Breaking Travel News

Breaking Travel News interview: IATA director general Tony Tyler

Breaking Travel News interview: IATA director general Tony Tyler

Tony Tyler became the sixth person to lead the International Air Transport Association when he took on the role of director general and chief executive 2011. With over three decades of airline industry experience, Tyler is a strong advocate for a safe, secure, efficient and sustainable global air transport industry. Here he talks to Breaking Travel News about the latest developments in the industry.

Breaking Travel News: IATA recently issued a series of robust data suggesting airline performance was improving in a challenging environment. Can you bring us up to date with where you think the industry stands at this time?

Tony Tyler: Robust is in the eye of the beholder. Last year airlines returned an estimated net profit of $6.7 billion.

Now, that may sound large, but that was on revenues of some $637 billion, which translates to a one per cent net profit margin. 

Not many would call that robust. But in view of the negative factors at work - high fuel prices, low global GDP growth and significant economic uncertainty - having generated any profit at all was a considerable achievement.

Turning to 2013, we expect much the same. Our latest forecast sees the industry net profit margin improving to 1.3 per cent. Europe will continue to be in the doldrums. Other parts of the world will see some modest improvements.

But continuing economic uncertainty coupled with high oil prices will continue to make the operating environment tough.

BTN: Which region excites you most when you consider the future of aviation? Do you feel the Middle East will continue to dominate growth, or will Asia gather momentum?

TT: Asia is still the emerging giant. Of the 831 million new passengers we foresee taking to the skies in the next five years, over 380 million of them will be in Asia-Pacific.

So in absolute terms, the region will increase its already leading share of world traffic.

The Middle East has been the outstanding growth story of the past several years, although its market share is still small compared to the Europe, North America or Asia.

There is a lot going on in the Americas.

Latin America has experienced rapid demand growth.

It has a rising middle class, some very dynamic airlines and a growing recognition on the part of some governments that unless major steps are taken to improve infrastructure, they will not fully reap the enormous benefits of connectivity that aviation can generate.

North America is the most mature market for aviation. Its progress on consolidation continues to be watched with much interest.

And I see renewed optimism in Africa.

New business models are emerging. The commitment to safety is strengthening. And international business interests continue to fuel traffic growth. It still faces enormous hurdles.

But there is a lot of good work being done.

That is a long way of saying that I see reasons for excitement in all parts of the world. I am passionate about aviation and the force for good that it is.

One of my key objectives at IATA is to get all of our stakeholders, particularly governments, to understand the enormous economic and social benefits of aviation. That aviation supports some 57 million jobs and $2.2 trillion in economic activity is well known.

But we need to help policy makers understand that there is much more below those top line numbers.

Aviation-enabled connectivity is a major economic driver in all parts of the world.

Without it, modern life would look very different. The more governments understand this, the more win-win policy decisions we can expect to emerge.

BTN: Do you feel there is any prospect of a Single European Sky being enacted in the near future? How far along the path do Functional Airspace Blocks take us?

TT: Unfortunately for European travellers and businesses, the Single European Sky remains much more of a concept than a reality.

We have not seen nearly as much progress as is required if aviation is to be able to play a bigger role in driving economic growth for the continent.

That’s why IATA, along with the Association of European Airlines and the European Regions Airline Association, recently published a report ‘A Blueprint for the Single European Sky’.

This outlined a possible way forward for SES, including rationalisation of air traffic control centres to not more than 40 Europe-wide (down from the current 63), and reducing the numbers of back-office staff to levels closer to those seen in the United States.

Steps like these would at least take us some way towards delivering the unit cost reduction targets of SES.

The Functional Airspace Blocks which were supposed to encourage airspace efficiency and cost reduction have not delivered so far.

There is an urgent need to look at an overall master plan for SES which will take us to the goals on cost, safety, capacity and environment.

BTN: With a series of mega-mergers already completed over the past few years, do you feel consolidation will continue to be the order of the day in the aviation sector?

TT: As airlines look to grow the networks and services they can offer their customers and achieve economies of scale, consolidation is a natural decision in any market that has reached a mature stage of development.

It is important that airlines be permitted to merge where it makes business sense to do so.

This is no different than any other industry, and in fact, the airline industry remains fragmented compared to many consumer-facing sectors.

That said, true cross-border consolidation has proven extremely difficult to achieve owing to the regulatory structure that governs international aviation.

We have seen some exceptions, such as in Latin America, where a more modern approach by regulators has enabled a number of cross-border deals including those of LAN and TAM and Avianca and TACA.

Changes in the structure of the industry are not confined to the Americas.

There has also been consolidation in European markets through merger and bankruptcy in both the network and point-to-point sectors.

And we are seeing the growth of multi-national carriers through franchising in the point-to-point sector in Asia Pacific and in Africa.

BTN: Can you bring us up to date with the implementation of a New Distribution Capability?

There has been a lot of confusion and dare I say misinformation about NDC. The first thing to make clear is that NDC is an IATA-led industry initiative to define a new messaging standard between airlines and travel agents.

IATA has a long and successful history of developing standards. Recent examples include standards for e-ticketing and e-freight, for example.

And just to be avoid any misinterpretation, NDC is an industry standard and therefore will never be a thing or a product of itself.

Developing the NDC standard will be good for travel agents. Why? Because it is intended to ensure that travel agents - who make up 60 per cent of the ticket-buying market - can market the full range of airline products which can be found on an airline’s own website.

Although the global distribution systems have tried to give agents greater flexibility, the legacy GDS model has made this extremely difficult, which is why you see airlines able to offer so many more travel options on their own sites, whereas the travel agent typically has a much narrower product offering from which to sell.

Developing the NDC standard will also be good for travellers.

We believe adoption of NDC will result in better-informed customers as airlines and third parties are able to display more information on flight options and services than is currently available through the indirect channel.

It will also enable comparison shopping among airlines, just like today, but with the full scope of the airline’s product offer, not just the base airfare. Adoption of NDC will permit travel shoppers to receive targeted, personalised offers regardless of distribution channel.

However, and despite reports to the contrary, no customer will have to provide personalised information to receive a fare quote - no different than the situation today

We are developing the standard with a lot of collaboration and input from all participants in the travel value chain including travel agents, agent associations, airlines, GDSs and other technology providers.

In terms of the status of the program, we are in the second year of the five-year roadmap.

Following a decision by the Passenger Distribution Group (the IATA airline steering group for NDC) we are negotiating with ATPCO for the use of Open Axis schemas as a basis of IATA’s NDC standard. Concurrent with this development, we have just sent out a call for participation on the NDC pilots.