Guest Lecturer, McGill University School of Business

Lecture to McGill University School of Management
Pierre J Jeanniot, O.C., C.Q., FRAeS
Montreal, 1 March 2018


Commercial aviation started in the Western countries …. in the 1920’s and 1930’s.  … It served some elitist passenger markets … and also some cargo markets and postal services … which enabled goods and information to be transported fairly quickly … compared to the more conventional ground systems that existed at that time.

The volumes were very small … and during World War Two the demand for commercial air transport virtually disappeared … and was dominated completely by the needs of aviation military applications.

At the end of the Second World War …interest in commercial aviation transportation revived fairly quickly … and some of the technical developments which had been made for war purposes were rapidly adapted to civil aviation … mainly passenger travel.

As commercial aviation was likely to grow rapidly … the various governments decided it was necessary to develop rules to regulate … how flights would take place between countries.

This was accomplished by the Chicago Convention in December 1944 … which created ICAO … the International Civil Aviation Organization … an organization of the United Nations … which established a set of rules … or Freedom Rights.

It was followed by the creation of IATA … the International Air Transport Association …  in April 1945 to provide a framework … and rules on how to operate/manage airlines.

From the start …  air transportation was viewed as an exchange of commercial opportunities … and the regulations developed to facilitate travel between countries consisted of a number of rights … such as air rights to fly to a country … rights to pick up passengers from that country … rights to fly over a country … rights to link a country beyond the two countries in question … and so on.

The exchange of commercial operating rights between countries requesting access to markets … required equal opportunities on each side.

The exchange of access to markets … was covered by an international treaty called … an air bilateral agreement. …

This covered an exchange of rights between each country …and regulated how … flights of passengers and cargo … should take place between those countries.

Essentially … this was an international treaty … to permit the exploitation of commercial opportunities in each county.

These agreements originally dealt with a rather elitist market.

The costs of flying were very high … and only the upper class of the population could afford them.

In addition to high quality leisure traffic … there was a need for travel for business … and political reasons.

There was a need to fly between different countries … to ensure that there were adequate … and rapid connections between those countries.

With the exception of two airlines in the U.S. … namely Pan American and TWA … the airlines of every other country were government … owned … and operated according to the rights that had been negotiated by their respective countries.

Most countries wanted an airline for “political reasons” … to establish control over their airspace … and to acquire an international presence.  Hence the term … “National Flag Carrier”.
Two things essentially governed commercial aviation:

  • The exchange of commercial rights to exploit the markets between two countries;
  • And second … also very important …, was the need for a safe operation to the extent possible … which required increased regulation … and the enforcement of safe practices by each of the operating airlines.

In the years following the Second World War … the number of flights … the size of the airplane … the exchange of rights between countries … were growing fairly rapidly.

Every nation regulated very closely the development of aviation within its respective country and … of course … the development of civil aviation between each country … was regulated by international air bilateral agreements … under the auspices of ICAO.

IATA was to provide rules … and processes … for the actual operation and management … e.g. tariff coordination … standardized procedures for ticketing … cargo … etc.

The concept … or model of national flag carrier … still exists today …   although even those airlines … which are still owned totally … or partially … by a government … have had to become more business-like … and to be guided by commercial considerations.

Any operator within its own country … was under the jurisdiction of its own Air Regulation Bureau … and its international flights would be governed by the Air Bilateral Treaties … its government would have negotiated.

For instance … Air Canada was created to provide fast transportation from one end of the country to the other. This initial role was in many ways … similar to the creation … decades previously … of the trans continental railways.

The original name of “Trans-Canada Airlines” reflected that role … but it was changed to Air Canada when it developed an international network … originally to Britain … then France … Germany and Switzerland.

The mandate was largely to provide fast service at break-even cost.

One Minister of Transport was fond of saying “Stay away from the tax payers purse … and we will stay away from your business.”

But that was not always so!

For instance … when I was head of the company … while it was still a Crown Corporation …  I was prevented from starting a Frequent Flyer program for the best part of a year … by the government … which originally had considered that this was not part of its mandate!

As a crown corporation … Air Canada was required to appear annually …  in front of various committees … where any parliamentary elected individual could appear … and ask questions.

The following anecdote is fairly typical of the kind of cross-examination which could routinely take place.

“The quantity of Canadian wine on board of Air Canada airplanes … being pushed by the Minister representing a southern Ontario riding. – (typical anecdote)


As one can see … sometimes … narrow political motives can become a factor … without any commercial considerations.

A decreasing number of national carriers still largely operate with non-commercial constraints … but generally will still require financial subsidies.

Or … have been allowed to disappear … e.g. Sabena.


Later in the 1960’s … a number of technical developments increased … the productivity of operations.

Most important were the jet engine … and the jet-liner.

It was now possible to transport twice the number of passengers … at twice the speed … on any transatlantic flight.

These new airplanes increased the productivity by 4:1.

Some entrepreneurs understood … that if one could increase the seating density … and achieve a higher degree of seat occupancy … say around 90% … one could operate a flight profitably … while setting a price at less than 50% of what a regular flight was charging.

In some ways … that was the first type of “low cost model”.

They were called … Affinity charters”.

Theoretically … one had to belong to a group … which occupied the entire flight … and required that almost every seat on that flight had been sold.

Affinity charters thus made air transportation available … to less affluent people.

These charters could benefit from the higher level of seating occupation … and therefore this made it possible to operate and sell tickets at lower prices.

The requirement to belong to a group … was subsequently removed.

An airline model that emerged … at that time and featured lower prices … was Laker Airways … called “Sky Train”.

Laker was able to create a new product … which did not require most of the overheads…  of the established airlines.

The airline did not have a reservations system – it was simply walk on … walk off.

Laker Airways operated routinely between major markets … such as London/New York.

The model was dependent on little overhead … and high density seating and occupation.

A rather similar affinity charter format existed in Canada … and met the needs of the low-cost market.

That was the charter airline operated by Wardair.

Wardair operated a series of programme of seasonal frequencies.

It depended on high occupancy … and offered fares which were much cheaper … than those offered by the regular airlines.

Those successful operations encouraged the growth of consumerism …  leading to a demand … for the wide availability of lower cost air transportation.


The Air Regulation Act was passed by the U.S.A. in 1978 to remove Federal control over routes … pricing … frequencies etc. and to allow total “domestic” competition.

All commercial constraints were to be removed … but naturally the U.S.A. maintained all regulations on safety.

Shortly after … the U.S. abolished the CAB (the Civil Authority Board) … which was a rigid …  bureaucratic mechanism … and had become redundant.

This created a climate of total … unrestricted … commercial competition within the U.S. territory.

The U.S.A. domestic air transport deregulation was sudden … and virtually instantaneous.

From that moment on … the U.S. airlines were allowed to fly anywhere they wished within the U.S. … with any flight frequency … any seating arrangements … for any price.

The only remaining regulations concerned safety … and associated air worthiness regulation.

Proving they met the safety requirements … some dozen and a half new airlines emerged fairly quickly.

These were the first U.S. low-cost airlines.

Invariably … these low costs were based on the same model … essentially

  • Very low fixed costs/and overheads
  • Single airplane type fleet
  • Higher density seating configuration
  • Single class
  • High aircraft daily utilization/fast turnaround
  • Focussing their operation on relatively large markets … e.g. Chicago-New York.

Pricing was designed … to significantly undercut existing airlines … on the targeted routes …

And hopefully attract new flyers … In other words … expand the market.

Employees at counters … and flight attendants … would be young … enthusiastic … and relatively low paid.

Typical of those airlines were “Peoples’ Express … the “New York Air” … the “Southwest Airlines”.

A number of traditional U.S. airlines were unable to cope … with the new degree of competition … which was being introduced.

A number of airlines disappeared … or consolidated … such as Eastern and Continental.

Of those new low-cost airlines … some 10 years later … only Southwest Airlines survived. …  The other low-costs were unable to achieve a profitable operation … in a sustainable fashion.

A good question would be …

Why were all the new low-cost airlines unable to survive … short of Southwest?

Apart from managerial know-how … the major difference lay in their choice of markets … and their aircraft scheduling strategies.

The survivor … Southwest … avoided head-on competition … and specialized in smaller markets where there was less competition.

They also decided to serve point-to-point markets … where customers were being inconvenienced … by the hub strategy being followed by the legacy/larger airlines.

Clearly … many passengers may prefer a direct flight … to a connection … if the timing is suitable.

It is also fair to say that Southwest was able to sustain enthusiasm … within its young group of flight attendants and airport employees.

The vast majority of new “low-costs” … chose to go head-to-head with established airlines on major markets.

They were unable to sustain their operation … to gain a sufficient presence … and achieve a minimum profit.

The difficult financial situation … faced by most businesses in the 1980’s … also contributed to their failures.

Given the proximity of the U.S.A. … Canada felt the need …  for progressive deregulation … of the commercial Canadian aviation market.

The Canadian government introduced …  a Domestic Commercial Aviation Deregulation Act … which progressively provided total domestic freedom.

The 1984 “Freedom to Move” Act permitted … progressively …

  • Any airline to fly anywhere in Canada
  • Total freedom on frequency and pricing

But … of course … the Act maintained all safety-related regulations.

