Giovanni Bisignani Interview - The Power of Change
Director General Emeritus Giovanni Bisignani spoke to Airlines International shortly after his retirement, about his time as DG and CEO of IATA—and the challenges ahead
What was the most important change you made in your time as IATA Director General and CEO?
I made many changes but the first and most important was probably the internal reorganization of IATA itself. To regain relevance we had to rebuild IATA. It was important to put IATA in the driving seat and kill the committee approach. It had to be run like a business with targets and a renewed relevance to the industry. These were the building blocks that made every other development possible.
The industry situation helped a lot. I joined IATA in early 2002 after 9/11 had left the industry in complete turmoil. I didn’t need to explain why change was necessary: it was obvious. And although I didn’t have everybody’s backing I did have the full support of some very influential board members such as Rod Eddington, the British Airways CEO, and Jürgen Weber, head of Lufthansa. Their strong support made the changes possible.
I also knew that if I changed IATA I would start to affect industry processes in general. IATA as an association is very different from the norm. It isn’t just a lobbying organization, talking to governments on the industry’s behalf. It is a key part of the industry it serves and plays an important role in many areas, from safety to finance.
Changing IATA and industry processes meant engaging with every member airline and finding the money to assist our weaker members in implementing changes. IATA could no longer be a big boys’ club. Like the airlines, IATA didn’t have any money at the time. We had no assets and only a few months’ worth of cash. I traveled a lot to build personal relationships with the members. I explained to them all the changes we were intending to make.
And we built up IATA’s commercial division to provide the funds to implement the many projects we became involved in and to allow IATA to reduce member fees.
Aside from staff changes, restructuring IATA involved streamlining the many committees that were micro-managing IATA’s budgets and had become strong opponents to change. So I added a small word to IATA’s mission; we would now lead the airlines as well as serve and represent them. I think the board thought it was just a small change in wording and nobody took much notice. But I used it whenever necessary. Most importantly, I used it to set targets. Because as my mentor, Jack Welch, would say: “no targets, no business.” Still, I always kept in mind that the biggest satisfaction would come from ensuring all our members were on board.
After a decade of change, is there anything you still consider unfinished business?
In a sense security is unfinished business. But I think we have a very good road map and an understanding that this is not a national issue. As with safety, governments finally understand that we need to share information and work together. The work with Secretary Napolitano in the United States has opened the door to a revolution that increases effectiveness and reduces passenger hassle. The challenge is to get screening technology to adapt to a moving target as passengers walk through a tunnel but there’s a real race on among the suppliers. I think my “crazy” idea of a Checkpoint of the Future could be a reality in a couple of years.
Another piece of unfinished business is commercial freedoms. We tried to address this with the Agenda for Freedom. Twelve countries signed up to this push for liberalization but we need to resolve growing internal industry tensions between the expanding Gulf carriers and those in North America and Europe first. Calling in governments as referees or advocates has not worked. The solutions must come from within the industry. Areas of cooperation are always possible.
Will we see consolidation across borders in the near future?
It will be very difficult. Rather than tearing down walls, governments are building them higher and higher. In part that is a response to the financial crisis but, in Europe in particular, governments have failed to recognize the importance of the industry. They become interested when a volcano erupts but then they forget about it the moment the ash disappears. And they take too long to sort out these issues. In 1992, as Chairman of the Association of European Airlines, I pushed for a Single European Sky and was told it would be a reality in a couple of years. Two decades later, we are still waiting.
So how can we get governments to listen?
Explain the facts. If necessary, shout politely to embarrass them with facts and figures. And use examples from those governments that do listen. Governments in Asia-Pacific, Latin America, and the Middle East have all invested in aviation. GDP growth in these regions is much higher because they all have very proactive aviation policies.
It will be important to get governments involved in the industry’s future because we can’t solve all our problems alone. Only governments can change the rules of the game. And remember, they set the current rules 60 years ago when airlines were flying DC3s.
