APG World Connect 2014 – Pierre Jeanniot delivering the closing address

APG World Connect 2015 – Closing remarks

APG World Connect Conference
Marrakech, 28-30 October 2015

Ladies & Gentlemen

The hospitality we have been enjoying over the last few days illustrates rather well why Marrakech and Morocco have become the most popular destinations in the world!

This was clearly demonstrated by His Excellency Aziz Rabbab, the Minister of Transport and Infrastructure, who eloquently illustrated the importance of Morocco to tourism and international aviation.

We are indeed most grateful to the Minister and to Royal Air Maroc for their important contributions.

Marrakech has been a great setting for this Conference which, as usual, has provided an excellent combination of food for thought – as well as food for the pallet.
Jean-Louis was faced with a major crisis yesterday. We risked running out of champagne! Fortunately the problem was quickly fixed.


We enjoyed a review of the current geopolitical trends by one of the more famous world economists, Dominique Strass-Kahn, an astute observer of the more significant forces at play currently reshaping our geo-economic political landscape.

This re-shaping is driven by a transfer of global wealth and economic power from west to east – to China and India primarily, but not uniquely.

We were told that our economic problems are not yet behind us:

  • Europe will need to face up to some of its difficulties, and decide to pay for the Greek problems;
  • The market is still too optimistic and shows excessive volatility;
  • The BRIC countries all have problems, but India seems to be doing better;
  • Political unrest is likely to continue, particularly in Ukraine and in the Middle East.

On the brighter side, international travel and tourism will continue to be a major driver of world economic growth.

But for this to continue to grow, it will need to deal with three major challenges:

  • Open Skies;
  • Ownership;
  • Policies, namely on pricing and safety.

In much of the world, population growth will take place in Africa, Latin America and Asia, and migration will continue towards Europe and North America.

We will face new challenges in governance – and we are likely to face continued insecurity.
Dominique Strass-Khan then proceeded to conduct a very informative discussion with “three wise men” which were were not, of course, Melchior, Gaspar and Balthazar, but our own very own three wise men – Marc Rochet, Peter Morris and Richard Burgess.

Marc Rochet was convinced that despite the series of mergers and acquisitions, middle-sized airlines will always have a place.

They are closer to the customer, and have a role in geographic and different types of service niches.

They tend to be more responsible, are able to move more rapidly, and are forced to be more mindful of the bottom line.

They are very conscious of the need to be uncompromising when it comes to safety.

Peter Morris observed that the airline industry is very resilient. It has learned to adjust and survive many downturns in the economy.

He felt that alliances are useful but, he believed, more for the airlines – and that the benefits to the customer could be significantly improved.

He further observed that the economic centre of gravity for the airline industry was shifting to the Middle East.

Richard Burgess attempted to explain the complexity of fare structure, and why it had defied various attempts to simplify it.

He felt that, unfortunately, the full implementation of N.D.C. would not result in any simplifications – perhaps it could even lead to some increase in complexity.

Discussing the impact of social media on, for example, product distribution and merchandizing, he felt that much of that was hype and somewhat over-valued.

Concluding that first session, as we talked about economic trends with the “Euro stagnation”, the Greek crisis, the petroleum meltdown, and the Chinese financial crisis, we wondered whether instead of economists, perhaps we should have more psychiatrists!


On the “Open Sky” debate, the position of each side was clearly stated.

It was not the objective of this session to reconcile the various and diverging strategies. Much of it hinges on the possibly nebulous interpretation of “fairness”.

Originally, I believe it was intended to mean an equal and unrestricted access to each other’s markets – probably to be understood as “home market”.

But we also believe that the spirit of “open skies” was intended to have fairly unrestricted international competition.

Defining “fairness” may be as complicated as answering the question “How many angels can dance on the head of a pin?” (a well-known debate in the Middle Ages).

Royal Air Maroc described some of the “pros and cons” of their “Open Sky” agreement with the European Community, and agreement that they felt was not totally “fair” and needed to be re-addressed.

The ball is now back in the court of the various governments – and it will be interesting to see how it will be resolved.

Meanwhile, many African States still need to finally decide whether they want their national carriers to remain a highly controlled instrument of each government? – or do they wish to participate in the expansion of tourism and travel in general, by “opening the sky” and allow their various airlines to regroup and participate in the resulting growth?

Once again, the ball is in the hands of the various governments.

We were given an overview of the “Open Sky” situation by Esayas Woldemariam Hailu, the Managing Director of Ethiopian Airlines’ International Services.

Ethiopian, while 100% government owned, operates essentially as if it was non-government. It has been called “A capitalist success in a Marxist Ethiopia”.

It won the “Best Airline Award” from Air Transport World in 2014. It is probably the most profitable African Airline at this time, and operates to 83 international destinations.
Ethiopian is well positioned to benefit from an “Open Skies” policy in Africa.


In that session, we were told about the “Next Big Things”!

Frederic Vanhoutte of Eventiz predicted that

  • The sky will be populated by remotely controller aircraft – drones;
  • We will increasingly be using new, less polluting bio fuels;
  • Space travel will become affordable (Virgin Galactic); and
  • We will see the evolution of driverless taxis, such as the experiment currently underway in Japan.

Massimo Morin addressed Google’s travel development initiatives including applications which not only keep track of where you have been and tell you where you are going, but also suggests where you should go – and you did not even know you wanted to go there!


It would appear that the “distribution actors” of the global travel sector are finally singing from the N.D.C. page in relative harmony.

The level of understanding – and acceptance of N.D.C. – is miles on from where it was at this time last year!

All three major G.D.S.’s are now on Board with the N.D.C. standards – and philosophy. That is a very significant outcome!

We have heard from Amadeus, which reminded us that one needs to find a balance between adoption and flexibility.

But there is more work to be done. IATA released last month a survey of Global Corporate Travel Buyers, as you have heard, showing that a majority have yet to be fully convinced, and maintain a neutral position.

They have identified several points which they believe could impact their effectiveness in managing travel for their businesses.

For instance, buyers are increasingly having to respond to the decisions of the travellers, rather than focusing on the needs of their corporation.

The acceptance of N.D.C. standards is only the first step in a long journey.

Many airlines will require assistance to introduce “N.D.C. marketing” – or merchandising – and IATA is prepared to help.

IATA has come up with a number of activities for the airlines, and an N.D.C. “starter pack”.

And as you have heard from Sandrine, there is a lot that APG can do to assist small and medium-sized airlines to feel comfortable with N.D.C., and learn to take advantage of this new standard.

APG has developed a distribution platform.

And of course IATA, as you have heard from Carlson Wagon Lits, is also working with travel agents’ associations to understand – and address – their concerns. Productivity and benefits are key factors.

In a nutshell, N.D.C. is off to a very good start – but it is still work in progress.
There are a few remaining questions.


Consumers are becoming accustomed to customization – in banking, in dining, or in selecting a watching experience such as the personalized choice which Netflix is attempting to present to each of its customers.

In the same way, Google is personalizing travel.

It is about being able to define the product in a way that not only allows a great deal of differentiation, but eventually to be able to propose to a customer the products whose features are more likely to correspond to his or her interests.

At the end of the day, this conference is really about the customer, and how to best serve their needs.

In closing, and to all of you who have been such a great audience,

Thank you!

Pierre J Jeanniot, O.C., C.Q.
Director General Emeritus – IATA
President & CEO – Jinmag Inc.
October 2015

“Open Skies” or “Fair Skies”? That is the question


October 29, 2015 – Marrakech


“Open Skies” or “Fair Skies”? That is the question >

Moderator Pierre Jeanniot  >>

Having completed their respective consolidations, the three major U.S. airlines – namely United, Delta, and American – have been reaching a new height in profitability.

The profit forecast for the current year continues to be excellent, and some concerns are beginning to appear about what is starting to look like a comfortable oligopoly.

An immunized Joint Venture involving the major players of each of the three key alliances was in place and controlling a substantial portion of the trans-Atlantic traffic.

It was now time to renew the fleet – and finally reward the shareholders.

In Europe, the Lufthansa Group and the Air France/KLM Group are hoping to finally reach an agreement with their respective unions to expand low cost subsidiaries, which hopefully will contain the erosion of their domestic/European traffic caused by Ryan Air and Easy Jet , among others.

Lufthansa had an ambitious program in place for German Wings, and the Air France/KLM Group was anxious to obtain the green light to substantially grow TransAvia.

The International Airline Group (IAG), led by British Airways, had been the first to restructure by “right-sizing” Iberia and establishing a strong presence in the low costs game with the acquisition of Vueling.

One would have expected that some new stability would emerge for the airline industry, but this was not to be the case.


The Gulf Carriers’ Hub Strategy

Exploiting a strategic geographic position – or some other specific advantages, whether economic, historical or otherwise – is nothing new.

Venice took advantage of its strategic geographic position on the Adriatic sea, and the financial strength of its bankers, to control the trade between Europe and the Middle East during the 13th to the 15th centuries.

Genoa became a competing hub, and later on Amsterdam developed a dominant position in Northern Europe.

England, a state island, felt obligated to ensure that London would become a strong naval hub.

In more recent times – and looking at the commercial aviation side – KLM was probably the first airline to build an international aviation hub in Schiphol.

KLM was quite successful at growing its market well beyond its own home base.

KLM became a 6th freedom specialist, handling traffic flows from other countries to other countries through Amsterdam.

Singapore, an island state, exploited the same strategy, driving traffic from south-east Asia to Europe through Changi Airport.

It is therefore not surprising to see that both Singapore and the Netherlands were the first to welcome with open arms, and to adhere to the U.S.A. “open skies” type of bilateral – essentially because the “open skies” bilateral further facilitated the expansion of the 6th freedom strategies.

A decade ago, the Gulf Airlines’ 6th freedom traffic was not yet very significant and did not attract much attention.

However, their growth ambitions should have been fairly obvious, given the very large quantity of aircraft they were ordering.

Last year, the three Gulf airlines – together with Turkish Airlines which is following a similar strategy – carried a combined total of 115 million passengers.

The European legacy airlines began to lose an increasingly significant share of their long-haul market to Asia, which was being diverted through the Gulf airlines’ respective hubs.

Lufthansa believes that its Frankfurt hub has lost nearly a third of its market share on routes between Europe and Asia since 2005.

Emirates and Qatar Airways now serve some 32 destinations in Europe, and Turkish Airlines operates at 84 European airports.

Those carriers are in the process of adding many services to more points in Asia, and are expected to take an increasing share of the Europe to Asia traffic.

They are also increasingly providing good connectivity through their hubs to various points in India, and in the Eastern part of Africa.

The legacy European carriers’ initial attempt to draw attention to their perceived lack of “level playing field” was unsuccessful in bringing the E.U.’s attention to the matter, perhaps because:

  • These Gulf carriers were placing on order a huge amount of European-built airplanes, and
  • Europe was attempting to negotiate with the U.S.A. an air bilateral agreement which was trying to be even more liberal than “open sky” and would permit expanded foreign ownership.

And thus, on the basis of “if you can’t beat them, join them”, European carriers began to look for accommodations, if only reluctantly.

  • Air France/KLM declined to inject more funds into the restructuring of Alitalia, and instead tacitly accepted that, by default, Etihad would acquire a 25% commanding stake in Alitalia.
  • Air France/KLM, while maintaining a much reduced position in Alitalia, developed a series of code shares with Etihad – to protect their position.
  • The I.A.G. invited Qatar Airways to join “One World Alliance”, and Qatar purchased 9.99% of IAG’s stock.
  • More recently, Lufthansa formed a Joint Venture with Turkish Airlines called “Sun Express” for vacation destinations in Turkey and various Mediterranean and Middle East destinations.
  • The European Community had tacitly approved an investment of 49% by Etihad in Air Berlin and some 25% investment in Alitalia.

Additionally, the Swiss Civil Aviation Authority gave approval to a 33% stake of Etihad in “Darwin” which was rebranded Etihad Regional.

And then, choosing not to rely on its previous relationship with B.A., Qantas became a major partner of Emirates, choosing their hubs as the most appropriate way to connect with many European destinations.

However, having explored many of the opportunities in Europe, the Gulf carriers now turned their sights on North America.

Now they were ramping up their service to the U.S.A. – to the dismay of the major North American international carriers.


Claims of Unfair Competition

The U.S.A. coalition of airlines, a lobby group representing, primarily, the three major North American carriers – Delta, American, United, and their unions – released a document to back a report accusing the Gulf carriers of having received some 42 billion USD in assistance by their respective States over the past decades, and they alleged that this was only the “tip of the iceberg”.

Those benefits would include such things as:

  • Zero interest loans – with no arrangements for repayment;
  • Grants of land which could be regarded as subsidies;
  • Development of massive airports, built and paid by the State, and very cheap rent facilities and landing charges;
  • Low labor rates because the home state bans unions;
  • Low personal and corporate tax rates to promote the growth of business.

These three carriers were pressing the “White House” and the Department of State Transportation and Commerce, to revise or terminate the “Open Skies” air bilateral agreements with the United Arab Emirates (U.A.E.) and Qatar.

They claim that the extensive government support enjoyed by the Gulf carriers provides them with unfair advantages, and distorts competitiveness.

Not all the U.S. airlines support the attacks. Fedex – a major beneficiary of the U.S. “Open Skies”, and one of the world’s largest airlines – opposes any major change to the current “Open Skies” policy.

Fedex President/CEO, David Bronczek, wrote: “These U.S. passenger carriers do not fly extensively between foreign points like Fedex does. From its Dubai hub, a gateway into Africa, Fedex flights from the U.S. crisscross with our flights from India and Asia, in order to move U.S. products into local markets.”

The U.S. Travelers’ Association and several airlines such as Alaska, Hawaiian, and Jet Blue, have also indicated their opposition to any changes, and have signed a letter defending the Gulf carriers.

The U.S.-U.A.E. Business Council asked that Delta release for public review its study of the subsidies provided by the Gulf States to their airlines, and redirected public attention to its own 2013 “Study of the Impact of Open Skies on the U.S.-U.A.E. relationship”.

This study had identified that the impact of Open Skies on the U.S.-U.A.E. relationship was 16 billion USD and 200,000 manufacturing jobs, plus some 6 billion USD in increased inbound tourism.


Who is more subsidized?

Both sides have essentially made claims that their counterpart has benefitted from unfair financial support which has been distorting competition.

The Gulf carriers have responded vigorously to the U.S. major airlines’ allegations. Emirates has published a huge report which indicates that, contrary to these allegations, Emirates received only a total of 218 million US dollars in capital investment and has returned some 3.8 billion US dollars in dividend to the shareholder, while the U.S. carriers have received benefits of some 100 billion US dollars.

Ethiad has estimated that American Airlines, Delta, and United Airlines received 71.48 billion US dollars in government sanctioned “benefits and concessions”, which allowed the U.S. carriers to quickly progress from the “edge of bankruptcy” to being today among “the industry leaders”.

Referring to the current “Open Sky” air bilateral agreement between the U.S.A. and the Gulf States, Emirates points out that under the current agreement:

  • A capacity freeze would be a breach of the current bilateral.
  • Article 11 of the US/UAE Open Skies agreement – dealing with fair competition – contains no reference to subsidies.
  • Article 13, which deals with artificially low prices, does not mention any direct or indirect government subsidies or support.
  • Neither party shall take unilateral action.

Emirates currently serves ten U.S. destinations, and still plans to extend its operation to some twenty U.S. destinations in total.


European Majors Airlines echo their U.S. Counterparts

The U.S.A. Open Skies discussion had reached a stalemate on the question of foreign ownership some time ago, with the U.S.A. refusing to allow more foreign ownership.

In fact, the U.S. airlines appear quite comfortable with the current status quo, and their unions find themselves on the same page.

Thus no one in Washington wanted a change at this time – but the dramatic rise of the Gulf carriers was having an impact.

Stimulated by the position taken by the three major U.S. carriers with respect to the Gulf airlines, some European carriers decided to go back on the offensive, and asked their governments to intervene.

Both France and Germany’s Ministers of Transport have called for the European Commission to act in order to restore “fair competition with the airlines of the Gulf”, and called on the E.U. to adopt a common strategy to “put an end to those unfair practices”.

Austria, Belgium, the Netherlands, and Sweden supported the initiative.

The European Cockpit Association is calling the rise of the Gulf carriers “an unintended consequence of liberalization”.

The request is now for “fair skies” … not uniquely “open skies”.

The European Union will request a new mandate from Member States to the European Commissioner, Violeta Bulc, to negotiate with the Gulf Cooperation Council on Aviation Competition.

Some European airlines are asking for Europe to withhold traffic rights from Gulf carriers until further negotiations and a new Agreement is achieved between the E.U. and the Gulf States.

They are also requesting that financial support for European “quasi subsidiaries” such as Air Berlin and Alitalia – where Etihad holds a major stake – be subjected to European competition law.

The E.U. and the Gulf States have agreed to hold a round of talks by the end of 2015.


Strains on Alliances and Associations

The current situation has introduced some strained relations in both North America and Europe.

Alitalia and Air Berlin have terminated their membership in AEA. Both are affiliates of Etihad.

The International Airline Group (IAG) also withdrew its membership in AEA, citing significant differences in opinion.

Having left AEA, the International Airlines Group has now become a member of ELFAA – the European Low Fare Airlines’ Association.