Air Canada … was government-controlled and was faced with the choice of becoming a private enterprise … or eventually disappearing …. since it would not be able to compete on the open market … as a number of important decisions needed government approval.

The new Act forced Air Canada to privatise … encouraged new low costs to emerge … and caused some of the existing airlines to merge … particularly PWA acquiring CPAir … then Wardair.

A new low-cost was successfully launched … “WestJet” … which wisely followed the same successful model … as Southwest Airlines … e.g. one airplane type … high seat density and one class.

WestJet originally …  avoided head to head competition … and also recruited some young and enthusiastic employees.

A number of regional airlines merged … or disappeared … and some of the more traditional charters … survived … generally as a component or holiday/destination package … example Air Transat.

The U.S. Domestic Deregulation Act … had allowed full freedom to the airlines to alter their schedules.

To increase their efficiency in serving the market … the surviving traditional airlines decided to build around a major hub … sometimes called “Fortress Hubs”.

For example … Atlanta became the major hub of Delta …. Dallas for American Airlines … and Chicago for United Airlines.

This enabled each major airline to concentrate traffic … increase the efficiency of airplane utilization … as well as ground services.

The hub strategy provided for more frequent services to the “spoke” cities … but required passengers to transit through the hubs.

This “fortress hub” strategy …  enabled the major airlines to dominate the market of their major hubs.

The passengers had a joke …

“With this system … when I die and I wish to go to heaven … I will have to go through Atlanta … Dallas … or Chicago.”

Hubs were also developed for air freight.

The strategy of the domestic cargo hub in Memphis … enabled FedEx to offer an efficient package delivery service … throughout North America … daily.

On the international side … KLM … was probably the first airline to build an international hub in Schiphol (Amsterdam).

Exploiting its strategic geographic position in Europe … and the proximity of relatively underserved markets … KLM was quite successful at growing its traffic … well beyond its own base.

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

With a relatively small “home market” … Singapore … an island state … exploited the same strategy … driving traffic flows from Southeast Asia to Europe … through Changi Airport.


During the 1990’s … the European Community decided to deregulate progressively the air travel market.

The creation of a European Common Air Market enabled:

“Any current regular European airline to have unlimited freedom to operate within the Common Market … any location … frequency … price …etc.

The emergence of new carriers … essentially low-costs … with the ability to operate anywhere within the Common Market.”

The model of the new European low-costs … was similar …  to the original group of low-cost airlines in the U.S. … with the following differences:

The new European low-costs:

  • Avoided head to head competition
  • Operated from secondary/low cost airports
  • Attempted to avoid unions
  • Emphasises ancillary revenues
  • Located their corporate H.Q. … in countries with the lowest corporate tax (e.g. Ireland).

These features enabled a number of new low-costs to grow rapidly … e.g. Ryanair … EasyJet etc.

As expected … the European deregulation forced regular … or legacy … airlines to attempt to adjust … to the increased competition.

Some were allowed to fail … e.g. Sabena … and many consolidated.

Eventually … three major groups emerged … one led by British Airways … the International Airline Group … (IAG) … which included BA … Iberia … and Vueling … a low-cost airline.

The second group was led by Lufthansa … which acquired Swiss … (formerly Swissair) … Austrian Airlines … Brussels Airline … (replaced Sabena) … and low-cost airlines Eurowings … and German Wings.

The third group … of Air France/KLM … operating Transavia … originally created by KLM … Air France is also starting another low-cost … Joon.

The acquisition … or development … of a low-cost airline by the three major European groups … is a recognition of the significant success of the new European low-cost … and an attempt to participate in this expanding market.

The strategy followed by these three major groups … is to concentrate their traditional operations … on the long-haul markets … and to expect their low -cost subsidiaries … to regain a reasonable market presence … on the short to medium routes in Europe.

This assumes … that the long-haul market … will not be seriously threatened … by new low-cost airlines attempting to achieve a profitable operation on the long-haul market.

Long haul/low cost airlines … first began operating in Asia.

“Long-haul” market is defined here … as any operation of more than 4,500 kms.

One of the contenders … in the long-haul low-cost market is Air Asia X … which was originally targeting long-haul markets from Kuala Lumpur in Malaysia … to Sydney Australia … and from Kuala Lumpur … to London England.

The key features of the Air Asia X Business Plan are:

  • Single aircraft type operation … (wide-body) A-330 …

B-767-300 etc.

  • Daily aircraft hours utilization of 16 hours/day +
  • High density seating … and assigned seating

[to help boarding]

  • Discretionary income generated by all frills … (food … drinks … entertainment … baggage … certain seats etc.)
  • Connections offered … for a fee … but no hub and spoke.
  • The L.C.C. terminal at Kuala Lumpur Airport … and Gatwick in London.

Air Asia X has set as an objective … to achieve operating costs of 50% less than the competition … which is a very challenging objective.

The other major low-cost … long-haul contender … is Norwegian International … which is hoping to use more narrow-body aircraft on Atlantic routes … such as Boeing 737 Max … to connect Ireland and Scotland … with secondary airports in the U.S.

But adopting the European model to a long-haul operation has been challenging … and Norwegian’s long-haul operation is running lean. … [difficult to replace aircraft if mechanical] … (poor on-time performance)

While it was able to register its aircraft in Ireland … to benefit from lower corporate tax … Norwegian was not able to circumvent labour law by hiring Thai crew.

Ryanair had been able to sign up its flying personnel … to an individual contract … in Singapore  (now threatened).

In spite of all these efforts … in both Asia and Europe … long-haul low-cost operation has yet to demonstrate clearly … that this model … ensures sustained financial viability.

The growth of low-cost carriers … particularly Ryanair and EasyJet … has been nothing short of spectacular.

Today … Ryanair is the largest European airline … in terms of passengers carried annually.

Perhaps feeling that the low-cost market is becoming saturated … some low-costs have now decided … to attract a portion of the business traveller … by offering a “modest” business product and thus enjoying better yields.

This has given rise to a “hybrid” model for some low-costs.

Their “Business Plus” product includes:

  • Travel flexibility (ability to change flights)
  • Reserved seat priority
  • Booking priority
  • Baggage allowance, and
  • Dedicated Business check-in at airports

Typical of those are WestJet and Southwest in North America … and EasyJet as well as Ryanair on some European routes.

Some of those low-costs are also offering connection services … which had not been available previously.


In the extreme case of the Ultra-low-costs … every possible feature … such as choice of seats … baggage … any food or entertainment etc. … is the subject of additional price.

A number of ultra low-cost airlines … in the U.S.A. … are leading the way.

Typical of those are “Spirit Airlines” and “Frontier”.

The traditional Ryanair is still the true low-cost … and “no frills” champion … but for these ultra low-cost airlines … ancillary revenues account for an increasing part of their profits.

Internet … and fare search engines … have strongly increased the transparency of pricing … and the face value of tickets … has become the main driver … for customer purchasing behaviour.

Promoting the idea that customers will only be charged … for the services they chose.

For the airlines … ancillary fees represent a high revenue potential … with a large profit margin.

At the centre of the strategy … of those ultra low-cost airlines … lies the need to be a low fare leader in the market.

They aim at operating at fares … at least 25% lower than charged by the competition.

These airlines are planning average daily utilization … of more than 12 hours/day

… and an average load factor of over 85% or more.

New flights to small airports … is also a component of their strategy.

Finally … ancillary revenues have the advantage of being less seasonal … for example … fares move up and down … but baggage fees stay the same.

Three new ultra low-cost airlines are presently being planned in Canada.

“SWOOP” … the new WestJet airline’s … ultra low-cost … will begin domestic flights …. In June … with flights between Abbotsford in B.C. … and Hamilton and Halifax.

While fares will be at rock-bottom levels … SWOOP passengers … will similarly pay for everything beyond the seat itself.

In some cases … ancillary fees may exceed the cost of the fare.

Jetlines … and FlyToo … are still hoping to start operating in the next timeframe … hopefully in 2018.

Required financing is said to be mostly in place … and their plan is said to follow the same successful ultra low-cost model.

We wish them the best.


There are several important topics … which given time constraints … we have not been able to explore … such as:

  • The nature and impact of airline alliances
  • The “Open Sky” air bilateral … originally promoted by the U.S.A. … to guide aviation rights bilateral negotiations … which increased international competition.
  • and the controversy surrounding the definition of “fairness” in the implementation … of Open Sky Air Bilaterals between Gulf Airlines … and the European and U.S. legacy airlines.

Those subjects … and others … have an impact on the evolution of airline markets … and would require further discussion.


Prof. John Saba, McGill University (right) and Mr. Hector Ramirez, Honduras Representative to ICAO

Guest Lecturer, McGill University

Prof. John Saba, McGill University (right) and Mr. Hector Ramirez, Honduras Representative to ICAO

Prof. John Saba, McGill University (right) and Mr. Hector Ramirez, Honduras Representative to ICAO

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Pierre Jeanniot receiving the Officier de la Légion d'honneur de France

Named Officer of the French Légion d’Honneur

Pierre Jeanniot receiving the insignia of the Officier de la Légion d'honneur de France from Mme. Kareen Rispal, Ambassador of France to Canada.