A good example of a country that has consistently made progress and is now a key player is China. I first went there in about 1973 when Mao was still in charge. But as recently as 2000, its safety record was bad, and it had no airports of global standards but loads of airlines. As IATA DG, I worked closely with the Chinese Government. China now has an excellent safety record and its airlines have consolidated. Two of the five largest airlines by market value are Chinese. China was also ahead of the industry in converting to e-ticketing. It has improved ATC tremendously. And the airport development has been amazing: 45 airports built in the past five years and 52 more planned by 2020. There is much more still to be done to realize its enormous potential but this shows what can be achieved with political will.
How can IATA maintain its relevance going forward?
Maintaining relevance no matter what the situation means constant change—especially in aviation, which is such a dynamic industry. You have to anticipate the needs of the airline members, build a consensus among them, and then deliver the necessary changes. And if consensus takes too long then you must have the courage to lead.
It will also be important to engage our 2 billion-plus passengers. Even though we are the safest transport mode and fares have come down, we still have unhappy passengers not supporting our industry. We have to find a way to get consumers to appreciate the value and service they receive from airlines and to become our advocates.
The industry has made great strides in environmental terms. Was it easy to build a consensus on the tough targets you set?
When I started at IATA, many people were very comfortable with the idea that airlines were responsible for only 2% of man‑made carbon emissions. They said this was a small figure so we didn’t need to do anything. But I had been living in London as the CEO of Opodo and I knew that the environment was becoming a big issue. We need a proactive strategy. But it was not easy.
The United States had not signed Kyoto. Asia’s priority was growth. Others did not see themselves as part of the problem. Building consensus would have taken too long. IATA had to have the courage to lead. At the Vancouver AGM in 2007, I challenged the industry to achieve carbon neutral growth on the way to a carbon-free future. It was a risk but I had a plan and a road map. After the initial shock I traveled to present my plan to industry stakeholders and got their full support.
This was by far my most difficult challenge. Again, it was getting out there and building a sense of urgency, meeting with the airframe manufacturers, the engine manufacturers, and the rest of the value chain. I had to transmit the sense of speed, passion, and commitment necessary to win the environmental battle. You can’t do that over an email. The hard work paid off. UN Secretary General Ban Ki-moon commended aviation as a role model for others to follow when I presented our plan for carbon neutral growth from 2020 and to cut our emissions in half by 2050.
These are challenging targets, but aviation will make it, if we can get governments to support us in critical programs such as biofuels.
Can airlines achieve sustainable profitability?
There is still a lot of work to be done. IATA has had a big impact, saving more than $59 billion since 2004. And this has helped the airlines a lot. Fuel efficiency has improved 24%, and labor productivity increased 67%. When I started at IATA, airlines were struggling at about $25 a barrel but now $110 a barrel is normal and the industry will still turn a small profit this year.
But we cannot do it all our own. Governments must provide regulators with teeth to deal with monopoly suppliers. And they must gives airlines the freedom to operate as a normal business. With less than a 1% margin over the past 60 years and $200 billion of debt, the industry remains fragile and at risk.
What will the eastward shift of the industry mean for airlines?
The future for aviation is not in North America or Europe. They played their role in building up the industry but are no longer in a position to lead. Asia-Pacific is the largest aviation market and it has the biggest potential for growth. With size comes responsibility. We are starting to see change. The ASEAN countries will have open skies in the next few years and that will drive further change and make the region even stronger.
I am sure the relevance to the industry IATA has achieved in the last decade underlines this turning point. It is never easy for people to accept change but, with hard work and leadership, it is possible to start a revolution.
Under the leadership of Tony Tyler, who has a strong background in the industry and in Asia, IATA will continue to be relevant to the industry, promoting change and maintaining a leadership role. Vision 2050 provides a roadmap. Teamwork with the airlines and industry partners, as well an openness to change, will help the industry become stronger, safer, and cleaner.