53rd IATA AGM in Amman...

IATA member airlines fare well in 1996

IATA member airlines carried almost 1,185 million passengers in 1996 on their scheduled services _ more than 380 million on international services and more than 804 with loadfactors increase by 1.2 percentage points which will be offset by a negative difference between yield and unit cost. He said fares were falling and costs going up, bringing meagre profit margins for the airlines. However, the Director General predicted an increase in net profit from US$ 3 billion to US$ 4.5 billion. The growth prospects for both IATA and non-IATA airlines suggest a seven per cent in the Asia and the South million on domestic services. Growth of passenger numbers on international scheduled services was 8.4 per cent, but on domestic, it was only 4.4 per cent. Total charter passenger traffic decreased, with the relatively small domestic market contracting by 10 per cent. Overall freight tonnage grew by 4.6 per cent in 1996 to nearly 24 million. Growth on domestic services was only 2.2 per cent, but international freight grew by 6.7 per cent. All-cargo aircraft carried nearly 57 per cent of the 10.7 million domestic freight tonne, but only 38 per cent of the 13.3 million international freight tonne. However, the proportion of freight carried on all-cargo aircraft grew, on both domestic and international routes during the year. This was disclosed by IATA Director General Pierre J. Jeanniot, during his customary presentation on The State of the Air Transport Industry 1997 at the 53rd Annual General Meeting of IATA in Amman, on November 3-4. The Director General said the outlook for the current year will grow by 7.5 per cent and capacity by 5.3 per cent Pacific region, while for Latin America, Africa, Europe and North America the growth was estimated between six and seven per cent and the Middle East region's growth was around five per cent a year. The Director General observed that in recent years alliances have made a significant contribution to the airlines' efforts to simultaneously increase revenue and reduce costs. He maintained that alliances are not mergers and allied airlines simply act as a 'virtual' large airline only in specific dimensions while retaining their identity and independence in many other dimensions. Jeanniot called for a much better balance in airlines' distribution of rewards to their stakeholders, on the opening day of the Annual General Meeting. "Customers, employees, shareholders all need rewarding _ with good value for money, with good pay and conditions of work, with good dividends and/or capital growth, and with the prospect that any growth in operations is ecologically sustainable," he said. In recent years, the airlines had concentrated on their customers; this was clear from their failure to capitalise on good growth and lower unit costs, through higher profits. Their net profits were only US$ 3 billion on turnover of US$ 138 billion in 1996. Jeanniot said, "The industry badly needs to protect its yield. But it also needs to bring about a major downward shift in its unit cost. Two things could do this _ the widespread use of new satellite-based air navigation systems, and new unified financial instruments for the funding of mobile assets such as aircraft and engines. These two things together could be worth more than US$ 7 billion a year, when they are widely adopted." In a wide-ranging report, the Director General traced achievements during the past year, such as adoption of a new IATA air safety strategy, the new inter-carrier agreements on airline liability and the launching of the Cargo 2000 interest group. He also covered airline alliance activity and the nature of international airline cooperation _ concluding that airlines could not make significant progress on all the major issues they faced _ such as standards, security, infrastructure, user charges and the environment _ without common effort at the broadest possible level. His Royal Highness Prince Faisal of Jordan, who opened the two-day meet on behalf of His Majesty King Hussein, said that air transport was a much different industry than it was in 1944 when its regulatory framework was drawn up at the Chicago Convention. According to him, the liberalisation trend was unstoppable, and that airlines must be responsive to change. A key driver in this liberalisation process had been the trend towards privatisation. Many large airlines have responded by restructuring themselves to improve their competitive strength and improve their operational efficiency and productivity. At the same time it dawned on Governments throughout the world that they can no longer extend unqualified support and protection to their national carriers in the face of increasing competition and that those carriers should be able to operate on a purely commercial basis. Those nations that recognised this early gave their carriers a head start in making them competitive, in 'adding value' to the nation. The Prince urged the member airlines to maintain the twin imperatives of safety and economic sustainability at the centre of discussions, especially in addressing the increasingly urgent issue of traffic congestion on the ground and in the air, as safety was the responsibility of all involved in air transportation _ manufacturers, airlines, civil and international regulatory authorities. He also said that IATA should help small and medium sized airlines that are facing tough competition from large airlines as a result of deregulation. He said, "Small airlines are faced not only with external competitive challenges, but also with internal challenges. Among them was the problem of mounting accumulated losses and debts which cannot be easily resolved in the absence of government support. They are typically undercapitalised, and face unreceptive governments when seeking capital funds. They also face difficulty in financing fleet replacement and product development projects under the present uncertain circumstances. More specifically, the question is how to develop a new strategy for survival. However, he said, fortunately, regional airlines have demonstrated their contribution, to meeting passenger demands for new services _ highlighted by the fact that approximately a third of inter-European passengers are carried by regional airlines. Nader Dahabi, President of Royal Jordanian Airlines and the President of the 53rd IATA AGM said that the meeting was being held at a time when most of the airlines were restructuring while striving to reduce costs, improve revenues in the face of tougher competition and declining yields. Recalling IATA Director General's remark last year, "It is easy to buy airplanes. It is harder, but perhaps smarter, not to buy airplanes," Dahabi said that the situation was very much the same in today's competitive environment. The air transport industry is a cyclical one, and each cycle has resulted in changing the environment of the industry, Dahabi said. "We have to anticipate the next cycle and to plan accordingly." He remarked, globalisation, privatisation, alliance building and consolidation may be the forces shaping the global airline business, but some areas of the world have remained immune to them. He said, since the early nineties, the world has witnessed fundamental changes that offer both challenges and opportunities. Only those who understand the new rules governing the global scene, and adjust their economic policies accordingly, can utilise their opportunities. If liberal changes can be taken as indicative of our globalisation, the champions of liberalism seem to be having their day, and those who feel otherwise are on the defensive. "We must always ask ourselves: can we bend and adopt in the emerging world of globalisation? Or are we intimidated by all the uncertainty and complexity?" Talking about safety, Dahabi said that the ultimate responsibility of airlines is not service standards, nor revenue and cost, but the lives of their