Pierre Jeanniot was named Officer of the French Légion d’Honneur by the President of the Republic of France on 14th of April 2017 in recognition of his remarkable professional career and exceptional leadership of the International Air Transport Association. The insignia was awarded by the Ambassador of France to Canada, Mme. Kareen Rispal, at a ceremony held at the Consulate of France in Montreal on 13 November 2017.





Cher M. Jeanniot,

Monsieur le Ministre,

Distingués invités,

Chers amis,

Nous sommes réunis ce soir pour célébrer la juste reconnaissance par la France du parcours éminent de M. Pierre Jeanniot.

M. Jeanniot

Né à Montpellier en 1933, vous êtes représentatif de ce que peuvent réaliser de meilleur nos compatriotes de l’étranger. Vous illustrez en effet l’excellence française déployée à l’international. Formé sur le terrain, vous avez gravi tous les échelons dans le secteur de l’aviation civile, au sein d’Air Canada, pour finalement accéder aux fonctions de président directeur-général d’Air Canada, mandat que vous avez exercé de 1984 à 1990.

A la tête d’Air Canada, vous avez piloté le projet de privatisation de l’organisation, qui était alors une société d’État. La restructuration de l’entreprise, que vous avez conduite avec succès, vous a valu d’être reconduit pour un deuxième mandat de président directeur-général.

Vos mérites ont pleinement justifié une première reconnaissance de notre pays, puisque vous avez été fait Chevalier de la Légion d’honneur en 1991, un an après votre cessation de fonctions en qualité de PDG d’Air Canada.

En 1993, vous avez été le premier Français à diriger l’Association du transport aérien international (IATA), créée en 1945 et dont le siège est à Montréal. Premier et seul citoyen français jusqu’à ce jour élu à ce poste, on vous a surnommé “l’ambassadeur de l’aviation civile” et sous votre gouvernance l’IATA a été reconnue dans le monde entier comme le “porte-parole du secteur de l’aviation civile” pour avoir su faire valoir les intérêts du milieu international des transporteurs aériens.

Cher Pierre Jeanniot,

Durant votre mandat, qui s’est achevé en 2002, votre remarquable implication pour aider le secteur de l’aviation civile à traverser les périodes de crises et à en réduire les répercussions sur l’aviation doit être saluée. Vos talents ont été particulièrement manifestes lors des événements tragiques du 11 septembre 2001. Vous vous êtes ainsi attaché à atténuer les impacts de cette crise majeure en promouvant la coordination des échanges d’information entre les transporteurs aériens et les instances gouvernementales mais aussi l’harmonisation des réponses du secteur de l’aviation civile avec celles des autorités gouvernementales du Canada, des États-Unis, de l’Union européenne et de l’OACI, l’objectif ultime étant de rétablir le bon fonctionnement du réseau mondial de l’aviation et d’apporter des réponses rapides, efficaces et sécuritaires.

En votre qualité de directeur général de l’IATA, vous vous êtes fixé des objectifs ambitieux :
– renforcer, grâce à la mise en place d’un organisme externe d’évaluation, la sécurité du secteur de l’aviation civile internationale afin de réduire de 50 % le taux d’accidents sur dix ans, cible qui a été atteinte dès 2005
– convaincre par ailleurs le secteur de l’aviation civile de reconnaître ses responsabilités environnementales (normes pour réduire le bruit et les émissions)
– promouvoir une expansion efficace et durable de l’espace aérien et des aéroports.
– enfin, accroître le nombre de membres de l’IATA de 200 à 280 transporteurs aériens (en y intégrant les transporteurs chinois).

M. Jeanniot,

Grâce à votre action, l’influence de l’IATA a été renforcée. Cette institution est également devenue un important fournisseur de produits destinés au secteur de l’aviation, notamment en matière de formation et de perfectionnement des ressources humaines. Votre engagement indéfectible au sein de l’IATA a été salué par tous vos pairs et vous ont valu le titre de « directeur général émérite ».
Vos compétences, unanimement reconnues, vous ont ensuite conduit à occuper le poste de président du conseil de Thales Canada, entre 2003 et 2009.

Pierre Jeanniot

Au titre des nombreux et éminents services rendus au secteur de l’aviation civile internationale en votre qualité de directeur général de l’IATA, organisation aujourd’hui reconnue mondialement et constituant une référence dans le domaine du transport aérien, j’estime pleinement justifié de vous promouvoir au grade d’Officier de la Légion d’honneur. Cette très haute distinction est une juste récompense de votre indéniable contribution à l’aviation civile internationale et au rayonnement de la France.

Monsieur Pierre Jeanniot,

Au nom du Président de la République Française, et en vertu des pouvoirs qui nous sont conférés, nous vous faisons Officier de l’Ordre national de la Légion d’Honneur.








Mme l’Ambassadrice de France au Canada, Mme. la Consule générale de France à Montréal, distinguished guests, membres de la famille, chers amis.

Permettez-moi, en tout premier lieu, de remercier chaleureusement Mme. Rispal, l’Ambassadrice de France pour s’être déplacée à Montréal à l’occasion de cette cérémonie et pour les commentaires élogieux qu’elle a eu la bonté de m’adresser.

Mais je tiens aussi à la remercier pour les efforts de l’Ambassade, qui a contribué à dénouer un certain imbroglio au sujet de ma nomination en tant que Chevalier.

Efforts qui ont permis d’authentifier cette première nomination qui n’avait pas, semble-t-il, été homologuée.  Et je vous en suis totalement reconnaissant.

Je voudrais également très sincèrement remercier la Consule Générale de France à Montréal d’avoir mis « sur les rails »  le processus de promotion.

Processus qui ne semble pas, d’ailleurs, avoir été démarré par ses prédécesseurs, sans doute faute de temps.

Je voudrais également dire à la Consule Générale combien je suis sensible à cette chaleureuse réception organisée chez elle à l’occasion de cette promotion.

Mme. l’Ambassadrice, je reçois en toute humilité cette importante distinction.

Distinction qui revient de bon droits aux nombreux professionnels et spécialistes qui ont contribué aux succès de l’Association Internationale d’Aviation Civile.

I am much honored to have served as the International Air Transport Association`s leader for ten years.

The very significant and successful achievements by the International Air Transport Association during that ten-year period is very much a function of the professionalism, the dedication of the outstanding group of specialists who made those successes possible.

I will be forever grateful for their outstanding contribution.

Durant cette période, le volume du trafic aérien a presque doublé.

Nous avons connu, et nous connaissons toujours, une formidable expansion du trafic Asiatique.

La croissance a été très rapide aux Indes, en Malaisie, en Indonésie, au Vietnam et particulièrement en Chine.

Nous avons connu l’émergence de nouvelles lignes aériennes, et les besoins pressants d’effectifs d’expérience ainsi que de personnel qualifié.

Ces conditions de croissance accélérées nous posaient un important défi, qui a mis considérablement à contribution les ressources de l’IATA.

At the same time, and in spite of those excessive demands on our resources, our great professionals enabled our industry to achieve a 50% reduction in the fatal accident rate over a 10-year period.

Et nous avons réduit le taux d’accidents de 50% en dix ans!

The successes of our team were numerous and impressive, but let me mention only two in the interests of time.

Il y a une vingtaine d’années, les pays Africains ne représentaient moins de 3% du trafic mondial et malheureusement, étaient considérés responsables de quelques 20 à 25% de tous les accidents aériens graves.

Les causes étaient connues, mais elles étaient malheureusement fonction de multiples facteurs.

Il y avait des carences en équipement, en formation, en infrastructure, en compétences, en financement, etc.

Il était difficile de persuader les gouvernements d’agir, de prendre la chose au sérieux.

Il était difficile de les convaincre de conserver les redevances aériennes pour les besoins de l’aviation plutôt que de les verser dans le budget consolidé.

Les progrès étaient très lents.

Par hasard, le deuxième mandat du Président Bill Clinton nous présenta une opportunité.

Le Président Clinton avait décidé d’examiner la possibilité d’augmenter les échanges commerciaux entre les Etats-Unis et le continent Africain.

Il proposait de négocier un nombre de nouvelles liaisons aériennes entre les deux continents afin de stimuler les échanges commerciaux.

Nous avions déjà rencontré Rodney Slater, le nouveau secrétaire du transport du Cabinet Clinton.

Rodney, un Afro-Américain, avait été chargé par Bill Clinton d’agir comme ‘Sherpa’ pour la visite que Bill Clinton se proposait de faire.

Le directeur pour l’Afrique de l’IATA était un Sénégalais diplômé de la Sorbonne du nom de Sassy N’Diaye, grand fumeur de cigares qui était responsable de nos relations à l’IATA avec les divers gouvernements Africains.

Nous avons proposé que notre Directeur pour les Relations Africains accompagne le Secrétaire du Transport pour cette visite préparatoire.

Il a été facile de démontrer, grâce aux études détaillées accomplies par nos services techniques, qu’il était nécessaire d’améliorer, considérablement, la sécurité des liaisons aériennes avant de développer des nouvelles lignes.

Et il était clair qu’il y avait suffisamment de fonds pour les besoins en amélioration si ceux-ci étaient alloués aux aéroports, aux contrôles aériens etc.

De cette intervention est né le programme Américain nommé « Safe Skies Over Africa » qui devint une condition à la visite du Président Clinton.

