engagement. And that means challenging us as well as supporting our activities. IATA is determined to deliver value that contributes to your business success. And by working together we can achieve a sum that is much greater than its parts.
You can count on IATA. We are a team of highly motivated professional people fully dedicated to the success of our industry. I’m going to take this opportunity to thank the IATA team on your behalf for their hard work and exceptional efforts over the past year. They have risen to new challenges and are eager to ensure successful changes as we move forward.
I want to extend my personal thanks to our Chair, Alan Joyce, the Board of Governors and to everybody who serves on IATA’s committees and working groups. And I want to extend appreciation to all our members for their support. In return, you have my word that IATA will deliver.
(1) Since 2012 IATA has been preparing for a significant evolution in the IOSA program. The Enhanced IOSA (E-IOSA) program adds continuous conformity with ICAO Standards and Recommended Practices to the audit scope. In 2012, 10 E-IOSA trial audits were conducted, and, in 2013, two online training modules were launched.
(2) More information on DDS
(3) Cathay Pacific, Emirates, Korean Air and Singapore Airlines