Date: 15 July 2015
Remarks of Tony Tyler at the TAAI-TAFI Symposium on Future Aviation Trends, Mumbai
Good evening ladies and gentlemen. It is a pleasure to be here. I know that I am standing between yourselves and high tea, which means that regardless of what I say, I can be assured of loud applause when I finish!
I have regretfully had to decline many previous invitations to address the Travel Agents Association of India (TAAI) and Travel Agents Federation of India (TAFI) annual conferences. So I am particularly happy that my visit to India coincided with this opportunity. The 79,000 IATA accredited travel agents around the globe are the link between airlines and many of their customers. You are our customers for services ranging from training to the Billing and Settlement Plan (BSP) system. And you are important partners in the business of delivering connectivity. It is important that we invest the time together to understand our respective challenges better and to strengthen our important relationship.
This is a special year for IATA. After marking the first century of commercial aviation in 2014, this year we are celebrating 70 years of airlines working together through IATA to create value. In April 1945 the leaders of 57 airlines came together in Havana, Cuba, to form IATA. The goals of the Association were clear. IATA was to benefit the peoples of the world and foster commerce by promoting safe, efficient, and economical air transport.
The tag line for our 70th anniversary celebration is “Flying better. Together.” That reminds us of the fact that IATA was created to be a forum for collaboration and partnership and a vehicle to support the development of the standards necessary to the safe and efficient operation of the global air transport network. At the core of that activity are our 260 member airlines. But aviation is a team effort. And the “Flying better. Together” tag line recognizes work that we have done with the agent community over the past seven decades.
Aviation today is very different to when we were formed. This year airlines will carry as many people in a day as traveled by air in the entire year of 1945. And the industry has evolved into a job creation machine, employing 56 million people across its value chain—and countless millions more if you include all the jobs that depend on air connectivity to access global markets.
Aviation in India
India is no exception. We can trace nearly 7 million Indian jobs directly to aviation and aviation-related tourism which contributes in excess of $23 billion to India’s economy. Despite the great value that is created by aviation in India, the industry here is still struggling. There have been improvements and some Indian airlines are generating a profit. But collective losses are still expected to exceed $1 billion this year.
Reflecting the importance that IATA places on India, prior to joining you here in Mumbai, I was in Delhi reinforcing partnerships with the government as well as our partners in the value chain. We are very excited about the government’s commitment to make it easier to do business in India. I proposed to the Minister for Civil Aviation that we work together to make aviation a model sector demonstrating that India is an easy place to do business. But in order to do that we have a long list of items to overcome, including addressing crippling taxation, high costs, many infrastructure issues and onerous regulation.
All of this has to be achieved in line with global standards and in accordance with the principles of smarter regulation. This simply means taking a business-like approach to regulation that is implemented after meaningful consultation and which is targeted to solve identified problems, proportional to the desired outcome, and the result of rigorous cost/benefit analysis.
I am hopeful that the much-anticipated aviation policy which the government is due to publish for consultation in the near future will be a major step forward. There is great hope that the policy will help lay the foundations on which Indian aviation will flourish as it develops into the world’s third largest aviation market by 2029. IATA is, of course, committed to working in partnership with the government to make it successful.
I also hope that the new policy will have a strong focus on using technology to support global standard best practices. You would expect nothing less in a technology-rich country such as India. And that would help us to meet customer demands by moving forward the Fast Travel initiative here. According to our 2014 Global Passenger Survey, nearly 75% of air travelers would prefer to check in automatically or via a text message from their airline. Only 15% prefer to receive their boarding passes from an agent at an airport check-in counter. In the event of a travel disruption, 60% of travelers would prefer to be informed and offered new booking options via a kiosk or the internet or sent a new boarding pass electronically.
The Fast Travel initiative responds to these demands through six time-saving, self-service options including self-check-in and/or automatic check-in, self-bag tagging and self-boarding and automatic rebooking. And by the end of this year we aim to have this suite of services available to 35% of all travelers—increasing to 80% by 2020. That will be certainly be challenging, but the momentum is building with each new person who experiences the convenience of the program.
Maybe you are like me – I wondered at first how well online check in would work. Now I expect to use it every time and am surprised if it is not available and I have to wait until I get to the airport counter. And even though we only converted to 100% e-tickets in 2008, it is difficult to recall what travel with paper tickets was like.
There is plenty of opportunity to introduce process automation and self-service options at Indian airports. Certainly the expectations of those who have traveled outside of India will have been raised. And there are automated ways to work with mobile boarding passes to manage what is achieved through the multiple stamping of boarding documents at India’s airports today.
We are also trying to address two other areas where passengers are demanding change—baggage mishandling and security.
- Travelers want their luggage to arrive with them. That’s always been our goal, but mishandling does happen. We worked hard over the last decade to cut the mishandled baggage rate in half. And with our InBag program we are working with airports and airline partners to further reduce mishandled bags to less than one bag in every 250.