Cet important « coups de pouce » a grandement aidé nos spécialistes à suggérer et encadrer des mesures visant à améliorer substantiellement la sécurité aérienne en Afrique.

Le deuxième exemple, que je me proposerais de mentionner rapidement, concerne l’implémentation des activités de l’IATA en Chine.

La République Démocratique Chinoise était bien sûr déjà membre de l’Organisation Internationale de l’Aviation Civile, organisme des Nations Unies, mais avait jusqu’alors choisi de ne pas être membre de l’IATA.

Un accident aérien spectaculaire devint un élément déclencheur qui nous procura une opportunité de rencontrer le Ministre Chinois du Transport, et de le convaincre de la nécessité de permettre aux compagnies aériennes Chinoises de se joindre à l’IATA.

Un Boeing 737 d’une ligne aérienne Chinoise  venait de percuter une montagne, résultant en une perte totale.

Les derniers mots prononcés dans le poste de pilotage avant l’accident enregistrés par la boite noire indiquaient clairement des lacunes importantes, élémentaires, dans la formation de leurs pilotes.

Le commandant n’avait pas compris le signal vocal émis par l’avion lui demandant de changer d’altitude.

Sans pleine compréhension des conventions universelles requises, l’expansion internationale rapide espérée par le gouvernement Chinois était voué à l’échec.

Suite à notre discussion, le Ministre du Transport nous a alors proposé de familiariser tous leurs commandants de bord avec les conventions internationales sous peine de perdre leurs fonctions de commandant.

Ce projet fut suivi rapidement par un projet conjoint, «un joint venture », entre la Chine et l’IATA pour traduire en Mandarin la bible, les instructions sur le transport en avion des matières dangereuses.

Et ainsi de suite, et je dois dire qu’une fois le support du Ministre du Transport acquis, l’implémentation des services et normes de l’IATA s’est déroulée rapidement.

Aujourd’hui, les activités de l’IATA en Chine sont plus importantes que dans n’importe quel autre pays.

Durant la période de quelques dix années que j’ai passée à la tête de l’IATA, on m’a souvent infligé le titre d’Ambassadeur de l’Aviation Civile Internationale.

J’ai été mêlé à bien des conflits internationaux, en particulier ceux qui affectaient directement l’aviation commerciale internationale.

Parfois il est question de ‘point de vue’.

Je me souviens d’un dicton Africain qui dit que ‘pour une grenouille au fond d’un puit,  l’univers apparait très petit.

J’ai été témoin de l’importance de la diplomatie dans le règlement des conflits.

Et j’ai pu observer “qu’un Ambassadeur qui s’amuse … c’est plus rassurant … qu’un Ambassadeur qui travail » …

Et, en dépit des nombreux conflits internationaux qui sont présents aujourd’hui, je tiens à offrir à l’Ambassadrice de France au Canada nos meilleurs vœux pour un séjour des plus agréable.




COMMERCIAL AVIATION An incredible journey … an incredible future

Address to the Montreal International Aviation Club >>
by Pierre J Jeanniot, delivered by Jeffrey Shane, General Counsel, IATA

24 November 2016  >> 

It’s always a special pleasure to meet with a group of aviation enthusiasts – people who understand what a remarkable industry this is and what it has contributed to the quality of the world we live in!

Even for enthusiasts, however, it’s easy to forget what an incredible journey it has been over first century of aviation, and so I am going to provide a brief review of the highlights.

Then we will spend a few minutes considering together what we might expect in the future, given the remarkable trajectory this industry has been on, and given the exponential rate at which aerospace technology has advanced.

First, the history. . . .

Two years ago, we celebrated 100 years of the first commercial flight, when a flying boat carrying one passenger flew 21 miles from St. Petersburg, Florida, to Tampa at the breakneck speed of 55 miles an hour. The flight lasted 32 minutes.

From this humble beginning has emerged a global airline industry that last year transported 3.8 billion passengers worldwide.

No one could have imagined, back then, the extraordinary success that would be achieved in civil aviation over the next 100 years, nor the fundamental transformation of life on this planet that it would engender.

But it was by no means a linear progression. There were some important triggering events and some significant accelerators.

It’s an uncomfortable proposition, but there can be no denying it: Wars are great accelerators of technology!

The First World War provided a surge of innovation in aviation. The occasional bomb dropped by hand at the start of the war was nothing compared to the thousands of kilos of bombs carried by the much larger twin-engined airplanes which had joined the battle by 1918.

Engines quadrupled in power. There was a vast increase in the number of trained pilots. By the end of the war, more than 150,000 aircraft had been produced by the major combatants.

But none of the aircraft available at the end of the First World War were designed to carry either freight or passengers.

While potential passengers remained a bit skeptical about the safety of air travel, the great advantage of speed for freight and postal services was recognized almost immediately.

In 1919, Pierre-Georges Latécoère – an aircraft manufacturer in Toulouse – obtained a subsidy from the French government and some surplus military aircraft and started to operate regular mail services between Toulouse and Casablanca and eventually to Dakar.

Its successor, Aéropostale, began regular flights between Buenos Aires to Natal in northern Brazil, and across the Andes to Santiago.

In Canada, the first bush flying took place in 1919 to survey the Quebec wilderness.

Air mail services expanded rapidly in North America, and by 1925 the major U.S. banks had become regular customers.

These early commercial air services laid the foundation for the establishment of Imperial Airways in Britain. The first leg of its service from the UK to Australia was inaugurated in 1927.

Pan American Airways started its first international passenger service between Key West and Havana in 1928.

By 1931, KLM was operating a regular service between Amsterdam and Djakarta.

Air France was born in 1933, a regrouping of four small French airlines.

The pace of development quickened.

The 1930’s brought more powerful engines, metal fuselages instead of wood, retractable landing gear, and variable pitch propellers.

It was also in the 1930’s that the Boeing 247 led the way in revolutionizing air travel. Its two 550-horsepower Pratt & Whitney “wasp radial” engines propelled the airplane 50 mph faster than any other airliner at the time, and it was more economical to operate.

The Douglas DC-3, the airplane you see in the picture, was one of the most popular and versatile aircraft ever produced. General Eisenhower rated it as one of the most significant items of war-winning equipment. Over 17,000 were produced.

The Second World War represented another major aerospace accelerator. It accelerated development of more efficient piston engines such as the Rolls Royce Merlin, and major progress in aerodynamics. It also saw the introduction of large 4-engined bombers, the Flying Fortress and the Lancaster, each capable of carrying up to 10 tons of bombs.

But bigger was not always better! The most powerful engine built up to then was developed by Pratt & Whitney for Boeing’s 4-engined StratoCruiser. Each engine generated 4,300 horsepower and had 28 cylinders. Because they were so complicated, however, reliability became a major problem.

The most important development engendered by World War II, of course, was the introduction of jet engines and their use on fighter aircraft. The first of these, the German Messerschmitt Me262 and Britain’s Gloster Meteor, entered service in 1944.

This era also witnessed important developments in rocketry, notably Germany’s V1 and V2 guided missiles.

Commercial air traffic exploded during the 1950’s, growing from 3 million to 57.7 million passengers by the end of the decade.
The U.S. carriers Pan Am, TWA and Eastern became major players, and dominated the market.

European airlines also experienced a revival.

The 1950’s witnessed the introduction of the Douglas DC-4, DC-6 and DC-7, as well as the Lockheed Constellation, Vickers Viscount and Vanguard Turboprops. A transatlantic crossing took between 12 and 14 hours, using 4-engined aircraft carrying over 80 passengers.

Transpacific journeys required multiple stops – Hawaii, Midway and Guam.

The first commercial jet airliner was the DeHavilland Comet. With four so-called “Ghost” turbojet engines built into the wings, it first flew in 1949. Each engine developed 5000 pounds of thrust and consumed 1.2 pounds of fuel per pound of thrust per hour. Production was eventually halted due to catastrophic metal fatigue attributable to the airplane’s faulty design, but the airplane had been a game changer.

By 1955, the Pratt & Whitney JT3 engine was developing 13,500 pounds of thrust, but used 24% less fuel than the Comet’s engines.

The Douglas DC-8 and the Boeing 707 had twice the capacity and flew at twice the speed of earlier 4-engined propeller aircraft. In other words, they were four times as productive.

1970 saw the introduction of the Boeing 747, the first wide-body, with a twin aisle fuselage with three times the capacity of the Boeing 707.

At this point it was possible to say that air travel was no longer reserved primarily for the elite. The era of mass air travel had arrived.

An airplane designed exclusively for the elite, however, was the supersonic Concorde, produced cooperatively by France and the UK. Entering service in 1976, it was designed to fly 100 passengers at twice the speed of sound. It was a great technical achievement, but ultimately an economic failure. There just weren’t enough elite passengers. It ceased operating in 2003.

The development of turbofan engines in the late 1980’s substantially increased the efficiency of the turbojet. This innovation consisted of the addition of a larger fan, which passed part of the air around the engine, making it run cooler and quieter.

Steady increases in the size and range of wide-body commercial airplanes being produced by Airbus and Boeing required bigger, more powerful and more efficient engines. Improvements in the by-pass ratio have meant more power.