Encouraged by important membership gains earlier this year, particularly the addition of the International Aviation Group, ELFAA went on a renewed offensive

  • Calling for rejection of the air traffic control price hike proposal;
  • Requesting improvements in airport charges;
  • Condemning the proposed extension of the Intra-EU only scope for E.T.S. (Energy Trading Scheme).



Initiative by the five largest EU Airline Group

The five largest European Airline Group – Air France/KLM, EasyJet, IAG, the Lufthansa Group, and Ryanair – met last summer and agreed to work together to lobby for the development of a new aviation strategy for Europe in response to the request for input by the new E.U. Transport Commissioner, Violeta Bulc.


These five airlines between them carried a total of 420 million passengers in 2014, accounting for half of the passenger journeys in Europe.


They also agreed that to have six airline organizations representing the airline industry in Brussels was not the most effective way, and agreed to explore possible forms of future representation, yet their action was ‘de facto’ creating another airline organization lobby group.


The five airlines identified a number of measures which would support the Commissioner’s objectives to enhance the competitiveness of the European air transport industry, support the growth of jobs across Europe, and help consumers by providing more flights and lower prices.


The group of five proposed the following:

  • Develop a simpler, more efficient regulatory structure;
  • Look at lowering the costs of the E.U. airports, and at ensuring that monopoly airports are effectively regulated;
  • Deliver reliable and efficient airspace by reducing the costs of ATC providers, and ensure that ATC strikes do not cause disruptions;
  • Stimulate the economy by removing passenger taxes – and unreasonable environmental taxes.


The group confirmed their support for several key principles – the most important, of course, being commitment to safety and safety standards.

They also reaffirmed their opposition to the provision of State aid to airlines and airports, and their support for balanced consumer rights.


Airport Council International -Europe

Referring to the ACI Europe 2015 Airport Industry Connectivity Report, ACI Europe at its last annual meeting stressed the need for the E.U. to place connectivity and consumers at the very heart of its new aviation strategy.

Adding its voice to the current debate, the President of ACI Europe stated: “Open Sky and fair competition need to go hand in hand, but airport and tourism organizations do not regard public financing of airport infrastructure, start-up aid for airlines, and more favorable fiscal regimes as necessarily involving unfair competition, but rather as legitimate economic development policy chosen mostly by the Gulf States”.


What about consumer interests?

These do not appear to be a central preoccupation in the current airline concerns. The requests for a “level playing field”, and for “fair and equal opportunity” to compete, do not seem to refer to the consumer.

The original force behind aviation deregulation was the need to satisfy consumer pressure. The consumers were clamoring for more choice and better prices, and it could only be satisfied if there was more freedom to participate in the market and allow the offering of different products and prices.

The growing importance of consumer interests replaced the need to protect the interests of national airlines.

But there are no reasons as to why the interest of the consumers and that of each local airline would not coincide!

The Gulf carriers took advantage of their geographic position between Europe and the many emerging economies, primarily in Asia, and the availability of new long-haul and efficient large airplanes.

The Gulf carriers have introduced a level of customer service which corresponds to their expectations – but would that have been commercially possible without financial support from their States?

Open Skies bilaterals were successful in opening up new markets – promoting competition and consumer choice.

Using the particular advantages of strategic geographic position and modern long-haul fleets, the Gulf carriers have provided European consumers with a convenient, one-stop service from Europe to many existing and new destinations primarily in Asia, but not uniquely.

The Gulf carriers are probably taking market share from the European carriers, but they are also most likely stimulating the market, and stimulating overall market growth.

Are the European and North American customers flying on Gulf carriers being subsidized indirectly by the Gulf States – if not by lower prices, by offering higher quality?

And would that be considered predatory?

Have the European carriers, previously owned by their respective States, been also in the past heavily subsidized as well?

IAG and British Airways would appear to have come to a way towards living with the situation.


What about Africa?

The question of “Open Skies” is also an important subject for other regions of the world, and specifically for African aviation.

The Yamoussoukro Declaration, signed in 1999, pledged its 44 signatories to establish an “Open Sky” regime across the continent.

But it was really never implemented.

Clearly, not all African governments see aviation as a national asset – nor a strategy of economic development, as is the case for the Gulf States.

Despite this apparent lack of interest by African nations, the latest passenger forecast by IATA for Africa nevertheless predicts that the Continent should enjoy the second highest rate of growth of the various regions, at 4.9% per annum.

But still today, some 80% of the intercontinental traffic between Africa and the rest of the world is controlled by non-African carriers.

The African Union has recently agreed on a Common African Civil Aviation Policy which proposes to adopt a united position in its dealings with the E.U.

However, this proposal is not binding on its members – and has not made much progress.

Meanwhile, there are a few hopeful signs.

Senegal has made a formal offer to South Africa suggesting that South African Airlines and Senegal Airlines take an equity stake in each other, and work towards a common restructuring program.

In December 2006, Morocco decided to join Europe’s Common Aviation Area. This led to a dramatic increase in traffic volume, with the European “low cost” airlines as Ryanair and EasyJet aggressively competing to increase their share of this market.

Morocco had signed an Open Sky with the U.S.A. in 2001, but it did not have a major impact on traffic growth.

Morocco now attracts more than 15 million visitors annually, which is a major success for the tourist industry. However, Royal Air Maroc considers that some of these “Open Skies” agreements are unbalanced and unfair, as they do not feel they have an equal opportunity to compete.

With the population of Africa expected to increase by 50% over the next 20 years, the potential for a large increase in the Middle Class is excellent.

If it finally comes into its own, Africa could follow a similar pattern to that which we have seen in Southeast Asia during the past 20 years.

But today, in most parts of Africa, we may have a case of no “Open Sky” … and no “Fair Skies”!


“Open Sky” in Asia

 A 10-member group of ASEAN and developing nations plan to achieve a single aviation market by December 31, 2015.


This is part of a broader ambition to create a comprehensive free-trade zone which, however, would not go as far as creating a border control free market such as the Schengen zone in Europe.


To become effective, the agreement requires a minimum of three States’ signatures.


And given the aviation policies of a few of those nations, this is likely to be achieved fairly quickly.


However, the “Open Sky” agreement would, of course, liberalize air transport and services between those signing countries only.


Any country having some concerns about the unequal competitiveness of their aviation industry may ask for a moratorium on various aspects of the Agreement.

Looking at the membership of the ASEAN nations` group, there are giants like Singapore Airlines, Thai Airlines, and Malaysian which have bilateral feeder agreements with major airlines all over the globe, and which could readily benefit from such “Open Sky ASEAN Agreement”.


On the other hand, many smaller airlines such as Philippines Airlines, Garuda, and Lion Air would likely be more fearful.


As such, the implementation of the “Open Sky Agreement” over the 10-member group of the ASEAN nations will be progressive.


Intra-ASEAN air travel will increase – but only gradually.


What about China?

While attention is being focused on the Gulf carriers, China’s airlines are in the process of overtaking the U.S. airlines on the China-North American market.

In summer 2015, China’s airlines for the first time are expected to carry more passengers than their U.S. counterparts between China and the U.S.A.

Their rapid rate of growth is expected to continue, and the increasingly dominant position of the Chinese airlines is likely to impact on the next round of bilateral air negotiations.

It would not be surprising to see the U.S. position no longer favor a full “Open Skies” Agreement, reflecting on their experience with the Gulf carriers, although the consumers’ associations and tourism bodies would continue to press for more liberalization.

The same situation is occurring on the China-Europe market.

The number of seats – weekly, one-way in August of 2015, according to the OAG – flown by Chinese carriers between China and Europe now exceeds the totality of the capacity offered by the European airlines combined.

And the rate of growth in capacity offered by the Chinese carriers continues to rank in the double and exceed by a factor of three the rate of growth of European airlines in that market.

This summer, 22 airlines connected China and Europe. Some 14 Chinese airports have direct links to Europe, and that number is expected to continue to grow.

In agreeing to more frequencies between China and Europe and the U.S.A. , should the European Community and the U.S.A. be concerned that the Chinese carriers are heavily supported by their governments?

Placing limits on “Open Skies” Agreements on the basis of government support – or `subsidies’ – is a 2-edged sword!

In North America, the cargo airlines – Fedex and UPS – are enjoying the world-wide benefits of Open Skies Agreements, and any retaliation imposed by the Gulf States could be very damaging to their operations.

On the question of fairness, what attitude should be taken with respect to the “fly American” directive which has long been a contentious issue?

This is clearly a policy which gives U.S. carriers a substantial financial advantage.

The question of expanding “open skies” with China was considered very important to the major U.S. carriers.

China’s airlines are hugely subsidized by Beijing, and if subsidies are inconsistent with “open skies”, expanding U.S. flights to China may not be possible – and neither would the lucrative joint venture over the Pacific.

Would limiting competition over the Atlantic trigger a re-opening of the approval of joint ventures?

One thing is clear. Governments, both in Europe and in U.S.A., have been asked to review air bilaterals with the Gulf States.

International travel and tourism is a major engine of economic growth.

The “Open Sky” type of bilateral has greatly facilitated – and accelerated – that growth. But, considering the current questions

  • What is fair airline competition?
  • What is fair for each country?
  • What is fair for the consumers?

the “Debate on Fairness” may prove most interesting.


Thank you

Pierre Jeanniot at Assad Kotaite Memorial

Assad Kotaite Memorial


Montreal, 27 February, 2015

“Man of Vision” – Address by Pierre J Jeanniot  >>

Minister, President of the Council, Secretary General, Distinguished Panelists, ladies and gentlemen.

I was one of the few people – I would venture to say – who felt comfortable to call Dr. Kotaite “Assad, my dear friend Assad”, and he always addressed me as “my friend Pierre”.

This was not an unusual situation but simply illustrative of the most cordial relations which always existed between us – and between ICAO and IATA.

The genesis of this relation goes back to the creation of the two organizations.

As all of us know, it was essentially the same people involved in the creation of ICAO in December 1944 who gave birth to IATA in April 1945.

The two institutions cooperated very closely over the years, recognizing each other’s strengths and achievements.

Indeed one of my predecessors at IATA, Knut Hammarskjold, received the prestigious Edward Warner Award from Dr. Kotaite at the IATA AGM in 198 in New Delhi.

Early in his career, Assad developed a very clear vision of the role that commercial aviation should play in the fulfillment of the ideals promulgated by the United Nations, where multilateralism would play a very central role.

First as the Representative of Lebanon to the UN meetings in New York, Assad had the opportunity to witness the great architects of multilateralism first hand, and quickly understood that by making direct contact at the highest level one could side-step the more formal organizational procedures.

He was impressed by the personal qualities of Dag Hammarskjold, the then U.N. Secretary General , who was devoting himself heart and soul to the pursuit of peace and cooperation around the world.

Assad was also very impressed by the Canadian Secretary of State for External Affairs, Lester B Pearson, who had served as President of the UN General Assembly and who played an important role in diffusing the Suez crisis.

Pearson subsequently set up the UN Peace Keeping Force, winning the Nobel Prize in 1957.

H.J. Symmington, who was President of Trans Canada Airlines from 1941-47 (later renamed Air Canada) alongside the Canadian Minister of Reconstruction, trade, Transport etc., C.D. Howe – often referred to the Minister of everything – were the Canadian delegates to the Chicago Convention which led to the foundation of IATA shortly thereafter.

All were great leaders in multilateralism and conciliation.

As a bright, young and highly educated Representative of Lebanon to the ICAO Council, Assad’s involvement with those architects of multilateralism helped him forge a clear vision of the role that ICAO needed to play – and indeed was to play – in the expansion of civil aviation throughout the world in a peaceful, conciliatory and balanced fashion.

Assad often quoted Miles Kahler, Professor of International Relations at the University of California in San Diego, who defined multilateralism as “the international governance of the many”.

He was too modest to add, that for multilateralism to succeed it needed to be guided by a very persuasive, articulate and informed visionary leader who was able to identify the kinds of compromises, give and take, required to achieve a consensus.

He believed that it is important to build trust and to understand the other point of view.

He believed that people are more inclined to accept and respect the views of those leaders who are known to them rather than the views of those that caused the initial confrontation.

The Chicago Convention did not describe in great detail the role and duties of the President of the Council, but it provided a fairly broad interpretation.

This gave Assad the latitude that he felt was required to play the role of “architect of multilateralism” to which he had always aspired.

As President, he was often called upon to de-escalate conflicts between contracting States and clearly redefine those conflicts.

In some cases, it was necessary to demilitarize them by dis-associating them from any non-aviation matters, thereby redirecting the focus of the Council back to the question of ensuring the safety and efficiency of civil aviation worldwide.

Examples of his astutely brilliant action are numerous, but in my view some of his more notorious were:

  • The opening up of the significant air corridors on the Bangkok-Danang-Hong Kong routes across the Indochina peninsula – and everywhere else in the entire Saigon Flight Information Region.

Some delicate negotiations were required to bring the newly-unified Vietnam into the ICAO family, and to demonstrate to the new Vietnamese government that in providing air traffic services they would be able to earn charges from airlines using those routes.

  •  The many conflicts that have plagued the Middle East region offered Assad Kotaite ample opportunity to play his conciliatory role, as well as promoting his vision of safety and evenly balanced commercial opportunities in aviation expansion.

The invasion of Kuwait by Iraq and the subsequent intervention by coalition forces led by the United States placed ICAO in several very delicate situations.

The skills of Dr. Kotaite played a crucial role in resolving a number of issues, particularly in orchestrating the return to Kuwait of the Kuwait Airline fleet.

The fleet had been hijacked by Iraq and subsequently held in Iran, which had hoped to keep those assets as part of an overall settlement of the Iraq/Iran war.

The vision of Assad in promoting the efficient, safe and constructive expansion of civil aviation led him to explore the benefits of satellite-based navigation systems, and to support strongly the development of the concept of FANS – Future Air Navigation Services.

He was quick to recognize the revolutionary potential of GPS and GLONASS to improve air navigation for commercial aircraft, which led to the development of standards for the use of satellite-based navigation.

He was able to deal successfully with the concerns of the Member States that these satellite navigation services offered by the U.S. and Russia independently could be turned off at will by those countries.

The conditions of use by civil aviation negotiated by ICAO provided sufficient guarantees of uninterrupted services.

Had FANS been fully exploited, would we still be looking for Malaysian Airlines MH 370?

Assad was involved already at that time with the territorial disputes over the South China Sea, which had complicated the realignment of Flight Information Regions over the South China Sea.

The Asia-Pacific region was already experiencing the most rapid growth in air traffic of any region worldwide.

As we have noted recently, there are still some lingering issues of jurisdiction over the tiny “Spratly Islands”, despite the very significant progress he was able to achieve in the region.

Resolving the air dispute between Cuba and the American government appeared to be an almost impossible task.

The U.S. government had taken the position that Cuba’s civil aircraft could not overfly the U.S., as they could be used for espionage purposes.

Assad tried very hard to find common ground between the two governments.

The route in question was Havana – Canada (Toronto and Montreal), and after many days of discussion and negotiation he was able to achieve a compromise which enabled Cubana de Aviacion aircraft to overfly American territory on a more efficient route agreed in detail by the U.S.

This saved each airline more than 600 miles on the Toronto-Havana route – and more than 300 nautical miles on the Montreal-Havana route.

Assad’s continuous concern about safety led him to propose, in 1998, the adoption by ICAO of the Universal Safety Oversight Audit Program which was designed to allow audits to be carried out by ICAO at ICAO’s initiative with the consent of the audited States.

Although some States were unwilling at the outset to comply with the standards, ICAO was finally able to convince all States to agree to their adoption – and by 1999 all the Member States had rallied.

Under his leadership, ICAO has worked assiduously to ensure `the safe and orderly growth of international civil aviation throughout the world`.

Khalil Gibran, one of Assad`s favourite poets, says in his book ‘The Prophet’:

“If you bake bread without heart, your bread will be bitter.

One has to put one`s heart in everything that one does.”

And Assad always put his heart in every negotiation and conciliation he carried out.

He always – and successfully -recognized the importance, indeed the critical importance of the human element in achieving satisfactory solutions.

His vision lives on, and will continue to guide us as the future unfolds and brings new challenges.


Thank you.


Pierre J Jeanniot, O.C., C.Q.

Director General Emeritus – IATA

APG World Connect 2014 – Pierre Jeanniot delivering the closing address

Association canadienne pour les Nations Unies – Grand Montreal – Pierre Jeanniot delivering the closing address


Association canadienne pour les Nations Unies – Grand Montreal
Montréal, le 19 novembre 2014

Allocution par Pierre J Jeanniot  >>

Mesdames … Messieurs …
Je suis évidemment très honoré de m’adresser aujourd’hui au chapitre Montréalais de l’Association Canadienne pour les Nations Unies.
Une Association d’ailleurs à laquelle j’adhère depuis plusieurs années.
Les Nations Unies sont une Association très importante mais pas toujours apprécie à juste valeur à cause peut-être de la lourdeur de ses mécanismes.
Il n’est certes pas facile d’harmoniser les opinions et les objectifs parfois divergents de l’ensemble des nations de notre planète.
Je comprends les difficultés que ce défi représente.
J’ai eu l’honneur pendant quelques dix années de diriger la destinée d’un organisme international qui représentait quelques 250 membres lignes aériennes.

