The past twelve months have been eventful for your association. I am pleased to report that the state of IATA is strong. Our 242 members comprise some 84% of global traffic. We have members in 115 countries and with a broad variety of ownership structures and business models.
Our members compete vigorously every day in a very tough business world. But they come together through IATA to address common issues wherever they arise. They do this in the best interest of our industry’s future. That is why I am confident in the strength of our association and in the success of our meeting today.
Our Board Chair will provide full details of IATA’s main activities over the last twelve months. This will include a report on our finances, which I am happy to say are in good shape. I will focus my remarks on internal developments, partnerships and how we are working together with you, our members.
Our strategic focus is on delivering value to you. We support your financial health through our various services including the IATA Settlement aSystems. We influence your operational and regulatory environment through advocacy, legal tools, and most importantly by working with governments and partners. We provide products and services designed to meet your needs and the needs of the industry. We promote global standards that help your businesses to run efficiently. And we have assembled a motivated team that is aligned, engaged and dedicated to exceeding your expectations.
I should note that the membership dues that we collect are nowhere near sufficient to fund the programs and initiatives needed to deliver this strategy. The gap is filled with the surplus generated from our commercial activities. Membership dues haven’t been raised since 2009.
In line with our strategic focus, we implemented a major restructuring in July 2013. The goal was to make IATA simpler to deal with and more effective at what we do. That meant empowering our regional and country offices to meet your needs. They are backed up by IATA’s global resources and led by our five Regional Vice Presidents who are eager to support your success. I hope that by now you have had the opportunity to meet with the team in your region. If not, they are all here at this AGM and will be making contact with you.
While making these changes, we have maintained a sharp focus on the priorities that you have set. The clearest measure of that is the effectiveness of IATA’s Settlement Systems. In 2013, we handled some $387 billion. In two of our most important systems—the BSP and CASS*, we did that with a 99.96% on-time settlement rate.
I am convinced that the good results from the changes that we have made will only grow. We have the right structure, the right team and the right focus. We are geared up to deliver everything you expect of us, and add ever more value to your business.
Alongside ensuring that we are working efficiently to meet your needs, the IATA team has also spent considerable time strengthening our key partnerships.
As you know, IATA’s mission is to represent, lead and serve the industry. At times, that means taking a tough and uncompromising stand on key issues—often those involving excessive costs that our members are too frequently made to pay. But the vast majority of the work that we do on your behalf is accomplished by working with our partners to achieve mutually beneficial results. Let me provide two illustrations.
A formal partnership with Airports Council International (ACI) was signed in October 2013. This will see us cooperating to promote innovations through Smart Security, Automated Border Controls, Ground Operations, and standards for common use equipment and data exchange protocols.
This renewed partnership is already delivering results. For example, this year we will have Smart Security pilots running in both Heathrow and Schiphol airports.
The association has also strengthened its partnership with the International Civil Aviation Organization (ICAO). The presence here of Dr. Olumuyiwa Benard Aliu, President of the Council of ICAO, is testimony to the close working relationship our organizations enjoy.
Another recent demonstration of this strong collaboration is our coordinated efforts to finding a robust approach to global aircraft tracking. The outcomes of the 38th ICAO Assembly in October last year also show the enormous value that is being created by working in partnership.
The landmark agreement to develop a proposal for a global market-based measure to manage aviation’s carbon footprint was the highest profile achievement. But there were many other decisions taken which will positively impact your business. These include a strong message supporting harmonization and global standards in key areas such as Advance Passenger Information, cargo security, consumer protection and taxation. With IATA’s encouragement, the Assembly recommended further exploration by ICAO of opportunities to relax national restrictions on cross-border investments and market access. And the Assembly gave a direct boost to some of our top priorities by endorsing the Enhanced-IOSA program and encouraging States to ratify the Montreal Convention—a prerequisite for e-freight.
Some outcomes have already generated significant follow-up activities. As already mentioned, on the recommendation of the Assembly, a diplomatic conference was held earlier this year to close legal loopholes in the treatment of unruly passengers. This resulted in important changes to the Tokyo Convention. Later this morning, you will be asked to endorse a resolution which calls on governments to ratify these changes and which also sets out a framework to address this issue including actions across industry.
The achievements of the two-week assembly reflect years of cooperation and work that could only be done in close partnership. I thank Dr. Aliu again for ICAO’s continued support and open door to industry input into their vitally important activities.
But of course the most critical partnership for IATA is with you—our members. Your success defines our success. And we deliver the greatest value to your business when we work together.
I know the challenges of running an airline. The demands of the business are the top priority and more than fill your day. IATA’s role is to deliver value to you through global standards, programs and services. This is something that our global perspective allows us to do. And you elect a Board of Governors which gives us guidance in prioritizing activities and monitoring our progress.
Two of our most significant accomplishments in recent years were achieved together—IOSA and e-ticketing. IATA worked with industry partners and stakeholders to create the standards, clear regulatory hurdles and set up an implementation framework. But it was you—our members—who prioritized the work in your business plans and put in the muscle to make it happen.