- Travelers also want a better security experience. They understand the need for tight security procedures but want the process to be more efficient and less intrusive. Our Smart Security initiative in partnership with the Airports Council International aims to improve security and remove the hassle, so that passengers proceed through security checkpoints with a minimum of queuing and disrobing. With Smart Security, resources will be allocated based on risk, and airport facilities will be optimized. A key driver of this is the known traveler programs that we see in the US and elsewhere.
My hope that we can progress these areas in India is encouraged by the recent simplification of visa categories and the introduction of the e-tourist visa system which are major positive developments. There is scope to go even further in streamlining the process. But even as it stands now, this is a major change to a long-entrenched process. That tells me that with political will, even more change is possible—especially with a government that is focused on making it easier to do business.
I’d like to spend the last part of my remarks focusing on changes that are even closer to home for travel agents---with New Distribution Capability (NDC) and the evolution of Industry Settlement Systems (ISS), including the BSP, in which you all participate. I know that you have heard some of this already from the IATA team. These are key initiatives. So please indulge any repetition in my remarks.
Today’s travelers live in a world in which almost anything can have an element of personalization. Online shoppers are used to having options suggested to them based on what they are buying and information that they have chosen to share. When buying travel through an agent, however, choices are limited. But there is growing evidence that consumer desires are evolving.
Options such as onboard food and beverages, checked baggage, premium seat assignments, and early boarding contributed to the estimated $38.1 billion in airline ancillary revenues in 2014, according to research by IdeaWorks Company and CarTrawler. But you will know better than me that as agents you have access to sell only a small portion of the innovations and ancillary products that are being developed—even though agents account for about 60% of the value of all travel sold.
Our global research shows that most of the ancillaries on tickets purchased through agents are actually sold via the airline’s website. That’s where the most detailed information is for options such as seats with extra legroom, lounge access, or expedited boarding. Because agents—including online travel agents—don’t have easy access to this information, it is difficult for you to help your customers to compare airline offerings beyond the basic schedule and fare. And as airlines add to the capabilities on their own websites, the gap is widening.
IATA’s NDC is intended to address this issue by creating the standards that will make it possible to equip you with more information to better serve your clients.
There has been considerable misinformation circulating about NDC. Let me clear up some common misperceptions. NDC is not a system or a product. And it is not something that is competing with traditional distribution system providers. It is an industry-led initiative for the development and voluntary market adoption of a new, XML-based (internet language) data transmission standard for communications between airlines and travel agents. As such, it replaces the pre-internet standard common today. Furthermore, it is an open standard, available for all to use. While some global distribution systems (GDSs) have already begun to use some XML-based communication protocols, they have each developed these using proprietary standards rather than the open global standard offered by NDC.
If that sounds complicated, let me simplify. NDC is a standard - developed for building content rich applications that will help you service your customers better. How? By giving you the potential access to richer content--pictures, fuller product descriptions, prices that could even take into consideration a traveler’s status in airline loyalty programs. In short, all of which you will find on an individual airline’s website, but with the ability to compare full offers from different airlines transparently.
Let me also add that this will only happen with market adoption. IATA is leading the development of the standard. But it is only coming to life through the voluntary adoption by participants in the value chain who see its value as worth investing in.
I know that some of you have concerns about NDC and its impact on your business. That’s understandable. Any change brings uncertainty. But NDC is a change for the better. Travel agency distribution needs to be modernized to take advantage of the opportunities offered by internet-based retailing. If not, it risks being bypassed in favor of other channels that do offer these opportunities.
Let me highlight recent progress. Over the past 20 months or so we have reached out to our partners in the travel value chain to provide greater understanding and clarity as to the purpose of NDC. Engaging in this dialogue is building comfort with the program and support for its success. For example:
- At the World Passenger Symposium last October, all three major GDS companies--Amadeus, Travelport and Sabre-- endorsed NDC and said they would use the NDC standard if their airline partners asked them to.
- In China, Hainan and Shandong airlines, in partnership with TravelSky, the China-based GDS, also introduced the NDC Standard.
- Last December we announced an agreement with a coalition of national travel agent associations (which includes TAFI), to look at options that could benefit travel agents as the industry transitions to NDC.
Interest among airlines and technology partners continues to rise. Over the last two and a half years sixteen airlines have helped to move NDC forward through pilot projects, tests and deployment of certain elements of the standard and during our Annual General Meeting four weeks ago, a further eight airlines announced their intention to pilot or to deploy NDC this year. For example, Qatar Airways in partnership with Amadeus, will showcase its premium product across all cabins through travel agents. We continue to seek participants for NDC pilots in the travel agent and corporate travel communities. I am sure Yanik Hoyles, who spoke this afternoon, would be happy to discuss this with any party that is interested.