L’Assemblée des Nations Unies avait décidé dès 1944 de créer un certain nombre d’organismes mondiaux qui auraient pour mission d’accomplir certains des objectifs qu’elle s’était fixées.
L’OACI était un de ceux-ci et je crois comprendre que son Secrétaire Général actuel Raymond Benjamin dans une de nos conférences l’an dernier vous a décrit son rôle et sans doute ses présents défis.
Brièvement vous vous rappellerez sans doute que l’OACI établie les règles et les procédures qui régissent les droits et la façon dont l’aviation civile opère mondialement.
Cela inclus la juridiction sur les espaces aériens les couloirs de navigation aériennes et un certain nombre de standards techniques pour la navigation la sûreté et la sécurité.
Lors de leur première réunion en décembre 1944 le groupe fondateur de l’OACI avait rapidement conclue qu’il y avait nécessité pour une autre organisation.
Celle-ci aurait pour mandat de développer des standards et normes opérationnelles et commerciales au-delà des compétences de l’OACI.
Il s’agit de compétences qui seraient beaucoup plus de ressort d’organisation commerciale et opérationnelle.
Ce qui a été concrétiser par la création de l’IATA – l’Association Internationale des Transporteurs Aériens.
La première rencontre de l’IATA a été lieu en Avril 1945 à la Havane à Cuba.
Il va sans dire que le Canada a joué un rôle majeur dans la création de ces deux organismes et au fait qu’elles avaient été établis à Montréal.
Je crois que le rôle primordial des Nations Unies est la préservation de la paix mondiale et de créer le climat et l’harmonisation qui facilitent la coexistence pacifique des peuples.
A cette fin l’aviation civile telle qu’encadré par l’OACI et jusqu’à un certain point l’IATA joue un rôle essentiel permettant d’accélérer la création de liens économiques, sociaux et culturelles.
Nous célébrons cette année le 100ème anniversaire du premier vol commercial.
En janvier 1914 un hydravion traversa la baie de Tampa en 23 minutes avec à son bord un premier passager payant.
La distance était de 34 kilomètres et le vol reliait St. Petersburg à Tampa en Floride.
Le service ne fut offert que pendant 4 mois.
Les lignes aériennes avaient déjà dès le départ des problèmes de rentabilité!
Aujourd’hui – 100 ans plus tard – mondialement les lignes aériennes transportent 8.5 millions de passagers à tous les jours.
Avec les réseaux de télécommunications internationales l’aviation civil est en train de créer le ‘Village Globale’ envisagé par Marshall McLuhan.
Aujourd’hui il est possible de rejoindre n’importe quel destination au monde en moins de 24 heures.

Donc l’aviation commerciale à 100 ans et j’ai eu la chance d’y participer pendant plus de la moitié de cette période.
Les défis que cette industrie a dû relever ont été nombreux et fréquent, et il m’a été suggère de vous entretenir de quelques-uns de ces défis auxquels le hasard a permis que je puisse contribuer à leurs résolutions.
(Je vous signale en passant que la biographie dont Jacqueline Cardinale du H.E.C. est l’auteure et ici présente couvre d’une façon beaucoup plus complète la plupart des anecdotes dont il sera question aujourd’hui.


Les écrasements d’avion sont spectaculaires et largement médiatises.
Ce sont toujours des événements douloureuses et ressenti par l’ensemble de la communauté des lignes aériennes.
Chaque accident est un accident de trop et bien qu’utopique nous partagerons tous l’objectif de faire tout en notre pouvoir pour bien comprendre la ou les causes de chaque accident afin de nous assurer qu’il ne se reproduise jamais.
Dans cette analyse détaillée de chaque accident la ‘Boîte Noire’ joue incontestablement un rôle important.
On m’a – et je crois abusément – affublé indûment du titre de ‘Père de la Boîte Noire’.
Une invention est rarement le fruit d’une seule et unique personne mais bien l’aboutissement de plusieurs développement et c’est certainement le cas de cette Boîte Noire ou l’enregistreuse de données de vol.
En anglais – Flight Data Recorder – F.D.R.
Dès la fin des années 1950 il existait aux États-Unis une petite enregistreuse de vol qui inscrivait sur une bande l’aluminium à l’aide d’un stylus de métal, six paramètres simples qui indiquent la vitesse, la direction du vol, l’altitude, l’heure, la marche des moteurs.
En 1958 la TCA – Trans Canada Airlines aujourd’hui Air Canada – avait installé dans ses appareils DC-8 et Vanguard une version de cette enregistreuse.
Malheureusement cette enregistreuse était trop souvent détruite lors d’un accident n’ayant pu résister à la force de l’impact ou aux méfaits des feux.
Dans les meilleurs des cas les traces sur la bande métallique étaient très difficiles à lire et à interpréter.
Ce fut la situation dans le cas de l’accident du DC-8 de Trans Canada Airlines à Ste Thérèse ou l’enregistreuse avait été totalement pulvérisée.
Deux enquêtes successive des plus exhaustives conduite avec la participation des meilleurs experts des diverse secteurs de l’aéronautique durent s’avouer vaincu.
Le rapport conclue à l’impossibilité d’établir la cause exacte de l’accident.
Parallèlement une firme Britannique avait convaincre T.C.A. d’acheter leur invention qui devait révolutionner la façon de faire de l’entretien des avions.
Elle proposait d’enregistrer la performance d’un certain nombre de systèmes importants et de faire une suivi afin de détecter toute détérioration de la performance et ainsi de faire de l’entretien préventif.
En principe c’était une idée merveilleuse mais malheureusement compte tenu du développement technologique à l’époque en pratique elle ne valait absolument rien.
Mon patron qui avait été séduit par l’invention m’avait chargé de l’installation de cette enregistreuse … et de développer son utilisation aux fins d’entretien préventif.
Je me suis rapidement aperçu que ce merveilleux système n’était pas fonctionnel pour des fins d’entretien préventif.
Sur un aller-retour Montréal-Vancouver de 12 heures de vol, la seule lecture de la bande enregistreuse pouvait prendre plusieurs heures sans compter qu’il fallait ensuite analyser en détail et établir des corrélations.
L’enregistreuse avait la capacité d’inscrire sur bande magnétique jusqu’ à 90 paramètres à toutes les 3 secondes.
L’enregistrement était analogique et à toute fin pratique aurait pris beaucoup trop de temps à déchiffrer.
Il va sans dire que mon rapport essuya un fort mauvais accueil de la part de mon patron ainsi que de la firme britannique qui avait développé le système.
C’est là que m’est venu l’idée de se servir de cette enregistreuse non pas pour l’entretien – mais pour l’analyse post-mortem d’un accident.
Il s’agissait d’assurer que les paramètres désiré soient les plus pertinent pour l’analyse d’un accident et que l’enregistrement survive à un écrasement.
Pour ce faire nous avons proposé un contenant pouvant résister à un impact de 1000G et une chaleur de 1800C pendant 20 minutes.
Ce que fut fait avec succès.
Nous avons ainsi développé la façon de faire toutes les lectures et les corrélations qui seraient utiles à l’analyse détaillées d’un accident.
Cette nouvelle version du ‘Flight Data Recorder’ est rapidement devenu la norme de l’industrie et pendant quelques deux années nous étions la seule installation qui pouvait faire l’analyse des résultats.
Nous l’avons ensuite cédé à Transport Canada.
Assez rapidement il fut décidé d’ajouter une deuxième enregistreuse cette fois désignée ‘Cockpit Voice Recorder’ ou C.V.R. qui enregistrait les bruits et conversations des pilots et tout autre personnel dont on entendrait la voix.
De l’enregistrement analogique de 90 paramètres – la ‘Flight Data Recorder’ – est passé à plus de 1200 paramètres en numérique et solid state.
Dans les derniers 40 ans le système a grandement contribué à élucider un bon nombre d’accidents.
Mais des événements récents et plus particulièrement cette année nous demande de réfléchir sur un certain nombre de lacunes qu’il faut combler.
Il s’agit évidemment de la disparition d’avion recemment celui de Malaysian Airlines et plus tôt il y a quelques 5 ans la disparition d’un vol d’Air France.

La sécurité aérienne a toujours été une de mes préoccupations principales et dès mon arrivé à la tête de l’IATA j’avais décidé d’en faire mon objectif numéro 1.
L’IATA ne s’était jamais officiellement préoccupe de la question; nous n’étions pas habilité à donner des certificats de navigabilité ou à imposer quelque contraintes techniques ou quoique ce soit.
Par contre le trafic international était en pleine croissance. Il était évident que si nous n’arrivions pas à diminuer le taux d’accident on en viendrait dans quelques années à déplorer un accident par semaine!
Cela ne me semblait tout simplement inacceptable!
Nous avions mis un groupe de travail sur pieds afin d’analyser les causes des divers catégories d’accidents.
Leurs natures, leurs causes, les régions, les types d’équipements etc., tout cela a été très révélateurs.
Cela nous a permis d’analyser plus profondément chaque catégorie et dans le mesure du possible d’établir des programmes qui s’adressaient à chaque catégorie.
En ce qui concernait les divers régions du globe le continent africaine était de loin le plus mauvais élève l’lorsqu’il s’agissait de sécurité aérienne.
Le taux d’accident en Afrique était de l’ordre de huit à dix fois supérieur à celui d’Europe et d’Amérique du nord.
Un pourcentage important de ces accidents était relié aux mauvais conditions d’infrastructure que ce soit les aéroports ou les services de navigation aériennes.
Nous avions catalogué un bon nombre de déficiences mais il était difficile de convaincre les divers gouvernements concernés à prendre la chose au sérieux.
Une occasion de faire bouger les choses se présenta quelques mois plus tard.
Le Président American ‘Bill Clinton’ venait d’annoncer un vaste programme visant à favoriser les échanges commerciaux entre les États-Unis et les pays subsahariens notamment le Ghana, le Sénégal et l’Afrique du Sud.
Des compagnies Américains tel que Delta et d’autres se montraient intéressées à des partages de code avec des lignes aériennes Africaines dans le but d’exploiter ce nouveau marché prometteur.
Cela nous donna une opportunité de mettre en évidence les lacunes en infrastructures du continent.
C’était durant le deuxième mandat de Bill Clinton et j’avais rencontré son nouveau Secrétaire d’État au Transport Rodney Slater, un Afro-Américain qui allait bien sur jouer un rôle important dans ce programme d’ouverture de marché.
Il nous fut facile de le convaincre qu’il était indispensable d’améliorer la sécurité des cieux Africains avant d’aller plus loin dans tout programme d’échange économique avec le continent noir.
J’ai donc décidé de détacher notre Directeur Régional pour l’Afrique, Sassy N’Diaye, pour qu’il accompagne Rodney Slater dans une tournée initiale du pays concernés afin d’identifier clairement les déficiences qu’il s’agissait d’éliminer.
Cette tournée largement inspirée par l’IATA donna naissance au programme « Safe Skies over Africa » dans le cadre du quel se furent signées des ententes qui stipulent l’installation d’équipement modernes et de mesures de sécurité adéquates comme condition ‘sine qua non’ pour tout pays d’Afrique intéressés à s’ouvrir au commerce avec les États-Unis.
Il va sans dire que ces installations d’équipements modernes et mesures de sécurités adéquates étaient largement ce que nous avions identifiés.
Dans sa tournée pan Africaine sur toutes les tribunes le Président Clinton terminait ses discours en soulevant la question de sécurité et se félicitait que les États-Unis avait fait preuve de vision afin d’aider les pays africains à améliorer leurs structures aériennes.
Le tout fut entériné par le Senat avec « l’Africa Trade Act ».
Trois ans plus tard huit pays Africains avaient largement éliminé les problèmes que nous avions identifiés.
Il s’agit de l’Angola, le Cameroun, le Cap Vert, la Cote d’Ivoire, le Kenya, le Mali, la Tanzanie et le Zimbabwe.
Nous étions évidemment satisfaits des résultats mais il restait encore beaucoup à faire.
Et même si les choses se sont grandement améliorer, le continent Africains continue à démontrer un taux d’accident bien supérieur à d’autres régions du globe.


Un des problèmes auquel se heurtent les lignes aériennes dans leurs activités internationales est le blocage de fonds.
Cela peut-être le résultat d’un embargo décrété par les Nations Unies tel que dans le cas de la Lybie à l’époque où celle-ci était soupçonner d’avoir orchestré l’attentat de Lockerbie.
Assez fréquemment il peut s’agir de manque de liquidité en devises étrangères nécessaire pour les échanges internationales.
J’avais d’ailleurs été confronté avec cette situation lors de l’ouverture du premier bureau de l’IATA en Chine en 1993.
À l’époque Pékin autorisait difficilement la sortie de devises hors du pays.
Dans ce cas particulier cela n’avait pas posé d’inconvénient, dans l’immédiat nous avions l’intention d’utiliser les fonds bloqués en les affectant à des opérations appelées ensemencements en attendant l’ouverture des canaux financiers.
Dans les années 90 le problème des fonds bloqués se présentait de façon important en Iran.
On se rappellera qu’en 1979 le Shah d’Iran s’était refugie aux États Unies suite à un coup d’état orchestré sans doute par l’Ayatollah Khomeiny depuis la France ou il s’était exilé.
La République Islamique fut proclamée et le régime en place favorisa l’instauration d’un gouvernement théocratique et le strict enseignement du Coran.
La même année l’anti-américanisme atteignait son paroxysme avec la prise d’otage à l’Ambassade des États- Unis.
En représailles les États Unies bloquaient les fonds Iraniens en terre Américaine et Iran décide de réagir en faisant de même à l’égard de toutes entreprises étrangères.
Après la mort de Khomeiny les nouveaux maîtres de l’Iran scellèrent d’avantage le pays en regard avec l’occident.
Les fonds des entreprises étrangères en Iran continuèrent d’être bloquées et les compagnies aériennes internationales ne furent pas épargnées.
Dans les années 90 les fonds bloqués appartenant aux membres de l’IATA se chiffraient aux alentours de 150 millions de dollars et ce chiffre était en croissance.
Des vols continuaient d’arriver à Téhéran en provenance de Paris, Zurich, Londres ou Frankfort mais les compagnies aériennes qui vendaient leurs billets en dollars américains ne pouvaient pas sortir leur argent d’Iran.
La situation économique n’aidait pas les choses pour l’Iran.
Le prix du pétrole n’atteignait plus les sommets précédents sur le marché international et la vente de tapis qui depuis toujours était une excellente source de devises étrangères avait chutés d’une façon notoire.
Pour essayer de compenser un manque de devises étrangères le gouvernement en place à voulu miser sur le tourisme.
J’avais fait quelques visites précédentes en Iran … sans grands succès d’ailleurs pour débloquer les fonds lors qu’Une invitation du Ministre des Transports vint de me donner une nouvelle opportunité.
Le gouvernement avait espéré augmenter le tourisme en augmentant le nombre d’aéroport et ainsi donner accès à de nouveaux sites d’intérêt.
Le Ministre des Transports avait pour mission de me persuader de l’importance de ces nouveaux sites touristiques et d’intéresser les lignes aériennes d’augmenter leurs vols.
Après quelques visites d’ouverture possible de nouvelles destinations prometteuses les discussions s’ouvrirent sur la question clef.
Honnêtement il me semblait extrêmement difficile d’inciter les lignes aériennes d’augmenter le nombre de leurs vols vers l’Iran alors qu’il leurs était impossible de rapatrier leurs argents et a un taux de change acceptable.
De fait il était fort probable que bien des lignes ariennes opérant en Iran se préparaient à diminuer leurs vols pour ne pas augmenter leurs fonds bloquées.
La discussion se déplacer rapidement sur un autre terrain et le gouverneur de la Banque d’Iran fut appelé à la rescousse.
La question était devenu : «Combien d’argent pourrait être débloquer – et à quel taux de change? »
Les négociateurs Iraniens accepteraient finalement de débloquer des fonds à la hauteur de 85% du total avec un taux de change qui protégeait la valeur au moment de l’achat du billet.
Je m’engageait à encourager les compagnies de l’IATA à augmenter leurs vols vers l’Iran en vue de favoriser le tourisme.
En retour d’un document qui s’engageait à libérer immédiatement les fonds bloqués auquel tous deux apposeraient leurs signatures au nom du gouvernement Iranien.
De retour à Genève alors que j’étais sur le point d’émettre un communique de presse pour annoncer la bonne nouvelle j’ai reçu un message urgent et top secret de la part du Ministre des Transports de l’IRAN.
Il m’indiquait que l’accord avait été refusé par le conseil des ministres qui s’était tenu la veille.
J’ai décidé d’ignorer ce message. J’ai convoqué la Presse et indiquer que j’avais en main un accord dûment signé par des représentants officiels du gouvernement Iranien autorisant le retour du fonds bloquées.
J’en profitait pour féliciter le gouvernement Iranien pour leur ouverture d’esprit et leur désir de voir le trafic touristique s’accroître vers leur pays.
Les media firent amplement écho à cette bonne nouvelle.
Pendant les 3 jours qui suivent je n’ai reçu aucune nouvelle de Téhéran. Puis au 4eme un message laconique qui confirmait officiellement que l’accord avec l’IATA serait respecté.
J’ai appris par ailleurs de source officieuse que le Ministre des transports et que le gouverneur de la Banque d’Iran avait été muté à d’autre poste administratif.
Le problème des fonds bloquées continue malheureusement aujourd’hui à causer des problèmes financiers aux lignes aériennes tel que l’on a pu voir récemment avec le Venezuela.