The Airbus A380 is the largest airliner today and can carry a maximum of 853 passengers, with a range of 15,300 kilometers and a cruising speed of Mach 0.86. Remember those “Ghost” turbojets on the DeHavilland Comet with their 5000 pounds of thrust? The A380 is powered by Rolls Royce Trent 900 engines. Each one produces 70,000 to 80,000 pounds of thrust.

A potential competitor to the A380 in terms of cost – but still to be produced – is the Boeing 777X with a range of 14,000 kilometres and a capacity of 440 passengers. The 777X engines will each deliver upwards of 105,000 pounds of thrust, and yet fuel consumption per seat will be barely 18% of that of the Comet!
Commercial aviation has become a very efficient, worldwide transportation system, currently transporting – as I said earlier — some 3.8 billion passengers a year. Travel from one side of the world to the other now takes a day or less.

Particularly because of the growing middle-class in India, China, and many other developing economies, traffic is expected to continue to grow at around 4.5 percent a year. People enjoying some measure of disposable income for the first time want to travel, and a growing aviation market is thus assured.

Given the enhanced efficiency of aircraft together with liberalization and competition, the price of air travel will continue to fall in real terms.

The question now is: Has commercial aviation reached a plateau in terms of innovation?

We could still build bigger airplanes, although some think the A380 may already be too big. How much more improvement are we likely to see in aerodynamics based on the traditional wings-on-a-tube configuration? Are our avionics and propulsion systems approaching their effective limit?

In the not too distant future we can expect to see the emergence of unconventional aircraft shapes such as a blended or hybrid wing body, increasing aerodynamics and improving structural efficiency.

Alternative positioning of the engines, perhaps above the wings or in the tail, is also being explored to reduce drag.

Development of a quiet supersonic jet is well advanced. NASA is planning to unveil a prototype in 2019, and a company called Aerion is developing a small supersonic private or corporate jet. Eventually, small commercial supersonic jets are expected to capture some 1% of the market.

Another company, curiously called Boom Supersonic, is developing a supersonic airliner using composites and today’s vastly improved turbofan engines. It will be efficient enough, its sponsors say, to match today’s subsonic business class pricing. It will comply with applicable noise regulations, they say, despite naming themselves “Boom.”

Studies to develop a hypersonic airliner are also underway, aimed at meeting the needs of wealthy customers in a hurry — London to Sydney in two to three hours, for example.

There is certainly no shortage of new ideas. Richard Branson’s Virgin Galactic project is one of them. The epic round the world flight of Solar Impulse II is another, and of course commercial drones.

Each new idea introduces a certain discontinuity in existing markets, and creates potential new markets.

They challenge us to think about the unpredictable, or even what might have been deemed “impossible” – ideas that have the potential to reshape the aviation landscape.

Most are the product, of course, of new, emerging technologies.

Richard Branson’s Virgin Galactic project is designed to commercialise space tourism.

Much was learned from the crash of the ill-fated Spaceship I. The first flight of its successor, Spaceship II, is planned for next year.
Already, over 700 people have pledged the ticket price of US$ 250,000 to enjoy a few minutes in space.

Here’s how it will work: Spaceship II will be carried by the mothership, a converted 747, to an altitude of 50,000 feet. At that point, it will separate and fire its rocket engines to reach supersonic speed. After 70 seconds its engines will cut out and the spaceship will cruise to its peak altitude.

At 31 kilometers above the earth passengers will experience true weightlessness. When they reach 100 kilometers they will achieve astronaut status, as officially defined by the Fédération Aéronautique Internationale, an aviation sports club based in Lausanne that apparently decides who is an astronaut and who isn’t.

Spaceship II will re-enter the atmosphere at an angle to minimize friction, then switch to a gliding position at an altitude of 24 kilometers above the earth. From there it will take 25 minutes to glide back to the spaceport.

One of the most remarkable accomplishments in the entire history of aviation was the successful round the world flight of Solar Impulse II, which circled the globe without burning a drop of fuel – relying simply on solar-generated electric power.

It took two men with a crazy dream to do it. Bertrand Piccard is a medical doctor, a psychiatrist by training, and a guy who had circumnavigated the world in a balloon in 1999, earning a world’s record for the longest flight ever – more than 28,000 miles. If the name Piccard sounds familiar, it’s because he’s the son of Jacques Piccard, who with American Don Walsh in 1960 dived in a bathyscaphe to the deepest place on earth, the Mariana Trench in the Pacific Ocean. Bertrand is also the grandson of Auguste Piccard, who while studying the effects of cosmic radiation in order to validate some of Einstein’s theories, climbed more than 14 miles high in a balloon. Interesting family.

The second man was André Borschberg, a mechanical engineer, an entrepreneur, and a former pilot with the Swiss Air Force.

This is a fascinating story and so I’m going to take a couple of minutes to share it with you.

Aircraft and engine manufacturers told them their dream was impossible – too big, too light, impossible to control in flight. None offered any kind of support.
During its ten years of development, the two men succeeded in raising approximately US$ 100 million from non-aviation sponsors, including makers of pharmaceuticals, watches, and elevators. The aircraft was designed by the Engineering Department of the University of Lausanne.

Solar Impulse II was powered by specially designed lithium-ion batteries weighing 366 kilos. It carried more than 17,000 solar panels on its wings. It had a wingspan of 72 meters – wider than that of a 747 –and a carbon fibre body. It weighed 2,300 kilos.

The flight plan was designed to optimise energy production and conservation. During daylight hours, the aircraft flew at an altitude of around 8,500 meters, descending to 1,500 meters at night. Remember, it was solar-powered; it flew all night long on battery power. I think it’s a problem when my rechargeable shaver dies before I’m done shaving. The consequences might be a bit different if the batteries on a solar-powered airplane died somewhere over, say, the Mariana Trench.

But the batteries never died. Solar Impulse II flew around the world in 17 legs, the longest being some 4500 miles from Nagoya, Japan, to Hawaii – a flight that took 117 hours. The two men alternated legs – only one flew at a time – and Borschberg did the Japan-Hawaii leg. That one leg turned out to be the longest solo flight in history. He was up there nonstop for five days and five nights, grabbing sleep in 20-minute catnaps. Hard to imagine.
Just for clarity, it was the longest solo flight in terms of time aloft. The previous record was set by the late Steve Faucett piloting the Virgin GlobalFlyer. He flew continuously for 76 hours – a little more than three days – the differences being that he was flying a piston-engined aircraft and circumnavigated the globe without refueling. Less time in the air, yes, but a lot more distance. I leave to you to decide which was the more remarkable achievement.

Piccard and Borschberg are now in the process of creating an international association to promote renewable energy and to encourage the development of new technology. They predict that it won’t be long before we have electric airplanes transporting up to 50 passengers on short- to medium-haul flights.
Drones. Much of the dynamism in the commercial drone market is fuelled by the interest shown by the internet giants.

Amazon and Alphabet – Google’s parent corporation — plan to use drones to deliver packages. UPS, Fedex and Deutsche Post are actively exploring similar concepts. Clearly, the “drones business” has great potential to reduce costs and improve service.

But it is likely to alter considerably the landscape of air transportation, at least at the local and regional level. Unmanned commercial aviation requires development in automated flight controls and airspace management technology including sensors and algorithms to avoid hazards and collisions with other aircraft.

And, by the way, progress in unmanned aviation technology will also benefit driverless car technology.

Unhappy with Montreal’s traffic these days? What about drones designed to carry people? Well, the German start-up E-Volo is thinking about you. It is developing a 2-seater Volo-copter, the first certified electric-powered vertical take-off and landing aircraft – VTOL — which it plans to have in service by 2018. A 4-seater is expected in 2020.

E-Volo plans to introduce these products in places such as Singapore and Dubai, forward-looking jurisdictions where the airspace is relatively small and thus more manageable.

Uber and Airbus’s Silicon Valley outpost are working together to develop a concept for helicopter ride sharing. A prototype of an autonomous vehicle designed to fly cargo or a single passenger is expected next year.

The co-founder of Google, Larry Page, is personally funding a flying car start-up, while the CEO of Tesla, Elon Musk has a project to develop an electrical VTOL aircraft.

Okay – let’s shift gears now. We’ve been talking about aviation from its beginning, through its incredible evolution over the course of the last century. As impressive as that history is, however, let’s face it – it’s wholly terrestrial.

So now it’s time for a little star-gazing!

In order to protect our species, ensure its long-term survival, and fulfill our desire to continue to explore the universe, humankind must colonize beyond Earth. All we need to do, therefore, is achieve the ability to operate routine flights between the Earth and Mars.
Why Mars? It’s on the edge of what astronomers call the “Goldilocks Zone” – not too hot and not too cold for human beings to survive. Whether it’s “just right” may be less clear. But Mars is more or less similar in size to our Earth – the photo shows them to scale — and the evidence seems to be that it has water.

How do we achieve what appears – today – to be an impossible dream?

Much has been learned from the Apollo lunar program – most importantly some very valuable lessons in how to improve the critical power-to-payload ratio.
Clearly, a new, revolutionary propulsion system will have to be one of the essential breakthroughs.

During the Cold War and the space race between the United States and the Soviet Union, successively more powerful launch systems and ever bigger and more effective multi-stage rockets were developed to launch satellites and fly astronauts into space.

