APG World Connect 2015 – Closing remarks

APG World Connect Conference
Marrakech, 28-30 October 2015
CLOSING REMARKS  >>

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.

OPENING MORNING

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!

THE GREAT DEBATE

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.

NEW TECHNOLOGIES AND TRENDS

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!

DISTRIBUTION

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.

CLOSING COMMENTS

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