Dans les années 1990 toute la région de l’Asia-Pacifique s’ouvrait au monde et nombreux étaient les transporteurs désireux d’établir de nouvelles liaisons entre l’Europe, Singapour et Hong Kong ainsi que vers différentes villes du Japon de Taiwan et de la Corée du Sud ou même des Philippines et de l’Indonésie.
La même tendance s’observait en provenance de l’Amérique du Nord.
Dans les deux hémisphères les couloirs tracés au-dessus de l’Europe, du Moyen-Orient, de l’Atlantique et du Pacifique suffisaient à absorber les flots de vols mais pas partout.
La situation s’aggravait du fait de la Corée du Nord bloquait entièrement l’accès à l’espace aérien qu’elle contrôlait sauf aux compagnies de l’ancienne union soviétique et de la China communiste.
Tous les autres appareils d’où qu’ils viennent devaient obligatoirement éviter l’espace qui avait été placé sous sa juridiction en le contournant soit d’un cote soit de l’autre.
Les compagnies aériennes avaient manifesté leurs immenses frustrations à cet égard auprès l’IATA.
Les coûts associés à ces contournements devenaient considérables de l’ordre de 150 millions de dollars U.S. par année et il devenait important de trouver des solutions.
La situation comportait aussi une dimension politique délicate.
Depuis la fin de la guerre froide les dirigeants de la ‘République démocratique de Corée’ non seulement bloquait les moindre intrusions de leur espace aérien mais interdisaient de surcroît toute forme de communication entre la Corée du Nord et la Corée du Sud.
Alors que l’on réfléchissait sur la façon d’aborder la chose nous avons reçu une demande en provenance de la Corée du Nord pour permettre l’admission d’Air Koyo à l’IATA.
Le gouvernement du Nord Corée y voyait sans doute une forme de reconnaissance internationale.
Il y avait là une possibilité d’ouvrir une dialogue et d’entreprendre des négociations.
Par contre du point de vue de l’IATA il y avait dès le départ plusieurs problèmes importants qu’il nous fallait réglée.
Il nous fallait convaincre les militaires Nord-Coréens qu’il était possible de développer des couloirs aériens au-dessus de la Corée du Nord qui ne poseraient aucun risques pour leur défense territoriale.
Il nous fallait aussi nous assuré que l’espace aérien soit ouvert dans les conditions totalement sécuritaires.
Ors à cet égard le centre de contrôle de Pyongyang ne possédait malheureusement pas l’équipement nécessaire pour assurer un service de nivaux pleinement adéquats – ni pour la surveillance des couloirs aériens, ni pour les approches à l’aéroport.
Finalement un dernier obstacle semblait difficile à contourner: toutes communications entre les deux Corées étaient inacceptable de part et d’autre.
Pour faire passer les appareils de l’espace contrôler par Pyongyang à celui de Séoul les deux centres de contrôle doivent communiquer l’information sur les appareils au moment de changements de juridiction.
Remettant ce dernier obstacle à plus tard nous nous sommes penchés sur la question des déficiences techniques au centre de contrôle.
Il était évidemment bien connu que la Corée du Nord était à court de devises étrangères particulièrement de dollars américains.
Nous avons dû démontrer aux généraux de l’air Nord-Coréen que leur agence de navigation aérienne pourrait percevoir des redevances de survol et de droit d’atterrissage qui pourraient être une source importante de devises étrangères.
Évidemment l’IATA dès le départ contrôlerait les redevances afin d’assurer que l’équipement requis soit installer et que les contrôleurs Nord-Coréen reçoivent une formation adéquate.
Les deux parties en arrivèrent à un accord de principes.
Il restait quand même la question des communications entre les deux Corées qui demeurait strictement interdites!
Sur ce point … la Corée du Nord était intraitable.
Nous avons alors proposé une formule de compromis.
Nous avons offert que ce soit l’IATA qui installe et exploite des lignes téléphoniques entre Pyongyang et Séoul ce que permettrait à la Corée du Nord d’affirmé à la face du monde que la Corée du Nord n’avait établie aucun lien avec la Corée du Sud.
L’étape finale consistait à faire entériner l’entente par l’OACI.
Une fois les modalités négocier, régler et signer, l’OACI en accord avec les pays concernés qui avaient été sensibilisé par leurs lignes aériennes respectives ont rapidement entériné les modifications à l’espace aériens avec les nouveaux couloirs qui avaient été proposé.
Les économies annuelles de quelques 150 millions de dollars que nous avons ainsi obtenu en 1995 se chiffrerait aujourd’hui à 3 ou 4 fois ce montant.


Une des crises des plus importantes que l’aviation civile internationale a dû subir a été sans contredit les conséquences des attentats du 11 septembre 2001 qui détruisit les tours du « World Trade Center » de New York.
Les coûts réels qui découlent de cet événement diabolique ne seront probablement jamais totalement comptabilisé mais nous vivons aujourd’hui et probablement encore pour très longtemps les multiples inconvénients et tracasseries avec lesquels les voyageurs aériens doivent s’accommoder.
Nous avons eu à l’IATA la responsabilité de gérer une partie de cette crise et pour illustrer cette gestion je reprendrais la séquence des événements tels que nous l’avons vécu.
Le 11 septembre 2001 je travaillais à mon bureau de Genève lorsque un peu avant 15 heures trois heures de l’après-midi mon directeur des relations publics à l’IATA, William Gaillard, se précipite dans mon bureau pour m’annoncer qu’un avion d’une de nos compagnies aériennes membres d’une capacité de plus de 250 passagers venait de percuter une des tours du « World Trade Centre ».
Nous avons immédiatement rejoint notre salle de conférence doté d’un écran géant qui permettait de voir en direct les images provenant de CNN – la chaîne de télédiffusion de nouvelles internationales.
Il paraît que les cies d’assurance avaient évalué la probabilité qu’un avion commerciale gros porteur percute un édifice important dans un centre-ville a un sur un milliard.
C’était paraît-il le risque ultime.
Alors que nous étions en train d’observer l’horreur de cet accident on aperçoit un deuxième appareil qui vient directement se fracasser sur la deuxième tour de cet important complexe.
Il était 09 :03 heures à New York soit 16 minutes après le première accident.
Une probabilité d’un sur un milliard tend vers zéro mais qu’elle se produise deux fois de suite dans un si court laps de temps – il devenait évident qu’il ne s’agissait plus du fruit de hasard.
Après quelques instants de stupeur et constatant qu’il s’agit d’appareils de deux compagnies américaine dont American Airlines et United Airlines, nous avons immédiatement conclue à un attentat orchestré pas des terroristes.
Je suis donc immédiatement retourné à mon bureau avec William Gaillard et j’ai pris rapidement trois décisions.
Nous avons établi une cellule de crise à Genève pour coordonner, gérer et distribuer l’information.
William Gaillard pris la responsabilité de la diriger et d’entrer en rapport avec tous les directeurs des communications de nos membres.
J’ai ensuite téléphoné au siège de Montréal et contacté le Vice-Président des Affaires Techniques qui normalement assume les responsabilités pour les questions de sûreté et sécurité.
Lui aussi prit la responsabilité de contacter les Vice-Présidents ou Directeurs Techniques de toutes nos compagnies membres afin de les avertir qu’une cellule spéciale à Montréal s’occupera de coordination l’information ainsi que l’évolution des mesures additionnelles de sécurité et sûreté à la lumière des événements de New York.
Finalement dans les minutes qui suivirent j’ai rédigé un message à l’attention de tous les présidents de nos compagnies aériennes les avisant que de tout probabilité des terroristes attaquent des lignes américaines.
En conséquences il leur est fortement conseillé d’abord de resserrer les mesures de sécurité au sol pour tout ce qui touche leurs opérations.
Ils doivent encore être plus vigilants si ils partagent des codes avec des lignes américaines et il est recommandé de passer au niveau maximum de sécurité.
Dans le même message je mentionne les coordonnés des deux cellules de crises que nous venons de mettre sur pieds et les assure de l’appui de l’IATA en toutes circonstances.
À 9h17 la Federal Aviation Administration (FAA) l’organisme qui contrôle l’aviation civile aux États-Unis décide de fermer les aéroports de la région de New York.
À 9h26 la F.A.A. arrête tous les décollages d’avions civiles et décrète que tous avions se trouvant à quelques part dans le ciel américain doivent atterrir le plus tôt possible.
Il y avait à ce moment-là environ 4500 vols en cours.
Le choc s’amplifie à 9h43 lorsque le Pentagone symbole ultime de la puissance militaire des États-Unis fait aussi l’objet d’une attaque.
C’était un Boeing 737 d’American Airlines partit de l’aéroport de Washington Dulles à 8h10 avec 64 passagers à bord et il s’abîme sur la partie centrale de la façade ouest.
Finalement à 10h21 la F.A.A. ferme l’espace aérien américain et ordonne que les vols internationales en cours au-dessus de l’Atlantique atterrissent au Canada.
Un quatrième appareil venait de s’écraser dans un champ de Pennsylvanie. Il était destiné pour s’écraser sur la Maison Blanche.
Cette décision unilatérale des autorités américaines de fermer l’espace aérien a été prise en complète violation de toutes les règles et accords qui régissent la circulation aériennes autour de la planète.
Elle signifiait qu’il fallait détourner plus d’un millier d’avions de leurs trajectoires en plein vol au-dessus de l’océan.
Ceux qui n’avaient pas déjà atteint le point de non-retour pourraient se rediriger vers un aéroport Européen mais pour les autres il fallait les recevoir au Canada.
Il faut féliciter l’Agence Canadienne de Navigation Aérienne, NavCanada, qui a accomplie un travail formidable.
Qui a dû répartir rapidement les points d’atterrissages pour des centaines d’avions en prenant compte de leurs autonomies et de la capacité d’accueil des aéroports de l’est du Canada.
La population Canadienne Riveraines des aéroports a également accueilli les voyageurs avec beaucoup de chaleur leurs offrent de les héberger temporairement.
Pour les États-Unis d’Amérique un attentat d’une telle violence a eu l’effet comparable à mon avis à l’attaque Japonaise sur Pearl Harbour.
En Europe la réaction des pays diffère d’un pays à l’autre.
La France et l’Allemagne et les autres pays européens qui ont déjà été la cible d’attaques terroristes sur leurs sol voyait la situation comme un problème de sûreté.
C’était sérieux mais gérable.
Les Anglais adoptèrent une attitude plus alarmiste. Ils se sentaient plus visé. Le trafic entre le Royaume-Uni et les États-Unis était considérable.
J’étais administrateur de U.K. NATS, l’agence de Navigation Aérienne Britannique, qui venait d’être transformé en PPP « Public Private Partnership ».
La perte immédiate de plus de 10% des revenues avait des répercussions financières catastrophiques.
Pendant les 2 jours qui suivirent soit le 12 et 13 septembre l’espace aérien resta fermé je demandais aux Présidents des lignes nord-américaines de faire pression sur leur gouvernement pour ré-ouvrir le marché le plus rapidement possible.
Le trafic aérien américain représentait environ 35% des activités de l’aviation civil mondial.
Si l’on compte les liaisons depuis les États-Unis vers le reste du monde la proportion devenait près de 50%. L’impact économique mondial devenait considérable!
Le 15 septembre le gouvernement Américain décida d’autorisé leurs compagnies de recommencer à voler mais les lignes étrangères n’étaient toujours pas autorisées.
C’était à nouveaux en violation des règlements internationaux de la Convention de Chicago.
Il a fallu protester avec véhémence et essayer d’influencer le développement de mesures additionnelles de sécurité qui puissent satisfaire les États-Unis et être gérable internationalement.
Enfin moins d’une semaine après le 11 septembre la situation revenait à une presque normalité dans les corridors au-dessus de l’Atlantique.
Mais il restait encore le problème épineux des assurances sans lesquels il était difficile d’opérer.
Les compagnies d’assurances refusaient de fournir des protections.
Les États-Unis accommodaient leurs lignes aériennes. En Europe l’aide était partielle et fragmenter.
Après multiples discussions les assurances acceptaient de fournir une protection strictement minimale.
Graduellement la situation redevint normale mais nous avons tous subi des pertes considérables.


La tragédie de la Malaysian Airlines vol MH17 a soulève la question de l’évaluation des risques à survoler des zones où il se livre des combats.
Rappelons que les nations ont la pleine souveraineté de leurs espaces aériens et leurs centres de control du trafic aérien autorisent et guident tous appareils à travers leur espace aérien.
Mais en fin de compte la décision d’opérer ou de ne pas opérer un vol revient à chaque ligne aérienne.
À mon avis la situation est très claire.
Il y a malheureusement encore aujourd’hui une multitude de zones de conflits sur notre planète mais fort heureusement malgré cette prolifération de conflits il n’y a eu depuis 1970 – soit 44 ans – que 18 attentats visant à détruire un avion civil.
Il y a eu 3 attentats au moyen de missile air-air dont 2 ont causé une perte totale.
La troisième n’a causé que des dégâts mineurs.
Dans chaque cas il s’agissait d’une erreur d’identité donc une bavure.
En plus du MH17 récemment abattu ont compte deux autres appareils de ligne abattus pas des missiles sol-air.
Curieusement un de ces derniers s’agissait un avion Russe d’une ligne Sibérienne qui fait abattu accidentellement en 2001 au-dessus de la Mer Noire par un missile Ukrainien!

La grande majorité des attentats ont été perpétrer à l’aide de MANPADS – Man-Portable-Air-Defense-System.
Ce sont des missiles portatifs tiré par un fantassin à courte distance et dont la charge explosive est de moins d’un kilo et demi.
Toutes ces attaques ont eu lieu dans une zone de conflit et à proximité d’un aéroport.
La dernière attaque remonte à plus de 10 ans.
Ces petits missiles portatifs ont un rayon de 3 kms et une altitude maximale de 15,000 pieds.
La tragédie du MH17 de Malaysian Airlines a évidemment consterné immédiatement toute l’aviation internationale et l’OACI a aussitôt créer un Task Force avec les autres leaders de l’industrie.
Le ‘Task Force on Risks to Civil Aviation from Conflict Zones’ (T.F.R.C.Z.) a semble-t-il présenté un rapport préliminaire récemment au Conseil de l’OACI le 17 octobre 2014.
Deux projets ont été identifiés.
(1) Un premier visant à identifier comment le NOTAM – Notice to Airmen – qui est la façon usuelle de communiquer aux pilots des facteurs importants qui peuvent être d’intérêt pour leur vol peut être mieux adapté afin de communiquer une évaluation des risques à survoler une région comprise dans le plan de vol.

(2) Le deuxième projet vise à créer un système centralisé qui pourrait permettre de recueillir et partager très rapidement l’information afin que les bonnes personnes reçoivent l’information pertinente ponctuellement.

(3) L’OACI a projeté une réunion exceptionnelle en février 2015 afin de faire approuver les recommandations qui permettront de développer et dé implanter les systèmes et procédures requises.


Le deuxième problème majeur auquel les lignes aériennes ont dû faire face cette année est celui de la disparition inexplicable et inexpliqué du B.777.200 de Malaysian Airlines au-dessus de l’Océan Indien.
Pour nous tous il est inconcevable qu’une telle situation puisse se produire encore aujourd’hui et l’industrie des lignes aériens avec l’IATA dirige un autre Task Force afin d’y remédier.
Il existe aujourd’hui plusieurs constellations de satellites de communication qui pourraient contribuer à la solution.
Par exemple INMARSAT fait une suivie des navires de commerce et s’est offert d’aider.
Il y a aussi IRIDIUM qui pourrait fournir une certaine couverture.
Il y a aussi un certain nombre de satellites militaires.
Tout cela est à être revue afin de déterminer si il est possible d’avoir une couverture global qui rejoindrait toutes les parties du globe.
Aujourd’hui beaucoup d’avions particulièrement des gros porteurs sont équipée du système SATCOM qui permet la communication à partir de l’avion pour fin commercial et autres.
Cependant peu de compagnies opèrent ce système en continu en raison du coût de communication.
La plupart des vols aujourd’hui se font sur des routes aériennes qui sont suivi par une juridiction de navigation aérienne où une autre.
C’est en fait une minorité de vol qui survol un endroit où la couverture est en partie inexistante.
Le Task Force doit déterminer quel couverture sera requise et dans quelle région.
Il s’agira d’assurer pour ces vols exposés que des messages automatiques sur la position de l’appareil soient émis à courts intervalles.
Il y aura sans doute des recommandations à ce sujet qui seront formulé cette année.
Ce sera alors aux instances réglementaires et aux lignes aériennes de prendre leurs responsabilités.
Ces deux derniers défis soit la localisation en tout temps des appareils en vol et la question du survol des zones à risque vont modifier la façon de planifier les vols commerciaux ainsi que le suivi de ces vols en tout temps.