passengers. According to him, simple arithmetic shows that on an average, at least one extremely serious accident will happen every month by the year 2010 and it was the responsibility of a body like IATA to take preventive steps and improve aviation safety rates, which is a challenging task. He called for collective action by IATA, ICAO and other organisations to apply minimum safety standards. Calling for active participation of member airlines in the IATA, Dahabi said member airlines have to be actively involved, directly or indirectly, in all deliberations of the different committees and boards, to ensure that this organisation does not become a new site of authority and to be held accountable to its member airlines. "To this end IATA can be a neutral forum in which airlines, big or small, can voice their grievances, communicate their preferences and coordinate their policies." In an unique gesture, King Hussein received the chief executives of airlines, who participated in the AGM in his palace on November 3. « Later addressing a press conference, IATA Director General Pierre Jeanniot pointed out that it was decided at the AGM to create a worldwide registry of aircraft and engines. The harmonisation of laws, including assets could result in savings of two per cent. While justifying the practice by some airlines worldwide in giving discounts to its passengers, Jeanniot said, the product of airlines was highly perishable and the market is reactive. Safety has been a top priority for a long time and discussions were always being held with airframe manufacturers, aero engine manufacturers, airport authorities and ATCs, he said. He forecasted the yield will grow much less than the growth of costs and "hence we have to keep cutting costs." He revealed US$ 2 billion was spent collectively on updating technology. Talking about the infrastructure, Jeanniot said IATA member airlines commit themselves to infrastructure with objectives under microscope. "We feel today that with the existing commitment we have to be more objective with emerging market, we need to have an understanding to meet such a large growth and make the airports more passenger friendly." The thrust of airlines is to do a balancing act _ always to be competitive, able to balance the costs and improve yields. Jeanniot said it was decided that each airline should form a safety board comprising of professionals from every department with a wide spectrum, which will be overseen by external auditors to audit the procedures because "one accident will destroy everybody and it is a matter of survival." At this point of time it was purely on a voluntary basis, but this might become mandatory in years to come, said the Director General. "It is reassuring somebody from outside the airline _ the safety auditors _ to awaken safety with the aim of getting close to zero accident." Airports are being corporatised as a business venture, but it must also ensure that the profit is minimal _ modest profit _ in line with the service industry, because ultimately the customers (passengers) are going to pay. It should be done on cost effective basis, the Director General opined. The overall profit is estimated at $ 4.5 billion up from $ 3 billion recoded last year. "I propose that and there be, perhaps, more discipline in the way that we are addressing the markets and IATA is encouraging very much the reduction in costs. "Aviation will continue to be increasingly affordable and it is a question of ensuring that our costs are driven down, so there is profitability for the industry," the Director General pointed out. "From what we have seen in some situations of depression, airlines sometimes incur a loss for a year or two, but then they return to profitability again," Jeanniot revealed and added that the long-term future for aviation continues to be very bright in terms of growth. "It is a very active market. There are many difficult routes and markets and many different attacks on each other's market. So it is very difficult to control all that and one has to distribute/attribute the responsibility, which I think, we shall have to learn how to do that," the Director General said. The Director General felt that Asia will continue on its path towards fulfilling the forecast that 50 per cent of the world airline market will be guarded in that region in a few more years. IATA concluded its two-day meeting with the passing of the set agenda and resolutions benefitting the air transport industry, to further promote air transport services, air safety, security, airport services, ATC facilities and investments in the industry. The Director General said that the Association which is concerned mainly with providing facilities to and ensuring safety for passengers has appealed to the Governments to remove many of the restrictions and measures that impede air transport industry while maintaining safety practices. He said IATA considers itself as an 'umbrella' of the air transport industry and was keen on supporting airlines' efforts to remove obstacles. « The meeting discussed topics ranging from flight crew training, to the supply of high technology equipment and maintenance services. In a session devoted to Safety, Priority Number One, topics covered included the role of aircraft manufacturers to ensure safety, the regulatory role and the critical airline contribution. In another session, Passenger Processing -- Simplifying the Passenger Journey, delegates took part in a moderated discussion on new technologies _ including smart cards and automated ticketing and boarding _ and their place in both improving the air travel experience for the passenger and saving money for the airlines, simplified customs and immigration through automation. Greatly improved government clearance processes were seen as a vital component in achieving the two aims. During the final session, the airlines highlighted the challenge presented to the industry of ensuring effective consultations between providers and users of aviation infrastructure, against the background of lack of competitive pressure on airports and air navigation services, as natural monopolies. A session was devoted to Infrastructure with Value for Money which discussed the views of ANS provider, airport provider, airline user. The meeting also discussed asset-based financing and leasing treaties. These treaties will allow many more airlines, when financing aircraft, improved access to the asset-based financial, leasing and securitisation markets, thus reducing the cost of finance. An Aviation Working Group, led by Airbus Industrie and Boeing, including major engine manufacturers and global financial institutions, have joined forces with IATA to develop and promote these new instruments. The treaties will have significant implications for the way fleets are financed and will be of vital interest to treasury, legal, risk management and accounting staff of airlines. IATA has decided to create an annual scholarship of Jordanians graduating from the Amman training centre to receive advanced training in tourism and hotel management. The scholarship has been created in the name of King Hussein in recognition of the King's efforts to promote the air transport industry. Over 1,000 participants representing over 200 airlines, aircraft manufacturers, engine manufactures, as well as regional and international organisations attended this year's AGM. From India, Capt. J. R. D. Rao, Deputy Managing Director of Indian Airlines, Naresh Goyal, Chairman of Jet Airways and U. K. Bose, Chief Controller of Sahara India Airlines, leading a team from their respective airlines, attended the AGM. Incidentally, the international flag carrier of the country, Air-India was not represented at the AGM. At the closing session of the 53rd AGM, airline delegates elected Frederick Smith, Chief Executive Officer of Federal Express, as Chairman of the Board of Governors for 1997-98. The 54th AGM will be held in Montreal, Canada, June 7-9, 1998.