The largest of these, NASA’s mighty Saturn 5, which powered the Apollo lunar program, weighed almost 5 million kilos at lift-off. The payload, however, was less than 54,000 kilos – a ratio of payload-to-booster of 1.6%. Have we reached the limit in terms of the booster to payload ratio? Certainly not.
Moreover, thanks to the International Space Station program, we are learning a lot about how to work, grow things, and even to make things in space.
Twenty-four astronauts have flown around the moon and 12 have walked on its surface. The first two missions were Apollo 11 and 12, in 1969; the last was Apollo 17 – in 1972.

But let’s get back to our mission to Mars.

As I said, we’ll need a revolutionary, completely different, propulsion system.

Thermonuclear fusion powers the sun, and the potential for nuclear fusion, particularly the issue of how to contain and exploit the energy generated, has been the subject of intense research for many years.

Scientists estimate that a fusion-powered space ship could reach around 30,000 kilometers a second — 7 to 10% the speed of light. That’s zipping right along.
Other development work has focused on Ion Thruster engines, a form of electric propulsion.

Ion thruster engines are practical only in the vacuum of space, but the technology is highly efficient in terms of consumption of the xenon gas that provides the fuel.

Of course, once we get to Mars, we’ll have to deal with a pretty challenging environment.

The surface gravity on Mars is 38% that of the Earth; the Martian atmosphere is mostly carbon dioxide — CO2; and the atmospheric pressure on the surface of Mars is about 1% of what we have on Earth.

Only trace amounts of molecular oxygen are present in the mostly CO2 atmosphere of Mars, although large amounts of ice are thought to exist both underground and on the surface. It has been estimated that if the ice at the Martian South Pole melted, the planet would be enveloped by an ocean 5 to 11 meters deep.
We know the soil on Mars contains nitrogen, sulfur, hydrogen, phosphorous, carbon, and oxygen – all elements essential to life.

As on Earth, Mars’ tilted axis results in seasonal climate variations. The average temperature is minus 46 degrees Celsius, ranging from minus 146 degrees in winter at the Poles, to plus 35 degrees in summer at the equator.

Here’s a factoid that you might find interesting: A Martian day – the time it takes Mars to rotate around its axis — is just 40 minutes longer than a day on Earth. A Martian year, on the other hand, is 686 Earth days due to its greater distance from the sun.

NASA scientists believe that it is technically feasible to bring about on Mars the very considerable climatic changes necessary for humans to live there.
Such a hugely ambitious venture would of course require major international collaboration to overcome the many challenges, and involve enormous cost.
But the pioneers of this venture needn’t be humans; they can be robots.

The prospect of the human race one day emigrating to a new planet is tremendously exciting – and definitely worth it!

In a nutshell … And still gazing into my crystal ball —

Over the next 30 to 50 years, space tourism will become a major attraction, with hotels in orbit, trips on board orbiting space modules, and even round trips to the moon.

Major developments in solar panels and in our ability to store electrical energy will enable regional and local aviation to be mostly powered by clean electricity.

And improvements in biofuel and electrical power will completely eliminate the generation of CO2 by commercial aviation.

Aviation will become totally green!

Algorithms and sensors will be perfected, leading to automated, safe personal air travel.

Personal VTOL vehicles will be widely used for urban and regional transportation, becoming viable alternatives to road transport, particularly in gridlocked urban areas.

International cargo flights will be totally unmanned, and international passenger flights will be totally automated, although they will still have one pilot on board.

And by the end of this century —

We will have mastered a new propulsion technology, and the trip from Earth to Mars will have become a daily journey – or less.

A human colony will have been established on Mars and will be developing agriculture and local automated industries.

Humankind thus will have figured out how to survive and even flourish on Mars.

Because medical science will certainly have found a way to extend – considerably – our life expectancy …

you are invited to a meeting of the International Aviation Club of Montreal on November 24, 2116, to verify the progress made by the commercial aviation industry.

Thank you!

Au revoir, Tony Tyler; Welcome Alexandre de Juniac

30 AUGUST 2016 >> 

Distinguished guests, friends and former colleagues

I am honored – and happy – to be part of this gathering on the occasion of “IATA’s Changing of the Guard”.

I have had the privilege, over the past few years, to get to know Tony Tyler and to witness his important contribution to the international aviation world. Tony’s style of leadership contrasted significantly from that of his immediate predecessor, reminding us that much can be accomplished by a persuasive, quiet and diplomatic style.

Many others have highlighted Tony’s many accomplishments which have been widely acclaimed, and I would not attempt to offend his well-known
modesty by repeating those numerous achievements here.

But I believe that I am expressing the sentiments of the entire Montreal international aviation community when I express our gratitude to Tony for his – and IATA’s – contribution here.

And in saying on their behalf, “au revoir, bon vent” and our best wishes in your future endeavours.

At the same time, I wish to say to Alexandre de Juniac “bien venu et nous espérons vous voir ici souvent – vous êtes chez vous!” as you will remember, of course, that IATA is a Canadian organization, having been created by an Act of the Canadian Parliament.

We all know that Alexandre brings to the Director General’s role – a unique combination of government experience, aerospace hi-tech manufacturing and, of course, airline leadership as CEO of a major international airline. He will require all of that experience and wisdom to steer IATA through the turbulent skies our industry faces all too frequently!

It has often been said that management is much more an “art” than a science.

Some business schools have yet to make that observation!

One of our well-known Canadian authors, “Pierre Burton”, once described a Canadian as “someone who can make love in a canoe”.

Now, I don’t know how many of you have ever tried, but I can assure you that to make love in a canoe takes a lot of determination, a certain acceptance of risk, and a great sense of equilibrium.

Determination, acceptance of risk, and a sense of equilibrium – those skills were very useful to me in my role at IATA, and I would encourage Alexandre to acquire a canoe if he does not own one already.

At times, some IATA meetings would remind me of Kevin Costner in the film “Dancing with Wolves”.

All the wolves need attention, but you must always remember that you could become fair game at any time!

Those meetings would sometimes illustrate that “common sense” is not as common as you may think.

It is useful for any Director General to practice the art of letting a consensus emerge. The D.G. does not really have the authority to impose a view. At best he can use “moral-suasion”. and appeal to the solidarity – and moral responsibility – of the participants, reminding them that an “imperfect agreement” is sometimes better than “no agreement”.

If, at the end of the day, you have not disappointed too many – and pleased quite a few – you must have done it right!

But unlike a science, art can mean different things to different people.

A visitor at a painting exhibition was truly puzzled by a Picasso painting and, since the artist was standing by, the visitor enquired
“Mr. Picasso, can you tell us what this painting means to you?”

Picasso smiled and replied “Oh,

approximately 200,000 US dollars!”

Unlike science, the art of management requires different styles for different circumstances, from Mother Theresa to Niccolo Machiavelli!

At times you need the agility of a politician

One of my favorite politicians would say “If you think it is easy to be a politician, try standing on a fence while keeping your ear to the ground!”

At other times, the role may call for the cold neutrality of an impartial judge.

Sometimes it may call for quick action. Le Prince de Talleyrand would say “the art of statesmanship is to foresee the inevitable, and to expedite its occurrence”.

In adversity, we can get some valuable lessons from Winston Churchill’s determination.

In his darkest hour, Churchill would convincingly declare “Never, never, never give up! And if you are going through hell just keep on going!”.

Ladies and gentlemen, it may be wise for me to stop here.

I do not want to sound like the “mother-in-law” giving advice to the newly weds.

It is easy for some of us who have been there to give good advice, perhaps simply to console ourselves that we are no longer in a position to set a bad example.

Once again, Tony, all the best to you!

And Alexandre, we wish you great success. I know that you can count on everyone here, myself included, to support you to the best of our abilities

Thank you very much.

Remise des bourses Pierre Jeanniot

Université de Québec à Montréal >>
Le 25 mai 2016

M. le Vice-Recteur
M. le Directeur-général
Chers boursiers … mesdames et messieurs

Une remise de bourse … c’est toujours un événement très agréable … puisqu’il célèbre la réussite académique.

Vous savez … dès sa création … la Fondation de l’Université du Québec à Montréal … a voulu privilégier l’octroi de bourse aux étudiants les plus méritants.

De fait … lors des deux premières campagnes de levée de fonds … nous avions décidé qu’au moins un tiers des fonds reçu … serait dédié pour des bourses.

C’est une question d’investir dans la matière grise … plutôt que dans les briques !

Je tiens bien sur … à mon tour … à vous féliciter … tous, chacune ou chacun … pour les succès que vous avez obtenu.

Votre réussite démontre bien l’énergie … la volonté … et la persévérance … qui sont nécessaires pour obtenir le succès.

Ce sont des qualités qui sont aussi nécessaires pour réussir dans vos carrières respectives.
Évidemment … je ne voudrais pas négliger totalement le facteur chance … par contre j’ai souvent observé … que plus on travaille … plus on est chanceux!

Et il faut savoir saisir l’opportunité lorsqu’elle se présente.

Bill Clinton … qui avait espoir de trouver un compromis acceptable au conflit Israël-Palestine … disait que Yassir Arafat était la personne qui … « ne manquait jamais une opportunité … de manquer une opportunité. »

La réputation de l’UQAM … c’est largement la réussite de ses diplômés … sans vouloir bien-sûr … minimiser l’excellence de l’enseignement et la recherche.