I emphasized the “help us to help you” message at our last AGM. It is so fundamental to our success in delivering value that I will repeat it this year in the context of three current initiatives:
The first is the New Distribution Capability (NDC): Just last month, the US Department of Transportation gave tentative approval to Resolution 787—the foundation document for NDC. The deadline for comments is 11 June, and soon afterwards we anticipate final approval.
So the stage is set and the standards developed to modernize the way that airline products are presented through travel agents. The challenge now is implementation. Last year we launched pilot projects with Air New Zealand, American Airlines, China Southern Airlines, Hainan Airlines and Swiss International Air Lines. The Board has set a target to deliver five more pilot projects this year—one in each of the IATA regions. We have two already underway with Air Canada and Shandong Airlines. Today I am pleased to announce that Qatar Airways, Aer Lingus and Aeroflot have committed to launch pilot projects as well.
Now we are looking for more airline volunteers—particularly from Asia-Pacific and Latin America—to create even more momentum. We are not just working with airlines. We continue to engage and work with stakeholders across the air travel value chain to identify win-win opportunities for travelers and the industry.
We also need to boost momentum for e-freight. Progress has been much slower than anyone expected when it was launched in 2006. So we have taken a partnership approach in working with the Global Air Cargo Advisory Group (GACAG) to align the value chain and share the workload and more specifically with the International Federation of Freight Forwarders Associations (FIATA) whose members are your principal cargo customers.
This leaves airlines with the primary responsibility for driving the adoption of the e-Air Waybill (e-AWB). Significant milestones were achieved last year with the development of a multilateral e-AWB agreement, the provision of Cargo-XML standards and a significant increase in States that have ratified the Montreal Convention 1999. Some airlines have made very solid progress. For example, Cathay Pacific and Emirates have achieved 100% e-AWB penetration in their home markets. Still, we ended last year at 12.3% global penetration which was well below the Board target of 20%.
As I said before the break, this year’s target of 22% will be challenging. And we intend to reach 80% in 2016. We are committed to making this happen with all of the resources that IATA can muster. But we need your support.
The cargo business has been going through a tough time. We know that there is lots of strong competition for your resources and investment. The “help us to help you” message is asking for your leadership in prioritizing e-AWB in your cargo activities. Working together is the only way to achieve the targets that you have set. Even more importantly, it is the way to deliver the business benefits that you are counting on.
My last example of where we need your help concerns IATA’s Settlement Systems. IATA has always been committed to ensuring that our settlement systems deliver your money on-time and in full. As I mentioned earlier, last year we delivered 99.96% of collected funds in the BSP and CASS systems to you on time. But in some cases funds are not collected in full. And last year a few high profile defaults in the BSP saw unrecovered debt rise to 0.056% of funds handled.
The Board has now set a target to keep unrecovered agent debt below 0.025% of total funds handled in ISS. We will do all that we can to achieve this—within the rules that you have defined for the system’s operation through the Passenger and Cargo Agency Conferences. These rules include definitions of the settlement periods which vary from a few days in some markets to more than a month in others. In general, shorter settlement periods, coupled with good local financial rules for agent participation, mean reduced risk and lower levels of unrecovered debt.
As custodians of the system, IATA is fully committed to achieving the performance targets that you have set. IATA understands how important getting paid in full is to your bottom line. But we must abide by the rules that you have established for the system. So it’s time for a reality check. Our success in protecting your money will be limited by the rigor of the rules themselves. And only the participating airlines, in consultation with agents, can make them more effective.
“Help us to help you”
By asking you to “help us to help you”, I am not trying to pass the buck on achieving targets. You have created and enabled a strong association—one that is aligned with your business needs. We are, if you like, the part of your business that kicks in when there are greater benefits to be gained from working together than individually. All of us understand the limits on joint activities established by competition law. But there is still very wide scope for highly beneficial cooperation. We know that, like any of your business units, we are competing for your time and attention. And in return for that time and attention we will deliver value to your business.
On that note, I want to express my appreciation to all our members for the great support that you give to your association. Your engagement through service on committees, working groups, task forces, right up to carrying out the duties of the Board of Governors, gives IATA strength and guidance. And we are committed to deserving your support and trust in everything we do.
I would also like to extend my thanks to the IATA team. Their professionalism and dedication over the last 12 months have once again delivered solid results against challenging targets.
One member of our team, Patricio Sepulveda, our MER Vice President for Latin America is attending his 34th consecutive AGM. Some of these were with a member airline, a few as Chairman of the then Executive Committee and about 20 have been as a member of the IATA team. Patricio is now retiring from IATA. I’m sure that you will join me in wishing him well after such an extraordinary career.
In conclusion, I am proud to confirm that the state of your association is strong. You can count on the best efforts of the entire IATA team to be working ever-diligently on your behalf. And together we are ready to face the challenges that the coming years will bring.
* IATA’s Billing and Settlement Plan (BSP) operates in some 179 countries and territories and is designed to facilitate and simplify the selling, reporting and remitting procedures of IATA Accredited Passenger Sales Agents, as well as to improve financial control and cash flow of participating airlines. In 2013 BSP processed $259 billion. The Cargo Accounts Settlement System (CASS) is designed to simplify the billing and settling of accounts between airlines and freight forwarders. In 2013, CASS processed $31.2 billion