IATA membership

now stands at 259, with fourteen airlines joining IATA since the last AGM: Aviateca S.A., Cargolux Airlines International S.A., Bellview Airlines Ltd., Tam Trans-portes Aereos Regionais S.A., Pacific Airways Corporation, Hapag Lloyd Flug GmbH, Azerbaijan Airlines, Compagnie Africaine d’Aviation, Gujarat Airways Ltd, TAM Trans-portes Aereos Meridionais S.A., Zimbabwe Express Airlines, Belavia –Belarussian Airlines, Qatar Airways Company and Pan American World Airways, Inc.

IATA launches airport/air navigation award

IATA has announced an annual ‘Partnership for Productivity’ award for the best airport or provider of air navigation services (ANS). The winner will be the service provider who has taken particularly positive steps to control infrastructure costs and given quality service and value for money to airline customers. The award criteria emphasises the key elements that IATA Member airlines seek from their partners in the provision of commercial air transportation. An important element in the application of the basic principles established by the International Civil Aviation Organisation (ICAO) for airport and air navigation charges. ICAO principles include consultation with users, transparency of information, relationship of charges to costs, non-discriminatory allocation of charges, application of the ‘single-till’ principle and a system of regulatory oversight. The IATA ‘Partnership for Productivity’ award goes beyond these basic charging principles. It will also recognise initiative and creativity, resulting in improved productivity and lower unit costs — which will ultimately result in lower charges to the airlines. An experienced panel will select the organisation to receive the award. This international panel, which is independent of IATA, includes Ron Allen, former Chairman of Delta, Pieter Bouw, past Chief Executive Officer of KLM, Peter Lok, former Director General of Civil Aviation for Hong Kong, Sir Christopher Chattaway, former head of CAA, UK, Professor Chong Ju Choi from City University Business School, London and Professor Rigas Doganis from Cranfield University. Announcing the award, the IATA Director General said, “In today’s highly competitive airline business, our members are frustrated when airports and ANS providers are not working as hard as the airlines at cost containment. But we should recognise those who have been diligent in applying technology, improving efficiency, or finding new sources of revenue to reduce their dependence on user fees. IATA will be proud to point to those who demonstrate that the ICAO charging principles and productivity initiatives can be successfully implemented for the benefit of all.