En conclusion et pour revenir à la case de départ il me semble évident que l’aviation civile internationale joue un rôle de support important aux Nations-Unies dans la recherche de la paix et de l’harmonie mondiale.
C’est le moteur de commerce mondiale et du tourisme internationale.
Les défis auxquels l’aviation internationale doit faire face sont nombreux et la manière dont certains des défis dont il a été question aujourd’hui illustre qu’il est important de demeurer vigilant et ouvert aux opportunités de régler le problème.
Il faut prendre la “balle au bond” lorsqu’un embryon de solution se présente.
J’espère que ces quelques anecdotes et description des défis typiques que rencontre l’aviation commerciale dans l’accomplissement de son rôle socio-économique vous ont donné un aperçu de l’atmosphère ‘tranquille et paisible’ dans lequel l’aviation commerciale opère d’un jour à l’autre.
En conclusion ce n’est peut-être pas un domaine qui enrichir les participants à quelques exceptions près mais c’est un domaine dans lequel il est très difficile de s’ennuyer!


APG Global Connect Conference, Monte Carlo

APG Global Connect Conference
Summary and Closing Address
Monte Carlo, October 29–31, 2014  >>

This conference has focused on the year 2020 and attempted to describe – to the best knowledge of the participants and their ability to influence it – the shape of the aviation industry more than five years hence and the type of distribution systems that may prevail at that time.

The economic forces, as one would expect, are a most important driver of aviation and of traffic flows.

Jean-Christophe Victor gave us a brilliant overview of what is likely to happen in each geopolitical region of the world, their various interactions and economic impact.

His broad observations were:
• We are living longer
• The middle class will be much larger
• The economic weight of nations will be different – India, Brazil, Indonesia, Turkey, etc. The economic centre is shifting.

The airplane manufacturers pay very close attention to such forecasts to produce their own estimates of how many airplanes of each type they are hoping to sell in each region.

Both major aircraft manufacturers have similar expectations. They differ only slightly, mostly on the number of very large airplanes that are likely to sell.

Their more recent forecasts suggest that the market, i.e. the traffic, will grow worldwide at 4.9 percent p.a.

But the growth between emerging markets is likely to be 6.8 percent p.a.

On the basis of these forecasts, the aircraft manufacturers would expect to sell some 7300 airplanes by 2020, of which:
• 36% would be for Asia-Pacific
• 20% for Europe
• 19% for North America
• 8% for Latin America
• 7% for Middle East

CIS countries and Africa would buy 4% and 3% respectively, and freighters would represent only 3%.

In looking at those forecasts – and the trillion dollars of investment that these acquisitions represent – any banker could be tempted to express a word of caution.

I am reminded of a proverb, an Arab proverb I believe, which says that

“Anyone who predicts the future is lying, even if he speaks the truth; and forecasting is always difficult, particularly when it concerns the future.”

That is because most forecasting models assume continuity of the situation that has existed up to the present time, and we are poorly equipped for anticipating any dis-continuity or major disruptions.

IATA reported that 3.1 billion people flew during 2013.

On the basis of a continued projected growth of approximately 5% per year on average, by 2020 we should be flying 4.6 billion passengers.

That year, the industry’s revenue should exceed 1 trillion US dollars. Of course, this assumes linearity of forecasts and no major dis-continuity such as an economic recession or major military conflict in an important region of the world, any of which could seriously impact – temporarily – the flow of business traffic and tourism.

Such events are largely unpredictable, but history teaches us that their occurrence can have a significant impact on the growth of our industry.

We had, in 2013, the best year ever in terms of aviation safety, with the least number of total losses and fatalities.

Almost everyone was anticipating – and hoping – that this trend would continue in 2014.

In less than six months we destroyed that illusion.

We were given a grim reminder that unpredictable events can occur and dramatically change our course of action.

Was that predictable?

In the past, looking at the future, it has been often fashionable to quote the Prophecies of Nostradamus.

Michael Nostradamus, a French apothecary from “Provence” and probably a monk, wrote in 1555 (465 years ago) a book called “Les Propheties”.

In this book, each block of four lines – called a “quatrain” – is an attempt to predict some event in the future.

In his book of Propheties, this is the “quatrain” we may have found which would relate to our current times:
“In the days of a holy man named Francis
The sky was brought down to a fiery end
The Middle East close to sinking in the abyss
And the evil forces were there to attend.”

A few months ago, the global aviation industry experienced a tragic week, in which three different commercial airlines suffered catastrophic incidents over a short period of time.

First, Malaysian Airlines flight MH17, a Boeing 777-200, was shot down by an air defense missile as it was flying over Ukrainian airspace on July 17.

Next, on July 23, a TransAsia ATR.72-600 crashed on one of the Taiwanese islands of Penghu while attempting to land in adverse weather conditions.

The third accident was an Air Algerie MD83 aircraft which crashed in very heavy rain/thunderstorm over Northern Mali on the way from Burkina Faso to Algiers. Indeed,

“The sky was brought down to a fiery end”.

We will leave out for the time being the mysterious disappearance earlier this year of Malaysian Flight MH370 – still unexplained!

I hate to think what would have been said if this Malaysian airplane had disappeared over the Bermuda triangle!

I will refrain from commenting on the second half of the Quatrain, which one can assume would refer to the extensive turmoil still taking place in the Middle East.

Back to the three tragedies which occurred in quick succession, and unfortunately caused more casualties than the industry suffered during the whole of 2013 (210 to be precise).

To provide some reassurance, IATA reminds us that 100,000 flights take to the sky and land safely every day – and that getting on an airplane is still one of the safest activities one can do.

As one of our esteemed and very experienced speakers, Jean-Paul Troadec – the former head of the French Bureau of Accident Investigation – has demonstrated, our capabilities of analyzing accidents from the remains of the black box, as well as from the remains of the aircraft, enable us to learn rapidly and to take measures to prevent further similar accidents.

At this point in time, the mystery of MH 370 remains unsolved and may remain so for a long time, although a new attempt is being made to locate the aircraft.

The events of this past year, each in its own way, are in the process of introducing some major changes to the airline industry over the next five years – changes that will redefine the tracking of airplanes and ensure that we will never again be unable to monitor the path being followed by an airplane, that path being a function of the normal oversight and guidance provided by the air traffic control authorities of the different regions and areas, assisted by satellite tracking.

The Malaysian airplane destroyed over Ukraine reminded the industry – very forcefully – that there are many war regions on our planet, and if we are to continue to overfly conflict zones we must have a much better understanding of the risks that are being faced, and of the capabilities of the weapons used by the insurgents.

Both of these events are in the process, over the next timeframe, of altering the operations of civil aircraft – where they will fly, and the flight path to be followed.

The recent breakout of the Ebola pandemic is another reminder that our international flights are important potential vehicles of propagation of viruses, and that traffic flows can be seriously affected by such serious health hazards.

Session 1 – Building the Product

In the partnership to deliver the transportation product, the airlines are the most visible – and often the ones to be blamed by the customer if anything does not come up to expectations.


Manufacturers have continued to improve fuel consumption and operating cost.

They are improving the cabin environment, working on the pressure differential, the lighting, the appearance of the cabin, and in making the washrooms more easily accessible to handicapped people – particularly those with reduced mobility. We need:
• To accelerate the development of new sources of fuel for airplanes
• New materials – new systems to permit real-time display of logos/ads on airplanes’ outside fuselage, and the ability to change them on line

Better Passenger Info and Connectivity

Francesco Violante reminded us of the impact of big data, the increasing use of biometrics, and of proximity sensing

Aircraft will be fully connected – cockpit as well as passengers

Air Traffic Control

Air traffic control is continuously working at improving capacity, minimizing delays, and it is taking on an additional role of providing advice on flight plans – whether the presence of volcanic ash or over-flying potential conflict zones, more specifically stressing:
• The importance of collaborative decision-making involving airports, airlines, and service providers, etc.
• The need to manage civil and military needs to optimize the use of airspace

Airlines: The Buck Stops Here

Gerry Ko stepped in to describe some of the issues faced by the airlines – the evolution of various models including alliances and joint ventures.

The end product is in the hands of the airlines, and their ability to communicate with the passenger is paramount in the travelers’ perception of the product.

Session 2 – Selling the Product

Distribution channels are continuing to evolve, with new players taking a role and existing channels adapting to new needs.

Now that all objections have been removed and that N.D.C. is proving its usefulness, we should expect wide acceptance by any new and legacy distribution systems.

The Future of Payments

The Universal Air Travel Card has been an important player on the travel scene for many years.

Ralph Kaiser provided us with an excellent overview of the future of payments and the current and future positioning of UATP, suggesting that airlines will increasingly focus on the cost of payment – acceptance by credit card (6%).

Newer Distribution Systems

Among the newer distribution systems coming on the scene, Orbitz was most interesting. We have heard from Juliana Hill the various features and strengths of their on-line travel agency, and the important role that IT plays.

Model the Future

We had also a good description of the model of the future and the important role played by ARC – and Mike Premo’s ability to survive a total power outage!

Finally, we have heard from Amadeus that the G.D.S.s are determined to have a future, that new models are being developed.

Heavens! Even Ryanair is now using G.D.S. to distribute some of its products.

Dave Doctor provided estimates that incremental revenues could add $130 billion by 2020 – if properly exploited.

You may remember that the Mayans, with their sophisticated calendar, had predicted the end of the travel agents – by December 2012.

Of course, the Mayan had predicted nothing less than the end of the world for December 2012!

As we have heard from Mike Premo, travel agents are not about to disappear.

Question: Will “big data” be the foundation that will drive loyalty and profit?

Session 3 – Best Ways to Profit

What about the elusive “best route to profit”? As we have heard, the ways to profit have many paths.

Aircraft Manufacturers; Airline Business Models

The aircraft manufacturers – specifically Airbus – over the next timeframe will contribute some significant operating cost reductions with their re-engined narrow body and their new, efficient wide-body savings.
• Market growth – developed vs developing
• New engines
• Seat width – discussion on comfort

Profit for a long-haul airline

Air Mauritius, a long-haul carrier, has been quite successful in developing its own particular “niche” market.

It illustrates how important it is to stick to what it knows best how to do.
• Beyond customer service, to concentrate on customer experience
• To satisfy customers’ expectation, leading to more profitability

Airport Contribution; Sustainable profit

Many airports – and C.D.G. is a good example – have taken much care to simplify getting through an airport, and to creating a pleasant and efficient environment.
• How to be a good partner?
• How to be more efficient?
• Objective – to thank – to help support airlines

Sustainable Financial Health

I was expecting IATA to state that the path to financial health would be with N.D.C. John Gallego suggested:
• We are in the airline industry for fun – not profit!
• Lower costs – higher load factors lead to lower fares, not better profit

The path to success must at all times be focused on the customer, ensuring that the product reflects best value for money.

The information provided to the customer must be done with clarity, transparency, and timeliness.

The distribution system – or process – is a vital link in the trust which must exist between the product … and the consumers.


Commercial aviation will continue to grow, and the long haul trend of +5% per annum is likely to hold.

The growth of traffic between developing economies is forecast to be 6.9% per annum.

But there will continue to be many challenges such as financial crises, regional conflicts, pandemics etc. which could temporarily affect the long term growth trends.

Over the next five years, more efficient airplanes such as the re-engined narrow bodies and the new-technology wide-bodies will help reduce operating costs – and hopefully improve profits.

Airlines’ business models will continue to evolve towards efficient forms of hybrids.

Airline product distribution systems are looking to harness new technologies, and better respond to customers’ diversified preferences.

And travel agents will not disappear! They will continue to adapt and provide a significant and efficient service.

Just as Dilbert, one of our favourite cartoon characters, recently told us:
“Certainty about the future is a sign of mental weakness.”

It is unwise to rely explicitly on any forecast.

Charles Darwin’s observations about the various species applies equally well to our industry:
“Survival depends on our ability to adapt.”

The general trends are useful and – hopefully – will be an appropriate guide to our respective business models.

But we should always keep in mind the need for contingencies and the flexibility required to adapt quickly should the future not unfold as we had originally expected.

One last word about this conference

As we wonder about the future, we asked our crystal ball “What do you see for “APG World Connect” down the road, in year 2020?”

The continuing presence of Jean-Louis and Sandrine!

Well, that is a familiar and reassuring sight – and not only to the producers of champagne!

Thank you

Pierre Jeanniot congratulated by André Leclerc, President, Kéroul

Pierre Jeanniot delivers keynote address at Destinations for All World Summit in Montreal

Access to the Future
Keynote Address at Destinations for All World Summit
Montreal, October 19–21, 2014  >>

Mr. co-chairs, distinguished participants, esteemed guests. Ladies and gentlemen, Mesdames et Messieurs:

This Conference is about freedom. Freedom of movement for anyone.
Freedom for everyone. Freedom from any form of discrimination and particularly freedom from discrimination resulting from any type of limitation – physical or otherwise.

Probably the most notorious of all “freedom fighters” was Mahatma Gandhi, whose non-violence movement and charismatic personality brought political freedom to India.

But freedom is an empty word unless a framework is built and the conditions exist that enable freedom to be fully exercised, to be fully enjoyed.

In India, that task fell to Nehru, who had become the first Prime Minister. Nehru had transformed himself from political activist and freedom fighter into nation builder.

Nehru had a dream, a dream to provide the basic essentials for his people, a dream to create the conditions under which everyone in India could live with dignity. He insisted on the term everyone! We can well understand how difficult it was to achieve such a dream in India, given the lingering presence – unfortunately still today in some quarters – of the “caste system”.

I suppose that one could trace the concept of human rights back to the “Magna Carta” which was signed in 1215, and probably long before that. The Americans – and, of course, the French Revolution among others – made major contributions to the advancement of the concept and the definition of human rights.

The United Nations at its meeting in Paris on December 10, 1948 established a set of international standards which were to be agreed by every nation, and would apply to everyone. Incidentally, Canada made a major contribution to the drafting of that declaration.

Among the many freedoms identified in that declaration – such as freedom of expression, freedom of religion and so on – are listed some freedoms of particular interest to this conference – freedom to move and travel as we wish, and freedom from any form of discrimination!

Pierre Jeanniot address at  Destinations for All World Summit

The United Nations decided to go further when it established, in 2006, a Committee on The Rights of Persons with Disabilities. The resulting Convention came into force in 2009 and has since been ratified by some 150 nations.

The purpose of that Convention is:

“to promote, protect, and ensure the full and equal enjoyment of all human rights and fundamental freedoms by all persons with disabilities”; and

“to promote respect for their individual dignity.”

It’s a great and noble statement. I find it a bit cold, somewhat remote, but nevertheless a great statement!

Who does this statement apply to? Who are we talking about? Who are all these people with disabilities? Who are these people that we need to treat with respect and individual dignity?

Well ladies and gentlemen, let’s look at ourselves in a mirror – and reflect on the current demographic trends. These demographic trends are very interesting, very revealing!

The good news is that we are all living longer, on average, and our life expectancy has grown considerably. Talk to people who manage pension plans for retirees about that!

The not-so-good news is that this increase in our lifespan often comes at the cost of some deterioration in our physical condition.

A research document on the issue of human rights for the federal government of Canada, completed in 2012, established the proportion of Canadians living with a disability in 2006 at 14%. At that time, this represented 4.4 million people. The document concluded that in light of the aging population, this number was growing rapidly! Approximately half of these persons had a motor impairment

If we extrapolate this worldwide, the number becomes considerable.

Let’s just take the number of airline passengers. We now have a situation in which an increasing number of people have the time to travel and, given the proliferation of low prices available, more and more people have the means to do so.

However these same people have an increasing number of diverse physical disabilities.

IATA at this year’s Annual General Meeting, informed us that 3.1 billion passengers were transported by the airlines in 2013.

If the conclusions of the Canadian study hold up internationally, this would mean, proportionately, that the number of air passengers with a disability would have been, in 2013, around 450 million, of which 225 million were with reduced mobility.

I grant you that this approximation lacks scientific rigour. However there’s no denying that serving such a market has huge economic potential!

We have clearly made remarkable progress in medicine, thanks to advances in biomechanics, robotics and cybernetics. More recently, research in direct neuronal interfaces- or brain-machine interfaces if you prefer – has been very promising.

All this allows us to envision new prostheses that could minimize the impact of our physical difficulties. Physical difficulties due to illness accidents or simply aging – that incurable disease that we all have! There are plans for new prostheses that should improve our hearing, our sight and allow us to walk with the assistance of robotic adaptations that obey commands from our brain.

Unfortunately, the day that all these marvelous possible and probable developments will available to all is still far in the future.

We must be aware of current realities. There is an urgent need to act to compensate for conditions that will continue to be with us for a long time to come.

ICAO was established by the Chicago Convention signed on December 7, 1944. In the context of this Summit I believe that the preamble of the Chicago Convention is most appropriate.

Allow me to quote a short excerpt.

“WHEREAS international civil aviation can greatly help to create and preserve friendship and understanding among the nations and peoples of the world” …

“THEREFORE the undersigned governments have agreed that international air transport services may be established on the basis of equality of opportunity, and operate soundly and economically.”

Incidentally the same people established IATA in April 1947, which has similar principles.

ICAO has made a thorough review of the issues that must be addressed to ensure that each stage of air travel is adapted to the needs of people with disabilities. This excellent set of recommendations to airlines, airports, and various agencies such as security customs immigration etc. are proposed to facilitate the clearance and transportation by air of any person with disabilities in a dignified manner.