Mais cette réputation … l’UQAM la doit à la notoriété grandissante de ses diplômés … et j’espère bien que vous serez bientôt … vous aussi … à même d’y contribuer.

Les médias ont souvent tendance … à illustrer les turbulences … qui témoignent d’une jeunesse … un peu trop pressée … de voir notre société évoluer.

C’est le propre de la jeunesse … nous aussi à l’époque … nous avons fait notre part … mais cela peut rendre la tâche un peu plus difficile … à ceux qui dirigeait la levée de fonds.

À mesure qu’elle grandit … l’UQAM et sa fondation … auront de plus en plus besoin de fonds.

La notoriété de ses diplômés … l’excellence de ses étudiants … dont vous êtes un exemple … joue un rôle extrêmement important … auprès des entreprises qui sont sollicitées … lors d’une campagne de levée de fonds.

Nous devons être fier de notre réussite et nous nous devons … de médiatiser encore plus … les succès accomplis par nos diplômés.

À nouveau … félicitations à tous les boursiers … Je vous engage à compléter vos études avec grand succès.

Je vous souhaite … de prendre pleinement votre place … parmi les leaders de demain … et ainsi de contribuer à la notoriété de l’UQAM.

Merci … et bonne chance !



Pierre J Jeanniot, ancient président du Conseil d’administration et président fondateur de la Fondation de l’UQAM, Chloé McNeil, lauréate, et Jean-Christian Pleau, doyen de la Faculté des arts.

Pierre J Jeanniot, ancient président du Conseil d’administration et président fondateur de la Fondation de l’UQAM, Chloé McNeil, lauréate, et Jean-Christian Pleau, doyen de la Faculté des arts.
Photo : Jean-François Hamelin


Pierre J Jeanniot avec Ghania Dahim, conjointe d’Adel Benlagra, lauréat, et Luc-Alain Girdaldeau, doyen de la Faculté des sciences.

Pierre J Jeanniot avec Ghania Dahim, conjointe d’Adel Benlagra, lauréat, et Luc-Alain Girdaldeau, doyen de la Faculté des sciences.
Photo : Jean-François Hamelin


Pierre J Jeanniot avec Benoit Bourque, lauréat, et Stéphane Pallage, doyen de l’École des sciences et de gestion

Pierre J Jeanniot avec Benoit Bourque, lauréat, et Stéphane Pallage, doyen de l’École des sciences et de gestion
Photo : Jean-François Hamelin

“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

Industry Overview and Issues

Industry Overview and Issues

September 2015  >>

For the airline industry, 2014 was a great year. IATA reported a global net profit of some 19.9 billion USD.

This optimistic picture is continuing thus far in 2015, with a forecast industry net profit of 29.3 billion USD.

However, we have yet to see the impact on the world economy of the most recent Chinese financial crisis – and of the current reduction in oil and basic material investments.

The major slump in fuel prices has been the most recent dominant factor influencing the airline industry’s economics.

Airlines had been adjusting their operations, further trimming their costs to achieve profitability under the assumption that oil prices were to remain around the 100 USD/barrel level.

And thus, the rapid decrease in oil prices contributed directly to their bottom line.

For the foreseeable future, as the fundamental law of supply and demand dictates, the current conditions are likely to remain relatively unchanged.

“Supply is up – and demand is down”.

In a nutshell, the U.S. oil supply was recently increased, and the OPEC nations – led by Saudi Arabia -refused to slow production.

Regional instability in the Middle East has not proved to be a significant factor to affect traffic, nor to reduce oil production.

China’s economy is slowing down, and Europe’s is at best lethargic.

Although lower fuel prices are a positive cost factor for the airline industry, the resulting weaker economic growth will eventually have an impact.

The fall of oil prices is also having an impact on airline strategies, with old airplanes finding a new lease of life – and some thin routes, previously uneconomic, may become viable.

But impacting the profitability of individual airlines in 2015, will be whether hedging has been a significant factor in the past and going forward.

Any airline which had decided to hedge fuel at around 100 USD a barrel for the current year will miss out on a great profit opportunity.

And then , the industry will have to deal with the somewhat controversial practice of fuel surcharge which, if not reduced by passing on to the consumer some of the fuel price reduction, will likely attract the attention of politicians and regulators who love nothing more than to regulate airlines.

The favorable profit climate projected by IATA will benefit all regions of the world although, as one would expect, not necessarily equally.

North America will be the biggest beneficiary, as the USA’s big three airlines continue to enjoy the benefits of consolidation, and the U.S. economy shows significant improvements.

European airlines have benefitted also from lower fuel prices, but the impact is limited by the strength of the U.S. dollar.

While long haul markets have been stronger, the region’s operating environment is hindered by regulations, high taxes, and infrastructure deficiencies.

The Middle East region, which has the highest rate of growth of almost 13% per annum, will still show a mixed profit picture – although everyone will benefit from lower fuel prices.

While demand will grow by more than 5% in Latin America, the region’s weak returns are largely a result of the poor performance of key economies such as Brazil’s, and exchange rate weakness against the U.S. dollar.

Finally, African airlines’ weak traffic growth will continue to be affected by weak currency and the various problems which have been disrupting tourism.

Worldwide, we have gone from worrying about what we should do if the price of fuel was to reach 200 USD/barrel – to what do we do if the price of fuel falls to 20 USD/barrel.

Looking at each region a little more in detail:

In the U.S.A., the impact of the rapid improvement to the bottom line is likely to stimulate the expectation of its many airline stakeholders.

It should not be surprising that everyone should feel that he or she would want to benefit from this sudden and substantial improvement in profitability.

Over simplifying, twenty years ago or so airlines were enjoying a somewhat similar situation, where yield was improving and fuel costs were lower. This triggered a series of wage increases – which ultimately contributed to a succession of Chapter 11 bankruptcies.

Regretfully, all the full service airlines went through that painful process – which led to a significant re-adjustment of their labor costs.

Today, the labor situation with the major airlines has the appearance of being relatively stable.

However, there does not seem to be a consensus on how in the future employees should be remunerated.

Some airlines believe that instead of increasing wage levels, setting up a scheme of performance-based compensation could make a lot of sense.

In this way, if profitability declines a variable portion of employee compensation should also decline.

Of course, such a scheme would need to be carefully designed and cover every employee level in a manner considered fair and transparent, from the lowest –paid employee to the CEO.

Both Delta and United have indicated their intention to follow that course.

American Airlines, however, disagrees and intends to follow a more traditional approach. Their stated policy is “to reward workers with industry- leading wage rates, and not lower wages supplemented by compensation that varies with airline profitability”.

As a result of such a lack of industry agreement, it would be most unfortunate if the competitive cycle that contributed to Chapter 11 was to get started once again.

Europe has the world’s most congested airspace, and thus far every effort to substantially simplify the administration of that airspace has failed.

There continues to be a lack of political will to confront the interest groups opposed to administrative consolidation.

However, good progress is being achieved through technical improvements, and SESAR (Single European Sky ATM Research) is hopefully going to produce some significant increases in capacity and reduction in fuel consumption.

Fuel accounts for a large portion of the expenditure of Low Cost Carriers, and the current low fuel price will accelerate their advantages over the legacy carriers.

To illustrate, Norwegian – Europe’s third biggest L.C.C., does not hedge fuel and was an instant beneficiary of the fuel cost decline, achieving an immediate shaving of 20% off its overall costs.

To address another major type of cost, Ryanair has locked up its Euro/USD currency exchange to protect its new aircraft deliveries at a substantially lower price.

The challenge for the legacy airlines – primarily the Lufthansa Group and Air France/KLM – is to continue building up their low cost presence in Europe to eventually stabilize their share of the regional market.

Air France/KLM is now hoping to establish a Transavia Europe – outside of the French and Dutch        borders – given the recent willingness of their respective unions to consider and discuss this expansion.

Lufthansa is also hoping to achieve a comprehensive agreement with their pilots, which would enable a more competitive labor situation for Eurowings. The recent series of 24-hour strikes by the Pilot Unions is indicative that an agreement has yet to be reached.

Asia continues to be a great market for aircraft manufacturers.

The current Airbus forecast is for some 12,000 aircraft to be delivered in the Asia Pacific region over the next 20 years.

This is more than any other region of the world, and will place much pressure on the required expansion of infrastructure, airports and ATM.

The next challenge will be in the availability of skilled personnel to support their rapidly growing fleets.

The demand for air travel is driven by the substantial growth of the Middle Class.

Ten Asian countries have recently decided to implement an “Open Skies” Air Market Agreement, which should further stimulate the growth of air traffic among those South-East Asian countries.

China, the world’s second largest economy, has now discovered that it is not immune to the vagaries of the markets.

Its economy is slowing down, and it is suffering from an overheated real estate market which is deflating, and consumer demand which is falling.

The growth rate of the Chinese economy has now decreased to some 7% – and will continue to decrease.   In fact it is now suggested that it will slow down to 5% this year.

It remains to be seen if the recent devaluation of the Yuan and the current Chinese financial crisis will have a significant impact on world economic growth.

Still, it is projected that over the next 20 years some 600 million Chinese will enter the Middle Class.