Arab airlines meet

THE General Assembly of the Arab Air Carriers Organisation (AACO) held an extraordinary meeting in Amman on November 1 on the eve of IATA AGM to discuss cooperation among Arab airlines, with particular attention to passenger reservation systems and fuel purchases. Abdul Wahab Tuffaha, AACO Secretary General, presented an outline of the meeting’s agenda and the organisation’s activities through its Amman-based regional centre, which was established last year with financing from the European Union. He said 198 trainees from various Arab and foreign airlines have already received training at the centre in reservations and passenger services. Ahmad Samawi, AACO chairperson, said the fact that IATA was holding its conference in Amman reflects the importance of Jordan in civil aviation and air transport services and is a recognition of the active role Royal Jordanian plays in promoting air transport services.

Royal Jordanian and TWA sign code-share agreement

ROYAL Jordanian Airline and Trans World Airlines announced on November 3 during the IATA Annual General Meeting that both the airlines have entered into a code-sharing arrangement for flights operating between Amman and New York JFK Airport. The code-sharing shall be reflected on sectors between the two countries, to facilitate travel and create seamless travel arrangements to the different destinations served by the two airlines. Initially, the code-share will be reflected on the sectors between Amman and other US destinations such as Detroit and Los Angeles. Royal Jordanian will operate the Amman-New York sector. The implementation of code-share between Trans World Airlines and Royal Jordanian has come after almost two years of serious negotiations and planning. It is an integral part of total restructure programme of the airline, Nader Dahabi, President and Chief Executive Officer of Royal Jordanian said, while addressing a joint press conference along with Gerald Gitner, Chairman and Chief Executive Officer of Trans World Airlines in Amman. "Code-sharing agreement will allow RJ to reach more cities in the US through TWA's extensive network in the US. We would not have been able to reach all these cities on our own," Dahabi said. Royal Jordanian will look at other airlines as and when the need arises for a better share of the market, with better seat factor and yield. Jordan has always had a very liberal air services agreement with the US. It was the first country outside Europe to sign an open sky agreement with the US, said the chief executive of Royal Jordanian. Gitner said, "The combination of TWA and Royal Jordanian Airline, two quality carriers in the US-Middle East market, will provide numerous new benefits for the passengers of both airlines and we expect this to be a long and mutual prosperous alliance." "By adding Amman to the TWA services, we reinforce TWA's position as the premier US carrier to this region and we fully share Royal Jordanian's excitement over this new partnership and are looking forward to enhance our joint services as partners for years to come," said Joe Vilmain, Vice President - International Sales and Services of TWA. TWA will offer mileage to the members of its Frequent Flight Bonus (FFB) programme for flying Royal Jordanian to Amsterdam and Amman. TWA FFB members travelling round-trip in business class on TWA code-shared flights receive 20,000 bonus miles in addition to the actual miles flown. The bonus mileage alone will provide FFB members with a round-trip domestic coach ticket on TWA. Talking about the performance of Royal Jordanian, Dahabi said, 1997 has been a good year for the airline. It carried 1,168,973 passengers during the first ten months of 1997, compared to 1,299,212 passengers during the whole year of 1996. It achieved a seat factor of 69.2 per cent during the first eight months of 1997, compared to 65.8 per cent load factor during 1996. August 1997 recorded an all-time high of 79 per cent seat factor. Royal Jordanian's present fleet of four TriStar, six Airbus A310, four A320 and two Boeing 707 will be deployed with maximum utilisation. While the airline will replace the TriStars with two A310 and two A320 aircraft for better route economics, the two Boeing 707s will be converted into freighters. Dahabi revealed that privatisation of the airline will be completed in the next 18-24 months. The Government was not willing hold majority stake in the airline. During 1997, the airline suspended operations to several destinations which were uneconomical. Canada was taken off the route network after ten years of operation, and Singapore. "We hope we will be able to bring back all the destinations to the route network if the situation changes." The airline has also introduced services to more viable stations like Detroit, which was an instant success and served the need of Michigan state. Kuwait was brought back on the network, with two A320 flights, after six years when the service was suspended after 1990-91 Gulf war. Royal Jordanian is also planning to reintroduce services to Tehran as a study showed to be a viable destination.

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