This fairly extensive list of recommendations covers from reservation assistance (including seat selection) to moving through the airport, signage, information on arrivals and departures, check-in baggage assistance, security checks, boarding access to bridges and ramps, seat assignment, signage on board, availability and stowage of wheelchairs on board.

There is a need to give special attention to washrooms on all flights, and not uniquely on long haul and wide-body aircraft – although it is most certainly essential for airplanes that are designed to fly non-stop for thirteen to eighteen hours half-way around the globe!

Should we not identify seats closer to washrooms which could be allocated as a priority to handicapped travellers? These should be aisle seats with removable arm rests.

What guidance and support could be made available to assist a blind person in reaching a washroom and returning to his or her seat? And so on.

ICAO recommends appropriate training programs for all personnel involved in every step of a journey, training programs ensuring that all personnel are sensitive to the various types of disabilities and are able to adequately deal with each of those disabilities.

Particular care needs to be taken in the training requirements of crews when dealing with emergency procedures. Safety in air travel is our number one objective. It cannot be compromised!

Ensuring safety in the air at all times imposes a number of constraints on the operation of airlines. There are a number of necessary actions and conditions that must be carried out in the case of emergency, whether we are dealing with excessive turbulence, depressurization, or an emergency landing on land or water.

While these are – fortunately – infrequent events, we must at all times be in a position to ensure the safety of everyone on board – everyone, regardless of any disability.

To be fair and give credit where credit is due, we need to acknowledge that very real progress has already been made by the travel and tourism industry as a whole. There is much to be commended, and their efforts deserve to be recognized.

There is already a pictogram that clearly indicates which establishments, or mode of transportation, have the means – and the capacity – to welcome people with certain disabilities in a thoroughly satisfactory way, with dignity. Pictograms for people with limited mobility, hearing-impaired people, and blind people, have been around for some time.

Should we continue to go it alone? Or would it be desirable to create a new, international symbol grouping together these three main disabilities? A universal symbol that would indicate that all efforts have been made to compensate for motor and sensory disabilities – a symbol that is accepted, and recognized, by the international community.

Perhaps we could create a special award that could be given out each year to the most deserving company at a gala sponsored by a company that chooses to support the cause?

During the closing session of this World Summit, you will be invited to adopt a declaration. The “Montreal Declaration” will commit all of us to work towards ensuring that the objectives of this Summit are achieved as quickly as possible.

Among the international tourism players, air transport is one of the most important. The development of air transport continues to progress in a spectacular way. We can today carry up to 800 passengers aboard a wide-body aircraft, providing meal and bar service for all. Some airlines go so far as to feature deluxe cabins with showers – while carrying you halfway around the world in a single flight.

And yet despite these achievements, we have still not managed to make airplanes perfectly accessible to everyone. Major adjustments have been made in airports to welcome disabled persons and ensure their comfort – but much remains to be accomplished.

If it has not already been done, I would suggest that these excellent ICAO recommendations be made available to all airlines, airports, and governments.

Perhaps ACI and IATA would agree to include in their “passenger processing” facilitation programs a special section on the handling of passengers with handicaps.

The industry should set objectives and targets to achieve full compliance: implementation progress could be monitored by ACI and IATA in cooperation with ICAO.

It would be nice if the various government authorities were to review the situation of each of their agencies, and re-enforce those directives.
For instance, should agencies at airports provide a specific channel to more appropriately deal with disabled passengers?

In closing, ladies and gentlemen, it is also very important for the design of new aircraft, that the specifications provided by airlines to the manufacturers clearly stipulate the need to design and equip cabin space so as to accommodate – with dignity – the increasing number of disabled travellers.

If our famous aviator, Antoine de St. Exupéry, were still alive, he would no doubt have had an aging Little Prince say:

“Dear Mr. Aircraft Manufacturer, please draw me a plane

A plane that will allow me, who is now hard of hearing

And blind …

And with reduced mobility …

To enjoy the same privileges … as all other passengers …

And, like them, to be treated with dignity.”

Merci – Thank you!

Address at l’Institut de Formation Universitaire du Transport Aérien in Aix-en-Provence, France


> Airline Challenges – Current Strategies: A personal perspective

APG World Connect Conference, Washington D.C. Concluding Remarks

APG World Connect Conference – Concluding Remarks
Washington D.C., October 24–26, 2013  >>

Ladies and Gentlemen:

Once again, it appears that Jean-Louis has asked me to do the near impossible!

We have had two days of spirited – at times exciting – but always informative and most interesting debates and presentations.

Clearly, it would not do justice to the contributions to this conference to boil it down to a few words in ten minutes!

I will not attempt to do so (although a few highlights should be mentioned.)

So rather than a more elaborate summary, I will confine my remarks to a few observations.

The airline Distribution System needs to evolve … and it is evolving.

This conference has illustrated rather well what changes are occurring – or I should say, what changes are beginning to occur, since we are very much in a transition mode.

What will be the ultimate shape of this Distribution System?

How efficient – and useful – will it be?

This has some way to go to be clearly visible. It has been suggested that it may take four to six years!

It should be obvious that all the participants in the airline industry – be it airlines, G.D.S’s, travel agents, airports, perhaps as well as air navigation providers (although they were not present at this Conference) – all participants have a stake in these debates.

All those participants are interdependent, and they are to some extent linked through the Distribution System.

As the Distribution System evolves so is their relationship likely to evolve.

Common sense suggests that everyone should gain from better cooperation. Clearly, it should be a win-win for all participants.

Unfortunately for the legacy airlines, their lack of profitability has been most frustrating.

And the tendency has been, at times, for airlines to look beyond their own operations for reasons to explain their inadequate profit track record.

IATA has recently published another study on the “Profitability of the Air Transport Value Chain”.

This is the latest – and the third such study – but the main observations have not changed significantly from one study to another.

The study continues to indicate that airlines have the lowest returns of all the participants in their value chain. These include the manufacturers, the G.D.S’s , the airports, and the travel agents among others.

The study concluded that there were problems in the value chain – not too specific – but additional causes including inefficiently designed regulations, poor industry infrastructure, and commoditization of the airline product were identified.

Each sector of the industry managed to earn a higher return on capital
during every past business cycle, than the airlines.

Over the past forty years or so, the price of air transportation has dropped 60 percent in real dollar terms.

Over that period, load factors have increased from a world average of 55 percent, to 80 percent, aircraft utilization has gone from 8 hours a day to 10.5 hours a day, and fuel consumption per tonne/kilometer is now less than half.

But all the efficiency gains generated have been passed on to the consumer in terms of lower prices.

The airlines have shown tremendous generosity towards their customers – but investors have certainly not been privileged.

Investors in airlines have received a return on capital which, on average, has been USD 17 billion less every year than they would have earned by investing in another industry of similar risks.

It is somewhat ironic that the highest return on investment of any participant in the air transport chain is in the Distribution System.

More specifically, the Computer Reservation Systems (C.R.S.’s ) provided by the Global Distribution Systems (G.D.S.’s ) on average earn a very satisfactory 20 percent Return on Investment (R.O.I.).

And one should remember that the airlines created the C.R.S.s and subsequently decided to sell those very valuable functions!

Some 15 to 20 years ago – I was the Director General of IATA at the time – the cost of sale and distribution of the airline product had reached a level that exceeded 20 percent of total costs.

This included promotion, advertising, commissions to travel agents, loyalty programs, etc.

The airlines concluded that these costs were getting out of hand and needed to be addressed.

E-ticketing was introduced as a cost reduction measure.

Travel agent commission programs, with some of the “Super Commissions”, were an easy target.

In parallel, the growth of the Internet was having an impact, along with the rise of the “low-cost” carriers.

The success of the low-cost carriers in direct selling to the consumers using the internet was suggesting that large elements of the selling and distribution costs could be eliminated – or at least substantially reduced.

The legacy carriers were dragged into the ‘”low-cost game” rather unprepared, and unable to lower their costs sufficiently.

Of course, the perishable nature of aircraft seats and the low marginal cost of flying an additional passenger is certainly one of the reasons why prices often get below costs.

But selling at “low-cost fares” – and producing at legacy costs – was not likely to result in a profitable industry, even at peak load factors!

This was clearly not the road to achieving satisfactory profitability.

And the legacy airlines felt somewhat frustrated – and unfairly disadvantaged.
They were the ones “starving at the end of the food chain”!

Turning the airline product into a commodity is certainly the result of legacy airlines’ – perhaps unwilling – strategy to compete with the low-cost airlines.

Unfortunately, in my view, a strategy almost exclusively focused on price!

The airline industry needs to get back to better product segmentation, with options – all of which resulting from a better understanding of consumer needs and how to meet those various customers’ expectations.

The application of “Big Data” marketing shows some promise in individually targeting customers.

An improved Distribution System which better answers the customers’ needs and expectations – where all the participants have a proper role and a proper place – is what needs to evolve.

The result must lead to a better yield – and sustained profitability for everyone!

Thank you!

APG World Connect Conference, Washington D.C. Opening Address

The State of the Airline Industry – The Continuum of Change
Opening Address
Washington D.C., October 24–26, 2013  >>

Ladies and gentlemen:

It is nice to be meeting in Washington – a great city, and a beacon of democracy!

A city where the decision-making which takes place here has, at times, a huge potential impact on the entire world.

Many centuries ago when Rome was the seat of power, the common expression to illustrate its importance was that “all roads lead to Rome”.

Today, the electronic highways have taken over the role of linking the world.

And given the importance of this city, it may not be inappropriate to state that today all electronic highways – in some fashion – connect through Washington.

And thus it stands to reason that Washington is a natural choice for a conference to discuss the status – and the evolution – of the industry’s distribution system.

The electronic highway is of critical importance to travel, and to the airline world!

But before I go on, a disclaimer!

The views expressed here are strictly my own and do not necessarily reflect those of any companies or associations with which I am or have been associated.

10,000 Foot View

Once again, to paint the background against which airlines’ product distribution will be discussed over the next two days, it could be useful to take a 10,000 foot view of the airline industry.
And to take stock of the forces and the trends which are shaping its evolution.
The well-known periodical, the Economist, observed recently that the emerging markets – the so-called BRIC (Brazil, Russia, India and China) which have led the global economy for a decade- will no longer compensate for the weakness of the rich countries.
Collectively, these emerging markets – the BRIC – will barely match last year’s pace of 5 percent.
In the foreseeable future, growth is likely to be broader based, and include the ten next economies such as Turkey, Indonesia, Thailand, Mexico, etc.
These ten economies have a smaller combined population than China alone!
But we will achieve a more balanced growth from this broader array of countries, and it should cause smaller economic ripples around the world.
Looking at aviation, the latest ICAO forecast indicates that air traffic will remain relatively strong in the near term.
Passenger traffic is projected to increase 4.8 percent world-wide this year, and it will average approximately 6 percent for the following two years – more specifically in 2014 and 2015.
IATA remains optimistic that the airline industry will achieve a USD 11.7 billion profit this year, up from 7.6 billion US dollars in 2012.
The key driver is the industry’s load factor, which is expected to average 80.3 percent – an absolute record high.
Passenger yields are expected to grow a very modest 0.3 percent.
Although all regions are expected to show a profit in 2013 some, as one would expect , will be stronger than others.
Asia-Pacific will lead all regions with a margin of five percent. The main driver is the strong growth in China and in the region’s long haul market.
North American airlines’ profitability is expected to reach USD 4.4 billion. Here the main drivers are consolidation and efficiency measures.
Europe, where the economic conditions are the weakest , is expected to achieve a margin of 1.3 percent, although the market will grow 4 percent.
The fastest growing region remains the Middle East at 15 percent , while Latin America is next with a growth of 9.8 percent.
Unfortunately, African airlines will continue to be the weakest performers, with a margin of only one percent.
IATA notes that, worldwide, ancillary revenues are topping five percent, indicating that many airlines are trying to shore up their bottom lines with this source of revenue.

The Alliances

Are the alliances undergoing a significant transition?
Until recently, the Gulf carriers had stayed away from joining alliances – partly because, given their individual expansion strategies , they had no need for alliances to satisfy their growth expectations.
And partly because the hostility of the European legacy carriers – and their allegations that Gulf airlines enjoyed unfair advantages – would not have encouraged any form of partnership.
However , in the past year we have seen some significant shifts in attitudes on the part of both the legacy carriers and the Gulf airlines.
There is a growing understanding that the world economy is continuing to shift – and so are the traffic flows.
We are now seeing substantial traffic growing between various emerging countries, as well as traffic increasing between emerging countries and developed countries.
And thus, what is happening is not just about the Gulf carriers. It is about a re-alignment of business models to exploit and stimulate those traffic flows.
The legacy carriers, primarily European, are also adapting to this new market reality.
An example of this type of business re-alignment is illustrated by the alliance of Qantas and Emirates Airlines which, as one would expect, has had an impact on the “One World” Alliance.
But, in parallel, “One World” was successful in enticing Qatar Airways into joining their alliance.
The addition of Qatar Airways to “One World” is said to greatly facilitate the access of its members to several interesting Asia-African flows.
Etihad which, despite many delays and modifications by the Indian authorities has now been allowed to acquire a minority stake in Jet Airways, may have introduced some complication in Jet Airways’ previous attempts to join “Star Alliance”.
The situation becomes additionally confusing when one remembers that Etihad is a major shareholder in Air Berlin, itself a member of “One World”, while at the same time Etihad has a major commercial agreement with Air France-KLM , a leading player in “Sky Team”.
In South America , “Star Alliance” is well represented by AVIANCA, the second largest airline group in the region.

Seamless Air Travel

You will remember that the three global alliance airline groups have been promising “seamless travel” between members’ networks – but this has been little more than a marketing claim.
The fact of the matter is that the customer is still flying on multiple airlines with varying degrees of product quality, consistency, and communications practices.
True seamlessness remains more of a target than a fact, and unfortunately, as an alliance grows in numbers of airlines, the challenge of offering a consistent and quality product grows as well.

Regional Capsule: North America

With the merger of American Airlines and US Airways – at this time still opposed by the D.O.J. although it is a fair bet that it will be allowed – the U.S. commercial aviation landscape will have shrunk from six to three large mainline airlines.
When you also add the low-cost giant, Southwest Airlines which is now completing its integration of AirTran Airways, those big four players collectively account for three quarters of U.S. airline capacity.
Consolidation, route reduction and higher fares in the U.S. market are creating opportunities for the new breed of low-cost carriers, led by Spirit Airlines, to capture the traffic which the big three full service network carriers no longer find worthwhile.
With the purchase by Delta of a 49 percent stake in Virgin Atlantic , the three global alliances will have divided the routes between Europe and North America almost equally between them – leaving precious little for the non-aligned carriers.
In Canada, WestJet ‘s launch of a new regional feeder operation is likely to heighten domestic competition, while Air Canada is aggressively pushing into new international markets using Turkey as a gateway to Central Asia, the Middle East and Africa.
Air Canada has also introduced a new leisure airline, “Rouge”, targeting leisure Caribbean and European destinations.

Europe – The Battle for the Short-Haul Market

Last year, the ten members of the European Low Fare Airlines Association (ELFAA) carried 202.4 million passengers, while legacy carriers, members of AEA – the Association of European Airlines – carried 340 million passengers.
The rate of growth of these two groups suggests that in a not too distant future, low cost airlines will have overtaken the legacy carriers in the intra-European market.
The European “Big Three” – the Lufthansa Group, the International Airline Group (IAG) and the Air France-KLM Group – are fighting back, but so far with mixed success.
Lufthansa is planning to grow “German Wing”, its low cost subsidiary , to ninety airplanes by next year
German Wing will gradually take over control of all of Lufthansa’s continental routes, outside of its main hubs of Frankfurt and Munich.
For IAG, the acquisition of Vueling is a very important element of its European strategy.
Vueling has the second lowest cost base in Europe, and its enhanced business offering Is delivering a popular solution to the highly price-sensitive, short-haul sector.
Air France-KLM has set in motion many initiatives to improve productivity and competitiveness, which should reposition its regional offering, its leisure brand, and its alliance and partnership strength.
Meanwhile, “Sky Team” member ALITALIA faces a battle for survival – but it is unlikely to be rescued solely by Air France-KLM. Its shareholders are presently considering whether to invest another 100 million Euros to keep the airline running as it seeks new financing.
Ryan Air’s well established dominance on the Continent – with its 81.5 million passengers -is progressing towards its stated target of 20% market share.
It has launched its first base outside Europe in the Moroccan cities of FEZ and Marrakech, and intends to operate up to 60 additional routes following this first move.
Charging for toilets continues to be the number one story on the social networks. Although Ryan Air says that it has no such plans, it considers that this negative publicity drives people to their website – and sells more tickets!
Defying many predictions, Easyjet – with Carolyn McCall as CEO – has achieved an excellent turn-around, with a year-over-year pre-tax profit increase of 27.9 percent.
Easyjet was able to get a foothold in Russia following the re-allocation of British Midland route rights.
Easyjet has cautiously moved from a purely L.C.C. model to a limited hybrid to cater to business passengers on some key routes such as London-Moscow and Milan-Rome.
It has recently signed a contract with the “Shortbread House of Edinburgh”. The airlines will sell the traditional biscuit on board of its services in Europe, Russia and the Middle East!
And then there is the case of Turkish Airlines which considers itself to be a European airline.
• Its ambition is to connect the world via Istanbul, to compete and even outgrow its Gulf rivals.