In India, the World Bank’s projection is assuming that Prime Minister Modi’s current good performance will continue.

India achieved a 5.5% growth in 2014, and the Bank projects that India’s economy will increase by 7% by 2017 as China is expected to slip below that level.

India could continue to enjoy an accelerated rate of growth, but it needs to accelerate its efforts to rid itself of its corruption culture which, fortunately, the current government is determined to change.

But India must also attack its unfortunate bias for excessive and needlessly cumbersome regulations, some of which are largely there to protect the interests of favored parties – or quite simply to illustrate its inventiveness in regulation!


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

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

Such an agreement would have allowed for unlimited frequencies between any of the participating States, improve security by making it mandatory to apply ICAO safety standards, and encourage cross-border investment in air transport.

Unfortunately today ,State-owned national flag carriers continue to operate routes under fairly restrictive bilateral agreements.

Low cost carriers are struggling to make headway, having to fight the protectionist policies of the various national governments.

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

Despite those hurdles, the latest passenger forecast by IATA for Africa predicts that the continent should enjoy the second highest rate of growth of the various regions, at 4.9% per annum.

Despite the apparent reluctance to change, some progress is being made.

The African Union has a Common African Civil Aviation Policy which proposes a united position in its dealings with the E.U., advocating the replacement of separate African States bilateral discussions with a block-to-block negotiation.

But their proposal is not binding on its members.

A number of African airlines are modernizing their fleets and are buying new, fuel-efficient aircraft, which should improve both their quality of service and their operating costs.

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, and this led to a dramatic increase in traffic volume as European “low cost” airlines such as Ryanair and EasyJet aggressively compete to increase their share of this market.

Morocco’s objective was to attract at least 10 million tourists annually.

A report by Intravista, a group of independent consultants, concluded that if only 12 of the 44 nations party to the Yamoussoukro Declaration were to implement the decision, the liberalization of their key markets could provide an extra 155,000 jobs – and 1.3 billion US dollars in annual G.D.P.

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 which we have seen in Southeast Asia during the past 20 years.

Latin America

Turning to the Latin American region, Brazil’s airline industry did not enjoy a good year in 2014.

Inflation was up, consumer confidence was at an all-time low, and economic growth was almost at zero. …

This negative situation continues.

Despite the country’s economic slowdown, IATA forecasts that Brazil will overtake Japan’s home market by 2022 and establish itself in the top three global domestic aviation markets.

Although both the Brazilian and the Argentinian economies have been weak, traffic growth in the Latin American region in total was robust.

The increase in trade activity has provided a boost to business-related travel, resulting in a year to date of +6.3% RPMs by mid-year of this year compared to 2014.

The lack of adequate, timely, and cost-effective infrastructure, security, airports , and airways will continue to be the biggest challenge.

The Middle East region continues to be the fastest growing area.

Middle East traffic is projected by IATA to grow at 5.1% per annum, reaching some 250 million passengers annually in 20 years’ time.

The on-going dispute over “Open Skies” and alleged subsidies may slow down temporarily the expansion of the three major Gulf airlines to European and North American destinations, but in my view it is unlikely to change their longer term strategy.

In the immediate, the dispute has poisoned the relationships within the “One World” alliance, more particularly between Qatar Airways and American Airlines. Qatar Airways has indicated that it intends to leave “One World” unless this dispute is resolved promptly.

While the spotlight has been on the “unfairness” of the alleged advantages enjoyed by each side – European and North American vs Gulf airlines – other carriers in the Middle East region have been growing rapidly.

Saudi Arabian Airlines (Saudia) has announced plans to increase its fleet to 200 aircraft, and will capitalize, in part, on the growth in religious travel to the region.

Other players in the region which have expansion plans include Gulf Air, Kuwait Airways, and Oman Air.

Not to forget the very successful and fast growing Air Arabia – the most important low cost.

Capabilities of the air navigation authorities over the Persian Gulf to cope with the rapidly growing traffic could be a major challenge.

Although the current dispute over alleged subsidies may be a temporary distraction, the inherent and continuing political instability of the region can have a local impact.

LCCs worldwide are migrating towards a hybrid model – and the Middle East is no exception.

Flymas, Saudia’s LCC, has a Business Class cabin with generous 48 inch seats; and Fly Dubai on its Boeing 737.800 fleet has a 2-2 seat configuration for its Business Class. The airline aims to increase its annual passenger numbers to 20 million by 2020.

Air Arabia, based in Sharjah, is the only major budget airline in the U.A.E. that has not upgraded its fleet to a Business Class.

With its net profit margin being about 14% – higher than Ryanair and EasyJet – Air Arabia has no incentive to alter its Business model.


Restrictions on foreign ownership imposed by all nations was making it virtually impossible for all major airlines to increase their international reach by mergers and acquisitions, or by setting up foreign subsidiaries.

Alliances were developed to overcome this major hurdle, at least in part.

The first global airline alliance was launched more than 18 years ago.  “Star Alliance” was formed in May 1997, and initially regrouped Air Canada, Lufthansa, SAS, Thai and United.

It was followed in 1999 by “One World”, then comprising American Airlines, British Airways, Canadian Airlines, Cathay Pacific and Qantas.

The 3rd major alliance, “Sky Team” , was launched in 2000, with Air France, Delta, Korean Air and Aeromexico as initial members.

A fourth group, called the “Qualiflyer Group”, driven by Swissair, was intended to bring together the various airlines in which Swissair had acquired a stake, namely S.A.A., Fly , LOT, TAM, AOM and LTU.

The failure of Swissair resulted in the liquidation of that particular alliance.

The three Gulf airlines had each chosen originally to go their own way and not join any alliance.

Emirates, the super carrier of Dubai with the world’s biggest fleet of large airplanes – particularly but not uniquely Airbus A.380 – pursued a strategy of going at it alone.

Emirates, however, was able to develop bilateral relationships with many carriers including Korean Air, South African Airways, JetBlue, Alaska and Virgin America as well as EasyJet.

The most extensive alliance of Emirates is now with Qantas, which makes Dubai the principal connecting hub for Qantas from Australia to Europe.

Although Qantas is said to continue to be part of “One World”, it is a fair assumption that its very close relationship with Emirates would have strained its relationship with several members of “OneWorld”, including Cathay Pacific and British Airways.

Changing drastically its position, Qatar Airways took a different route and decided to join “OneWorld” in a move that included getting a stake in IAG (owner of British Airways, Iberia and Vueling).

Taking yet another different path, Etihad decided to invest heavily in various smaller /medium sized international airlines such as:

  • 20% of Virgin Australia
  • 33% of Switzerland’s Darwin Airlines, recently rebranded as Etihad Regional.

Etihad then created Etihad Airways Partners which comprised Air Berlin, Air Serbia , Air Seychelles, Jet Airways, Etihad Regional and Etihad itself.

Etihad’s strategy, which it describes as an “Equity Partnership”, is strangely similar to the path followed more than 20 years ago by Swissair.

Hopefully Etihad will be more successful.

Etihad is not unique in following a strategy of buying shares in other airlines.

Some U.S. airlines have been looking abroad for investment opportunities to increase their presence in the global market.

Delta plans to invest 450 million US dollars for a 3.5% stake in China Eastern Airlines.

Previously, in 2011, Delta had invested 65 million US dollars to acquire a 4.17% stake in Aeromexico, and 100 million US dollars for a 3%share of GOL Linhas Aéreos of Brazil.

Delta has indicated that it plans to increase its share of GOL to 9%.

United has also announced that it will invest 100 million US dollars in Brazil’s Azul Airlines.

Both carriers expect to have a seat on the Board of those airlines – but unlike Etihad they have no illusions of being able to directly influence significantly the strategic direction of those airlines, but perhaps simply monetarize eventually their investments.

The principal objective of any alliance was to provide for its most valuable customers a service of equal quality whatever the destination.

Ultimately, the alliance would be able to offer customers a seamless product, from any part of the globe to any other destination.

This pre-supposes that the alliance partner would be able to harmonize their product in terms of quality of inflight service, cabin environment, passenger handling at airports, etc.

This also meant that these passengers would be able to accrue benefits on all airlines (mileage points), access lounges, enjoy similar seat selection, priority check-in, upgrades, etc.

For instance, in the case of a customer buying a ticket on Lufthansa on a flight which would be operated by Brussels Airlines, or All Nippon Airways – could his expectation be fully met?

Or a ticket sold by KLM on a code share operated by Kenya Airways?

Then there is the question of providing an adequate customer experience, when part of the travel is carried out by a low cost airline itself owned by an alliance member.

The problem is that the contract between the passenger and the airline is different depending on whether the airline is a L.C.C. or a full service carrier.

Is the passenger fully informed that the service provided will be significantly different from the airline – a full service carrier – … which actually sold the ticket which actually includes that part of the travel which will be carried out by a low cost carrier?

It is generally acknowledged that alliances have significantly extended the market reach of their members, as well as increased their presence.  Joint ventures have been expected to improve their profitability on some of their key markets.

Customers have significantly benefitted from much improved connectivity.

But much remains to be done to provide their customers with consistency of service across the various alliance members.


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

President & CEO, Jinmag Inc.

Director General Emeritus, IATA


September 2015