We are seeking to get as many companies involved in NDC as possible. While we have every confidence in the abilities of existing players, IATA has also partnered with Travel Capitalist Ventures, a leading travel-focused investment firm, to create the NDC Innovation Fund. This fund will support innovation in airline distribution by investing in small- and medium-sized companies seeking to develop solutions which support airlines and agents as they leverage the enhanced distribution capabilities enabled by the NDC standard.
NDC is not the only improvement in distribution that we have achieved. We have modernized back-office functions associated with airline merchandizing. This has been achieved through the IATA e-Services project that eliminated paper from the process and created a standard electronic record, the Electronic Miscellaneous Document (EMD) to account for the sale of ancillary products. Passengers benefit because EMDs enable simpler billing, delivery, and accounting for ancillary purchases.
While the EMD project is a great example of success in modernizing business processes, as I said earlier, any change is a cause for uncertainty. I hope that you will agree that NDC is a much-needed change for the better. We did not do a good job of engaging the agent community when we launched the NDC initiative. We have learned from that and have made progress in building partnerships for support. That’s not a one-off activity.
We look forward to continuing the engagement as development continues and I hope that we can count on your active support. By that I mean engaging in forums like this, challenging us when things are not going right, and working with us to prepare a better future for airline distribution.
Modernizing Financial Systems
As we work together to meet travelers’ rising expectations we must also be alert to ways in which we can modernize our own systems and processes so that they are as safe, efficient and flexible as can be. One area where we are doing a lot of thinking is the Industry Settlement Systems including BSP.
The BSP has delivered enormous value to the industry by facilitating distribution and settlement of funds between travel agents and airlines since it was created in the 1970s. Last year, it processed almost $256 billion with 99.98% on-time settlement—and thank you for that!
A few years ago we restructured service delivery by consolidating activities in hubs, with Singapore taking on responsibility for India. That was a much needed change to improve financial controls that safeguard the industry’s money. It should have been a seamless process from the perspective of agents. I know that there were some teething problems at the beginning. I hope that is behind us now. Thank you for your support in the process.
Being the organization that is the custodian of such a large and important financial system necessitates that we function based on the guidance of well-thought out rules. Sometimes that means making difficult decisions in everyone’s interest. But we fundamentally see the BSP as a customer service organization. Our aim is to provide our airline and agent customers with an efficient, effective and non-bureaucratic service. Our customer-satisfaction reports show improvements. And I am confident that you will let us know if and when we are failing to meet your expectations.
The BSP is essential. You could not imagine the industry functioning without it. I often say, if it did not exist, we would have to invent it. But like all things, it exists in a changing world. Its rules were established decades ago using a one-size-fits all approach. But the users of the system come in different sizes and shapes. We need to re-think our systems to address the different needs, concerns and risks faced by airlines and agents today. This is our NewGen ISS initiative which aims to meet evolving needs of agents and airlines by creating a faster environment with safer and easier governance and accreditation practices that deliver relevant solutions.
This is still very much a work-in-progress. But let me share with you at a conceptual level some ideas which I hope will demonstrate the value that we are trying to create. We are looking at a range of accreditation models so that agents can choose which model is relevant to their business needs. With different accreditation models should come different risk levels for agents with risk management processes that fit the agent’s specific risk profile. And recognizing the popularity of developments such as PayPal and Apple Pay we are also looking at new forms of payment. And in parallel we are also conducting a feasibility study on a global insurance solution that aims to offer a more standardized and open financial security option for agents and better protection for airlines.
The project is still in the developmental stage but I hope you will agree that these are exciting developments that will bring more value to the BSP for the travel agent and airline communities. I do promise that we will share information on progress as it becomes available.
And lastly, I will close by reflecting on the great opportunity that is India. I am nearing the end of my India visit and I must say that, as with previous visits, I am impressed by the potential of this market. It is a big country, a big population and undeniably a big future. Travel agents will play a key role in that future. You will be critical partners as aviation in India develops towards the 2029 milestone when it will become the world’s third latest aviation market.
IATA is a committed partner in that process. Our ties to India go right back to our formation. Indian National Airways was among our founding airlines and TATA Air Lines attended our first AGM. The legacy of both companies lives on in Air India which is an IATA member, along with Jet Airways. We are proud to have some 4,000 IATA accredited travel agents across India and 80 IATA accredited training centers across the country. And we have resources available for you through the IATA India local offices in Mumbai and Delhi, at our regional office in Singapore and with the full support of our resources in Geneva and Montreal.
And as we mark IATA’s first 70 years I look forward working in partnership with TAAI, TAFI, our member airlines in India, the government, and the airports to ensure that aviation in India has a long and bright future…Flying Better. Together. Now I look forward to your questions.