• Strategically placed between Europe and Asia, as well as the Middle East and Africa, Turkish is one of the fastest growing airlines, having carried 38.5 million passengers last year.
Turkish Airlines is a recent addition to “Star Alliance”.


The outlook for the Asian market remains relatively bright despite the recent slowdown in traffic growth.
China expects domestic air travel to double by 2020, at which time it plans to have 240 civil aviation airports – up from 180.
But the gap between the demands of the rapidly growing airlines and the supply of experienced professionals is widening – potentially restricting growth.
Following the lifting of economic sanctions, Mynamar’s international and domestic markets have been growing very rapidly, and LAOS aviation has doubled over the last fifteen months.
Low costs are beginning to enter these markets.
Within South Asia, the L.C.C. penetration of the short-haul market is now 50%, but the medium-haul markets between South Asia and other parts of the Asia-Pacific region remain relatively undeveloped.
This market is now being targeted by Air Asia X.
On the Indian Sub-Continent, the government of India has now given conditional approval to the proposed investment for an up to 24 percent stake by Etihad in Jet Airways.
This will likely impact the market dynamics in the area, opening up the vast Indian market to a major Gulf airline – and providing Jet Airways access to the powerful Abu-Dhabi hub.
Air Asia hopes to obtain approval for a 49 percent investment in a joint low cost venture with TATA Sons Limited.

Middle East

As we have already seen, the three major Gulf carriers are pursuing very different strategies.
• Qatar Airways is joining “One World Alliance”;

• Emirates has chosen to grow a strong relationship with Qantas;

• Etihad’s path has been to take a minority stake in many carriers, and use those relationships to achieve cost and revenue synergies. Those investments now include Air Berlin, Air Seychelles, Aer Lingus, Virgin Australia, and more recently, Jet Airways.
The other airlines in the area are struggling to survive – with the exceptions of Air Arabia, the largest low-cost carrier in the Middle East and Africa , which continues to grow rapidly, currently 13 percent compared to last year.

Latin America

The LATAM Airline Group marked the first anniversary of its merger between LAN and TAM with an overall loss of USD 300 million, partly attributed to the depreciation of the Brazilian currency.
LATAM remains confident to achieve the long term financial benefits of the merger.
Regrouping AVIANCA, TACA Airlines, AEROGAL and Tampa Cargo , the new AVIANCA brand will be gradually introduced, seeking to project a new phase of growth of the Latin American carriers to the world.
AVIANCA Brazil has more than doubled in size in less than two years, and hopes to benefit from membership in Star Alliance.
AVIANCA Brazil is owned by the Synergy Group, which is the largest shareholder in the new AVIANCA and remains the only bidder in the sale of Star member TAP Portugal.
COPA has emerged as a leading carrier in the Intra-Latin American market, leveraging Panama’s strategic position in the middle of the region – and its superior airport.
With an annual operating margin of at least 17 percent since its 2005 initial public offering, COPA is highly profitable.

New Aircraft Overview

Hopefully, the Dreamliner’s nightmare is over!
Following a series of minor mishaps, the grounding of a Boeing B.787 fleet for four months was unprecedented.
Although the cause of the problem was never precisely identified, the extensive redesign of the Lithium C-ion battery system provided sufficient safeguards to allow the aircraft to return to safe operations.
Airbus has not been totally without problems. They are still fixing cracked wing components on the A.380’s currently in operation, as well as those on the assembly line.
Modified wings will not be available until 2014.
The Airbus A.350-900 successfully started its series of test flights, and the quality of the early results is most encouraging.
Good progress is being made on the development of the larger A.350-1000 with its engine, the Rolls Royce Trent XWB-97 …
However, the backlog on the smaller A.350-800 is eroding in favour of the larger variant.
Boeing has announced the launch of the B.787.10. This is an eighteen feet stretch of the standard B.787-9 version which will accommodate forty more seats.
The B.787-10 will accommodate 300 to 330 seats with a range of 7000 miles.
A few months ago, Boeing announced the launch of the B.777-X project. This new aircraft is unlikely to be in service until the next decade.
The B.777-X family will offer a new composite wing and a new GE9X engine , with capacity ranging from 353 to 406 seats. The B.777-X family is proposed as a response to the Airbus A.350-1000.
The A.320 NEO (New Engine Option) may well be history’s fastest selling jetliner – but Boeing’s 737 MAX is close behind.
Airbus promises a 15 percent fuel burn improvement compared to the standard A.320.
Boeing , not to be outdone, claims a 16 percent upgrade.
The improvement is largely dependent on the performance of new engines. Also, the Airbus A.320 NEO will feature sharklets, which improve fuel performance.
• The Pratt & Whitney 1100G (geared fan) has already achieved 12 percent better fuel burn than the CFM 56.5B currently on the A.320.

• The LEAP-1A of the GE/SNECMA Joint Venture is hoping to start tests next year. It will be the first commercial fan to incorporate ceramic material components.
The smaller version airplanes of both series, for example, the A.319 NEO and Boeing 737-7 MAX, are almost obsolete before delivery – and are not selling. These smaller versions account for only 2 percent of orders.
Airbus is considering some modifications which could take the A.320 NEO to 235 seats from the current 180 seats maximum permissible. (This will require two additional doors.)
Bombardier’s “C” Series has started test flights.
• The CS 100, covering the 100-125 seat market, is aimed at airlines wanting superior runway performance.
• The manufacturer has proposed a 160 seat variant by extending the fuselage of the CS300 by two feet.

• The performance of the “C Series” is highly dependent also on the Pratt & Whitney geared-fan engine, which has now been certified.
The decision by Embraer to re-engine its E-jet series has provided additional competition to Bombardier and the 70 to 90 seat Mitsubishi.

ATM – Europe
Single European Sky – a Failed Project?

The European Commission (E.C.) has been pressing Member States to comply with the Single European Sky targets – but many of them have not.
National interests – and powerful labor unions – continue to prevent the achievement of significant economic benefits, and the elimination of national borders in the air.
Slim Kallas, the E.U. Transport Commissioner, acknowledges that air traffic control continues to be too expensive, and hampered by high levels of delays.
The European Air Traffic Management systems are estimated to impose an additional cost of 5 billion euros per year on travelers.


Meanwhile, devoid of many political issues, SESAR – the Single European Sky Air Traffic Management Research joint undertaking – saw its mandate extended for a further eight years.
The new 600 million euro funding will focus on:
• Developing means to allow airplanes to fly more direct routes.

• Integrating new types of aircraft, such as drones, in the air traffic management system
Is the Single Sky Dead?
Europe is displaying a disconcerting lack of political will.
Perhaps the dream of the Single Sky is dead!

ATM – North America

The U.S. Next Gen ATM program , targeted for full implementation in 2015, is said to be on track.
Two crucial foundations for the system should be largely completed by the end of this year.
• “ADS-B” – Automatic Detection Surveillance Broadcast which allows 2-way links automatic positioning – is being implemented, and

• ERAM – the En route Automatic Modernization Program – is set to replace by the end of this year the operating system used by the F.A.A., at twenty of its en route centers.
The U.S. has also set 2015 as the date when small, unmanned aerial vehicles (U.A.V.) will be permitted to fly in all areas of the national airspace, although at the start the F.A.A. is likely to restrict U.A.V. operation to line-of-sight of the operator on the ground.
Only small U.A.V.’s – with a mass less than 25 kilos flying below 400 ft. over non-populated areas and within line of sight of the operator – are to be operational by 2015.

ATM – Asia

The Seamless Asian Sky (S.A.S.) concept is moving well.
The objective is to ensure that from an operational perspective, the airspace boundaries are transparent – or seamless.
The regional heavyweights – China, India and Japan – are providing valuable input, and will enable smaller countries to find their place in the jigsaw.
The Seamless Asian Sky plans to tie in as much as possible with the U.S. NextGen, and the European S.E.S. implementation.


Europe has climbed down over imposing Emissions Trading, finally responding to worldwide opposition.
Referred to as the “STOP THE CLOCK” decision, it agreed to suspend the Emissions Trading Scheme (ETS) for one year.
A global, market-based measure was discussed at the 38th ICAO Assembly this October. Governments mandated ICAO to develop a single Market-Based Measure (MBM) for implementation from 2020.
The last IATA AGM passed a Resolution in June suggesting that ICAO should adopt a global solution aimed at achieving a “carbon neutral” growth by 2020.
My own view is that taxes are a regressive measure – and given that the ultimate aim is to develop, low carbon substitute fuel – the emphasis needs to be placed on increasing funding for bio-fuels research and production!

Distribution Channels

Connectivity continues to grow, and providers say that mobile usage in flight is following the same trend as on the ground, with data usage increasing rapidly.
In the air, passengers are using their mobile phones more for data services – such as internet and texting – than actually placing voice calls.
In 2013, about five million mobile devices will have accessed the AeroMobile network.
More than fifteen million passengers have been connecting since the service was launched in 2008.
A study on the “Future of Airline Distribution”, commissioned by IATA and published in December of last year, predicted that:
• by 2017, 50 percent of bookings and ancillary purchases will be made on mobile devices

• and that air travelers are more likely than the general public to use smart phones and tablets;
Not surprisingly, the study concluded that the airlines need a system that can help not only to distribute their flights, but also merchandise their products – and value – across the various channels.
The system should support extensive fare and product transparency, dynamic pricing, ancillary product merchandising, and retailing.

New Distribution Capability

Airline Business magazine believes that, over the last year, the most important development in airline distribution is the introduction of the New Distribution Capability, “N.D.C.”
As we know, N.D.C. is a set of technology standards which will give the airlines an ability to distribute all their content through third parties, while retaining control over how it is presented.
N.D.C. will allow airlines to independently offer dynamic shopping and pricing through any channel.
The messaging system will be a modern messaging technology such as X.M.L.
The application to establish a new distribution capability – N.D.C. – was filed in March with the D.O.T. in Washington, in response to comments filed by third parties. Those parties were concerned , or opposed, to N.D.C. – as initially proposed – on matters of antitrust and privacy.
The G.D.S.’s are possibly the most exposed to the changes that N.D.C. is trying to bring about.
Some G.D.S.’s have requested some clarification, and will want to ensure that N.D.C. will not impact some of their product developments.
They have generally expressed a willingness to participate – if allowed to do so.
Hopefully we will hear their views at this Conference.

Travel Agents’ View

Bruce Bishins, President of the Travel Agents Association of Canada and Managing Director of ARTA USA, believes that
“There is a compelling reason for travel agents to get involved in IATA’s New Distribution Capability (N.D.C.) – or risk being left at the gate.”

There will be an impact on front-office selling, middleware facilitation, and back office routines and accounting.
It will definitely change the way things are done today
In his view, the travel agent community needs to become intimate with N.D.C., or they will find themselves eclipsed by airline websites and /or any emerging new entrants that want to sell travel.
Again, we will likely hear their views during this Conference.

Closing Remarks

The travel sector’s approach for the past two decades has been to push customers towards lower prices through lower cost and yet more uniform – and lower – cost distribution channels.
This has overly emphasized price as the primary, if not the only, product differentiator.
While customers value price significantly, it is far from being their unique preoccupation.
Clearly, travelers have different views, different desires, when it comes to their traveling needs – and in terms of their shopping preferences.
The basic theory which governs consumer behaviour has not changed.
How much consumers are willing to pay is still very much a function of their perception of the value they are receiving. And that has not changed!
A famous cosmetic company uses the slogan “our products may cost a little more, but you’re worth it!”
That company and many others have understood this relationship , and the need to place the consumer at the center of their marketing strategy.
There is a need to make customers the strategic focus – and for customers to be at the centre or our preoccupation.
There is a need to better understand their individual needs in order to serve each of them better, and to provide to each of them the best, most satisfying, end-to-end experience they deserve.
The industry should move away from a model focused exclusively on price – and, for that matter, on reducing distribution channel costs – to a model that seeks to maximize returns by best serving their customers’ needs.
I recall that Bill Clinton, then a Presidential Candidate, launched his campaign in this city with a rather simple – and explicit – slogan … and I quote
“It’s the economy … stupid!”
Ladies and gentlemen, when the industry’s load factor – worldwide – has now reached over 80 percent and this airline industry is still a long way from being profitable, it is time to do a little soul searching.
It is time to change our strategies. It is time to refocus consumer expectations.
To paraphrase Bill Clinton, it’s time the airlines recognize that if we are not profitable
“It’s the yield!”
And in the airlines’ elusive quest to achieve sustainable profitability – could the travel agents be an important ally?
Thank you!

Pierre Jeanniot delivers the keynote address to the APG World Connect Conference in Monte Carlo

State of the Industry – The Game Players
Keynote address to APG World Connect
Monte Carlo, October 25, 2012  >>

Ladies and gentlemen:

Every two years , Jean-Louis Baroux brings this Conference back to Monte Carlo, a place of opulence, perhaps in the hope that some of those characteristics will eventually rub off on our perennially troubled aviation industry.

Well, if we can believe the latest IATA forecast, the anticipated industry-wide – 0.6% net profit margin for 2012 – is not likely, once again, to cause everyone to pop champagne.

Not to take any chances, this conference continues to ensure that this magic liquid is amply present at every reception, to help either to celebrate our successes or to drown our sorrows, as the case may be.

Before I go on, let me remind you that the views expressed here are strictly my own and do not represent the views of IATA or any other corporation that I have been associated with over the years.

Our industry is accustomed to having to deal with numerous uncertain conditions, and this current year is no exception.

The Chinese economy, which has become a major engine of world economic growth, has been slowing down.

The Asia-Pacific international market was showing a 5.5% expansion. However, when one takes into consideration the impact last year of the Japanese earthquake and Tsunami, and the recovery this year of the Japanese market to its previous level, the real growth of the Asia-Pacific international market was, in fact, marginally negative.

India’s domestic traffic was essentially stagnant, partly as a result of the government’s disastrous aviation policies, bureaucratic nonsense and excessive taxation.

North American markets were essentially flat.

However, on the bright side, the other regions of the globe have continued thus far to show good growth, particularly the Middle East, Latin America and Africa.

The financial crisis has shaken public confidence in the banking system, revealing that unfortunately some banks – driven by greed – had total disregard for the basic rules of prudent investment.

To avoid a liquidity crisis which may have brought the entire economy to a halt, the government provided a huge “bail-out” fund to the banks – at the expense of the tax payers!.

Unfortunately the banks are not the only ones misbehaving.

Many governments are overly in debt, and the situation is particularly acute in Europe.

And unfortunately, unless the North American economy clearly recovers – and Europe fixed its problems – all regions will likely suffer.

Against this background of economic uncertainty and continued aggressive competition, the various major players have been re-evaluating their strategies, each in its own way.

Latin America has been one of the important battlegrounds.

The merger of two important airlines in the region, namely LAN and TAM – each belonging to different alliances – forced a re-examination of their respective affiliations.

The Chilean antitrust regulators told LATAM, the new combined entity, that its two operating airlines will have to be in the same alliance – and not in the same alliance as their primary Latin American rival, AVIANCA-TACA.

LAN is a founding member of “OneWorld”, and TAM became a member of STAR in 2010.

The dilemma should have been resolved this Spring, when AVIANCA-TACA was admitted into STAR.

One could have concluded that LATAM would be the South American member of “OneWorld”. However, LATAM has been keeping its options open.

Just to complete the picture, in Latin America we should remember that Aeromexico and Aerolineas Argentinas are the region’s members of Sky Team.

The European presence of “OneWorld” was somewhat weakened in Eastern Europe by the bankruptcy of MALEV.

However, that void will be partly compensated by Air Berlin and its affiliate Fly Niki, which joined the alliance in March of this year.

The bailout package provided to Portugal by the European Central Bank and the International Monetary Fund (IMF) imposed a requirement for the privatization of the national airline, T.A.P.

The relatively strong position of TAP in two key emerging markets – Latin America and Africa – has raised the interest of several groups including I.A.G. and the Lufthansa Group.

Among the other major alliance developments worthy of note is the expectation that Malaysian Airlines would join “OneWorld” this year.

And then, on the Indian sub-continent the largest Indian private airline, Jet Airways, has been invited to join STAR.

However, the government of India has requested that Air India, which had been previously rejected by STAR, be admitted at the same time as Jet Airways. This could complicate the situation.

As a natural expansion of the “Metal Neutral” Joint Venture between Lufthansa and All Nippon Airways , SWISS and Austrian were invited to join in.

Finally, Japan Airlines and I.A.G. have agreed plans for a Joint Venture business … on all services between Europe and Japan.

The European low fare airline scene has long been dominated by RyanAir and EasyJet.

For the first time – and perhaps as an indication that the market is reaching saturation – their growth rate has been coming down to a meager 4 to 5 percent per annum.

And for the first time also seasonality has become a factor. RyanAir, for instance, decided to ground a number of airplanes during the winter months.

This year, a newer and aggressive airline – “ Norwegian Air Shuttle” – has decided to challenge those leaders.

Norwegian Air Shuttle, last January, placed an order with Boeing and Airbus comprising of 374 aircraft, of which 222 are firm orders and some 150 are options to be exercised later.

One gets a good measure of this ambitious move when one compares the Norwegian Air Shuttle fleet plan with the size of RyanAir’s current fleet of 270 airplanes and EasyJet’s 204 airplanes.

Determined to stop the attack on their short-haul markets, the three major European airline groups have launched some substantial restructuring programs to reduce their operating costs.

Their objective is to achieve a more competitive presence in the European short-haul market.

Lufthansa, which recently announced a reduction of some 3,500 full-time administrative jobs worldwide, is considering shifting up to 90 jet aircraft to a division providing short-haul, low cost services outside of Frankfurt and Munich.

This would likely be combined with its low cost unit, “Germanwings”.

As part of its cost reduction effort, Austrian Airlines also decided to transfer the company’s fleet of 80 airplanes and its 2100 employees to its 100 percent-owned subsidiary, Tyrolean Airways.

The move was carried out to eliminate duplication and to achieve a new collective agreement.

The other member of the Lufthansa Group, Swiss, is looking at splitting off its short-haul operation – possibly to be based outside Switzerland – to achieve lower costs.

IAG – the International Airline Group – is disbanding the loss-making BMI Baby, redistributing its valuable airline airport slots to the more lucrative markets.

Thus far, the main focus of the Group has been in Spain. This will include short-term downsizing and network reshaping to address Iberia’s uncompetitive cost structure.

The Group will increase its low-cost presence in the Spanish market.

Iberia Express, a new subsidiary with services said to be almost identical to those of Iberia but with staff remunerated at low-cost competitive rates, became profitable in its second month of operation.

Thus far, Iberia Express and Vueling – also 46 percent owned by Iberia – are both growing successfully.

Finally, the last member of the European “ big three” – the Air France/KLM Group – centers its efforts on Air France, with a plan to increase productivity and efficiency by 20 percent.

Its regional restructuring is based on a three-prong effort:

First, giving Transavia – formally a KLM subsidiary – an increased role to operate a no-frills, leisure airline from Orly to Mediterranean and European destinations.

Transavia’s fleet will be increased from eight aircraft today to 22 by 2015-2016.

Second, the activities of AIRLINEAR, BRITAIR and REGIONAL will be regrouped with the objective of reducing costs by 15 percent.

Then, Air France is opening regional hubs in Marseille, Nice and Toulouse for services to various European and Mediterranean destinations.

Thus far, the results of those new liaisons have been somewhat mixed, suggesting some fine-tuning is still required.

The Gulf carriers had remained strongly focused on their plans to “Connect the World” through their respective hubs, maximizing 5th and 6th freedom opportunities.

But in the last few weeks we have seen a dramatic shift in their strategies which could position the Gulf carriers at the core of a new global order.

Emirates and Qantas have exchanged a major codeshare agreement which covers all major European destinations.

This could cause some serious strain on the “OneWorld” Alliance.

And then Qatar Airways, which had been cosying up to British Airways, and has now joined OneWorld.

The third member of the powerful Gulf “triumvirate”, Etihad, together with Air Berlin has now announced a wide-ranging commercial agreement with Air France/KLM.

Given this new development one wonders how long Air Berlin – 29% owned by Etihad – would remain in “One World”.

Clearly, the major strategic shift by the Gulf carriers has thrown the three alliances … into a state of flux!

A brief overview of the region would not be complete without mention of Turkish Airlines – fast growing and also ideally located between Europe, Asia and Africa.

Turkish Airlines, which today operates to five North American destinations plans in the short to medium term to add five more major destinations.

Turkish Airlines is also looking at investing in other airlines, and has been showing interest in LOT Polish Airlines as well as Portuguese TAP.

Finally, the growth of Air Arabia – the largest low-cost carrier in the Middle-East and Africa – is most impressive, and has established new hubs in Casablanca and Cairo in addition to its main base in Sharjah.

Regardless of who is involved, more consolidation will take place in the U.S.A.

American Airlines’ restructuring plan calls for a reduction of 13,000 employees, major concessions from each labor group, and termination of the defined benefit pension plan as well as closing the Fort Worth Maintenance Base.

The plan hopes to generate sufficient cash to renew the fleet over the next five years.

A strong American Airlines would marginalize U.S Airways, leaving it with little scope to grow. This is believed to be the reason for U.S. Airways to begin a potentially hostile take-over bid for American Airlines.

The U.S. Airways’ effort to gain control of American Airlines has generated much support from Wall Street and American Airlines’ own unions.

American Airlines, which had originally shown very little interest in merging with U.S. Airways, has since indicated that a merger should be considered.

Southwest Airlines, the model of the “low-cost” par excellence, has played a part as well in the consolidation process, having acquired AirTran. Southwest’s recent losses are, in part, related to the integration of AirTran in its operation

Return to its full profit potential is now targeted for 2014.

As part of its diversification activities, Delta Airlines has decided to invest 100 million dollars in GOL, the San Paolo-based airline, which has a 40 percent market share in Brazil, to leverage and consolidate further its long-term commercial agreement.

And then in Canada, in line with the trend to develop hybrid business models, Air Canada has announced its intention to create a NEW long-haul, low cost, wholly-owned subsidiary. This new airline will target trans-Atlantic leisure destinations as well as in the U.S.A. and the Caribbean.

Looking for more room to grow, WestJet announced this year the creation of a regional carrier division, with an order of some forty Dash8-400 airplanes.

WestJet was successful in negotiating with its current employees a lower wage rate for any new employees to join this new division.

And then, moving off the strictly no-frills product, WestJet is now introducing a premium product with more legroom and various amenities to appeal to the business travelers.

Hybrid business models are proliferating. Well, it’s a case of whatever will work for you!

Low-cost carriers are expanding rapidly in Asia/Pacific.

Malaysian low-cost carrier, Air Asia, continues to increase at 12% annually.

SCOOT became the third long-haul, low-cost carrier in Asia, joining JetStar and AirAsia X.

SCOOT is also the fourth brand in the SIA group’s portfolio, which already includes low-cost carrier Tiger Airways, partially owned by SIA, and the short-haul, full service carrier, SilkAir, in addition to the mainline Singapore Airlines’ full service brand

Seven years ago, there were no low cost airlines in the Singapore market. Today L.C.C.s account for 25% of passenger traffic at Singapore’s Changi Airport.

Yet Singapore Airlines has not shrunk. The market has simply grown.

Japan is fast becoming the new L.C.C. battleground in Asia-Pacific, with three new entrants this year namely:

JetStar – a Qantas /Japan Airlines’ joint venture;
PEACH – a subsidiary of ANA /All Nippon Airways; and
AirAsia – a joint venture between Malaysia Air Asia and All Nippon.

This flurry of new entrants has prompted Narita Airport to announce that it will build an L.C.C. dedicated terminal, due to open in 2015!

L.C.C.’s are projected to carry 20% of Japan’s domestic traffic by the end of 2012, and possibly as much as 50% by the end of the decade.

The L.C.C. Japan phenomenon is rapidly spilling over into neighboring countries.

The Qantas’ Group, which also follows a multi-airline portfolio strategy, has chosen to have its Asian expansion channeled through its low cost JetStar subsidiary.

JetStar, joining forces with “China Eastern Airlines”, will launch a new low cost subsidiary in 2013, based in Hong Kong.

China is the target market.

Another Chinese carrier, Hainan Airlines Group, plans to turn its affiliate – 45 percent owned “Hong Kong Express” – into a low cost operation.

Vietnam, Indonesia and the Philippines are seen as markets with great potential for low cost travel. Both are archipelagos with large numbers of overseas workers, and are increasingly popular tourist destinations.

Finally, Myanmar’s aviation market is poised to enter a major period of growth as the country begins to open up to world trade and tourism.

Despite a slowdown of work related to a delamination issue, Boeing plans to deliver – on schedule – forty-five B-787s to customers in 2012, and has a goal of meeting a rate of 10 aircraft per month by the end of 2013.

The first airplanes were powered by Rolls Royce Trent 1000. Earlier this year certification was completed for the B-787 powered by General Electric, GENX-1B.

Boeing’s network analysis group has forecast that a potential of up to 450 new city pairs could be opened as a result of the B-787-8s particular combination of size (250 passengers), range (14,000 kms) and operating economics.

Thin routes such as Boston-Tokyo, Mumbai-Mexico City or Frankfurt-Santiago (Chile) would be good candidates.

Meanwhile, Airbus has started the final assembly process of the A-350-900. Airbus still believes that it can begin customer delivery in 2014.

Redesign efforts have been on-going on the larger A-350-1000 model to reinforce its ability to compete successfully with the Boeing 777-300 ER and any further improvements to this model, which Boeing is already beginning to examine.

Not surprisingly, predictions vary widely between Airbus and Boeing on the performance of their re-engined, next generation, narrow bodies.

The A-320 NEO is due to begin commercial operation in three years, while the Boeing B-737 MAX debut is even further off – targeted for 2017.

Airbus indicates that the A-320 NEO is expected to produce an overall fuel-burn improvement of 15 percent compared to the current A-320 model.

Boeing is claiming that the B-737 MAX will have a 17 percent fuel burn advantage over the current A-320.

This could be a case of “apples and oranges”.

Boeing’s prediction for fuel burn per seat is based on a 162-seat configuration for the B-737 and a 150 seat arrangement for the A-320.

A huge order from SkyWest at Farnborough for 100 Mitsubishi regional jets – the 90-seat MRJ-90 – was a major signal that the Bombardier-Embraer duopoly may have ended.

SkyWest is a key player in the biggest regional jet market, the U.S.A.

But Mitsubishi is also studying a stretched 100 seat version for potential customers including Air Lease Co.

The MRJ is the second entrant in the larger regional jet arena, following the SUKHOI SuperJet 100 which entered service last year but has yet to gain full credibility with Western operators.

Meanwhile, Bombardier no longer insists that the first flight of the C-Series – the CS100 – will take place by the end of 2012, but still hopes to deliver a certified for 120 minutes E. T.O.P.S. at entry into service to a customer in 2013.

The plan also calls for the larger C.S.300 to be certified by 2014.

By allying its product with the Chinese COMAC C-919, Bombardier would be able to offer a hybrid family to the Chinese carriers.

COMAC C-919 is expected to fly in 2014, and start delivery in 2017. RyanAir has expressed an interest for the aircraft.

The objective of the Single European Sky initiative, launched in 2004, was to achieve a European airspace without borders.

Progress has been painfully slow.

Unable to see a way of overcoming, the complex political and bureaucratic obstacles required to achieve a Single European Sky, the Europeans have embarked on an intermediate step of forming Functional Airspace Blocks … (F.A.B.)

This would at least allow some consolidation of facilities and functions to reduce costs – and by extension, the fees paid by the airlines.

To illustrate the magnitude of the current European system’s inefficiencies, it may be sufficient to note that the United States’ A.T.C. delivers approximately twice the volume of all European ATCs – for the same price!

There are today, in Europe, some 27 air navigation authorities and a number of military air control centers.

And, at present, the European States are planning to regroup their ATCs into nine (9) multinational Air Space Blocks covering almost all of Europe.

But then, once the integration is completed within each of these Functional Blocks there will remain the task of ensuring that the nine will efficiently work together.

On the technical side progress is achieved more easily.

The Single European Sky ATM Research (S.E.S.A.R.) program was also launched in 2004 to provide Europe with “high performance air traffic infrastructure and technology” to meet the requirements of the future.

The 4-D Trajectory Management is on track, and is one of the more significant projects to deliver flight optimization.

This will require further coordination between airborne and ground systems.

The modernization of air traffic services is progressing in other regions.

In the U.S.A., as part of the NextGen air navigation improvement program, the F.A.A. has now awarded a contract to accelerate the development of satellite-based procedures.

These will allow aircraft to fly more directly to their destinations – and more efficient approaches into an airport.

In Asia, the concept for a seamless Asian Sky (S.A.S.) has achieved widespread, high level support.

S.A.S. does not mean one owner – but a need to agree that the airspace boundaries need to be transparent, or seamless.

Fortunately, Asian governments have progressive aviation policies. China, Japan and India will each provide valuable input, and will enable smaller countries … to find their place in the overall picture.

A decade or so ago, many airlines – particularly the low costs – began to offer their products directly through the web.

The advantages seemed obvious, and a number of experts were predicting the death of the travel agents.

But it is now clear that the travel agents are going to outlive those experts.

The role of the travel agent is not decreasing. More than 60 percent of all airline tickets are still being sold through travel agents.

G.D.S’s, which were also predicted to become obsolete, have evolved and today also operate direct sites for airlines.

The travel agents are being paid more money to use the G.D.S’s., which are probably their prime customers.

However, there is a need for the travel agents to develop a response to the rapidly increasing use of mobile devices.

The increasing importance of ancillary products to airline revenues is introducing a new dimension.

To what extent should travel agents and G.D.S.’s be involved in retailing ancillary products such as seat selection, food, entertainment etc. – in addition to those traditionally related to the trip, for example hotels, car rental, theatre tickets etc.?

The love-hate relationship between the airlines and the G.D.S.s is continuing, with strong opposition by all airline associations to a U.S. DoT proposed mandate requiring all airlines serving the U.S.A. to distribute all their content and services through Global Distribution Systems (G.D.S’s).

Meanwhile, Google is de facto becoming a distribution channel in its own right, with the additional capabilities of proposing more products and services on the basis of your purchase history and preferences.

Some eleven years ago, Ryanair C.E.O., Michael O’ Leary, boasted that eventually his airline would be making so much money from ancillary revenues that he would be able to afford to fly people for free -perhaps based on the expectation that gambling would be allowed on board, which of course has not happened.

Nevertheless, over time airlines have continued to come up with many more ways to boost their so-called “ancillary revenues”.

An annual study carried out by IDEA Works, sponsored by AMADEUS, has been tracking those revenues.

This year’s report shows that the total revenue collected by fifty carriers reporting ancillary revenues as a separate category was 22.6 billion US dollars in 2011 – up from the 13.5 billion dollars reported two years earlier.

Some observers believe that these revenues may be starting to top out, but there may still be some room by varying prices by flight based on demand, just as carriers have done with yields.

Meanwhile, Mr. O’ Leary is no longer talking about flying his customers for free!

Among other aspects being explored, airlines may be able to gain some additional revenues for connectivity on board.

By the end of 2011, 1,885 aircraft were equipped with Wi-Fi , and the current forecast is for 6,100 airplanes to be equipped by 2015.

Today, most Wi-Fi equipped airplanes fly in North America. All major U.S. airlines are – or plan to be – totally equipped.

The number of passengers who chose to pay for the Wi-Fi service increased to 7 percent by the end of 2011 from some 4 percent in 2010.

The growth is, in part, driven by the rapid penetration of smart phones and other communication devices such as tablets.

In-flight Wi-Fi revenues are expected to exceed 15 billion US dollars in 2015.

Connection services are provided by Chicago-based GoGo Inc., which covers all of Continental U.S.A., Canada and Alaska.

This represents only some 2 percent of the earth’s surface, but Geneva-based OnAir plans to offer near global coverage using INMARSAT satellite.

The price is not cheap, but the coming boom in air-to-ground and satellite broadband capacity should drive prices down.

Despite all those efforts of frequent cost restructuring, mergers, acquisitions, alliances, joint ventures, experimenting with different business models, hybrids and subsidiaries – the aviation industry as a whole continues to fail the profitability test!

With a few exceptions – far too few – the airline industry is not profitable, and does not consistently earn its cost of capital.

Many airports are also unprofitable – and overly constrained in their expansion.

Air Navigation Services are under pressure, and need to be encouraged to regroup.

For a few governments – and the Gulf States are a good example – commercial aviation is a strategic industry, and plays a major role in the development of their respective countries.

But unfortunately, for many governments – particularly in Europe and North America – commercial aviation and air travelers are regarded as the proverbial “milking cow”.

And the cow is getting thinner, and thinner!

And yet the socio-economic impact of air transport is simply huge on every country, region, and indeed the world.

A recent study carried out by Oxford Economics, clearly demonstrates the economic and social benefits of aviation at the national level.

This study involved over fifty countries, and concluded that when the air transport industry has been encouraged to grow efficiently in response to the demands of the expanding market, the economic impact has been very substantial.

The Oxford Economic study concluded that aviation is a key factor facilitating world trade, helping countries to participate in the global economy, and increasing their access to international markets.

While it may be a giant undertaking to convince all governments to be more supportive of our industry, we can make significant progress by working together better.

As partners of the broader travel, transportation and tourism world, we would all of course benefit from more enlightened government policies.

But we can also help each other to become more efficient and more profitable, and seek greater synergies to our mutual benefit.

This is an important dimension which we will begin to explore more thoroughly in the Friday afternoon session of this Conference.

In closing, ladies and gentlemen, I am reminded that having lost twenty thousand pounds in the South Sea bubble in 1720, Sir Isaac Newton has been quoted saying

“I can calculate the motion of heavenly bodies, but not the madness of people.”

If he had lived today – and invested in our industry – he may well have said the same thing about the way we manage airlines, which leads me to conclude that most of us must be in this industry for the romance and the fun – but certainly not for the money!

Yet we must be looking forward to a brighter tomorrow!

Thank you!