Airports have to 'up their game', strikes are 'destroying traveller traffic in Europe' and a 'revolution in terms of biometrics' - insights from twilight session at CAPA Airline CEOs in Sydney forum

5 June, 2018

There was a healthy debate in last night's twilight panel session of the CAPA - Centre for Aviation Airline CEOs in Sydney forum at the Sofitel Sydney Darling Harbour hotel. The session, 'The Big Issues: What are the big issues confronting airlines today?', questioned industry's leaders on how they will address these complex challenges.

Politics, regulation, security, environment, new competition, disruption in distribution, costs and revenues…. No-one ever said the airline business was easy. And it doesn't get any easier. It's often hard to know which issues to prioritise. But the job of a CEO is to do just that. They can't all be top priority, so which ones to deal with and when - while trying to make money.

What are the "biggest issues facing the world's airlines in 2018"? An audience response to the question outlined fuel as the biggest issue, with a number of other key concerns being noted including: overcapacity/capacity, security, prices, sustainability, pilots/labour, infrastructure, distribution and government.

Meanwhile, an audience wordcloud on the "biggest issues confronting the world's airlines for 2025" placed infrastructure as the biggest issue, alongside other following key themes: capacity, security, sustainability, consolidation, technology, aircraft, connectivity, environment, digitisation, constraints, distribution and aircraft.

The Blue Swan Daily was on site and brings you some of the key quotes from the discussion.

IAG CEO Willie Walsh

  • ATC strikes in Europe are a "big mess", noting "it is destroying traveller traffic in Europe". Mr Walsh stated: "If there are further ATC delays… Europe would not expect a proper operating performance".
  • "I will retire in this industry before there will be a pilot shortage", noting: "There was more of a captain shortage".
  • "Airports have got to step up and take responsibility that the infrastructure we are forced to use is efficient".
  • "What we need to do is to get people to see our industry as an attractive industry", noting in particular addressing female representation in the aviation sector. Mr Walsh stated "we have to convince" younger females that being a pilot "is an attractive career path".
  • "Fuel is going to be an issue... [however] we are reasonably well hedged for fuel in 2018... It is going to be a challenge for 2019 as most airlines are winding down." Mr Walsh noted fuel prices "much higher than anticipated".
  • "We've had a hedging policy for years… hedging is about giving us time to address volatility"
  • Air traffic control strikes "shouldn't continue in 2019". Mr Walsh stated the cost of industrial action "is impacting with 10 millions of pounds" and "3.5 times flights have been regulated by ATC delays". Mr Walsh also noted the issue "is completely outside of our control but we bear the costs".

Avianca CEO Hernán Rincón

  • "Infrastructure" and "understanding the detail of our customers" as the airline's two main issues.
  • Improved secondary airport utilisation and point-to-point services is beneficial, noting "its not huge but it helps".
  • The airline is "changing the organisation to be responsive to the customer needs." Mr Rincon noted the airline is improving its customer engagement strategy and use social media to directly communication with passengers.
  • "We have the longest pilot strike in history today with 52 days … it is an honour!". Mr Rincon stated the airline "is in the final stages" of addressing the issue, noting the industrial action has cost Avianca approximately "USD300 million" and approximately "seven months to recover".

LOT Polish Airlines president & CEO Rafał Milczarski

  • The industry is being "forced to have a revolution in terms of biometrics," related to "how we verify peoples identity and also "their intentions", in relation to security and terrorism. Mr Milczarski stated this is "great for the industry", while noting the need to improve the current pain point of security checks.
  • The carrier is "already a healthy company" and hopes to be a "super healthy company by 2024", when the carrier would again be eligible for state aid, after previously state aid was obtained in 2012.
  • Improved airport security experience would "likely increase airport capacity, increase attractiveness of flying", while also reducing the time required at airports, said Mr Milczarski. This, in turn, would support "greater aviation growth", with this reduce time at airport potentially a "game changer" for the industry.
  • The number of cities pairs that are connected is "increasing and will continue to increase", supported by new aircraft technology, which results in "smaller trip costs, smaller unit costs". Mr Milczarski noted that this enables smaller routes to become viable for airlines.
  • "Those who cause the disruptions should pay for them". He noted that there exists a basic "right to strike", so strikes should be permitted to exist, but added that there is "also a right" for passengers to have a "good disrupted journey". Mr Milczarski also observed that the "social situation" in Europe is a "challenging one," adding that "something needs to change at a regulatory level as its completely ridiculous".
  • "Connecting people, connecting new markets… and destinations" is an exciting proposition for the industry. He said new routes and connectivity is a "breath of fresh air", with LOT and the general population in eastern Europe "excited" about the prospect of direct connectivity without going travelling via a Western European hub.
  • He stated people are "empowered by that" with "many many new regions having aspirations for this growth". He added that "the world becomes richer because regions actually get connected". He added that many regions globally "are not connected to the same degree that they should be".

WTTC president & CEO Gloria Guevara

  • Power has always been on the customers' side, citing the example of fare prices and what customers are willing to pay. Ms Guevara referred to the "different variations of prices for customers" as one example, however now it's "more sophisticated and in real time", and "customers should be in the centre".
  • Passengers want a better and more seamless experience. She pointed out that if passengers have a better experience, they're more likely to travel. Ms Guevara emphasised customers want to feel welcome in a country, stressing "it's about the experience" for passengers to come back to a destination.
  • Customers are complaining "a lot" and more. She stated customers are travelling to easier destinations that offer better experiences, including online check in and biometric technology. Ms Guevara said WTTC is "seeing that a lot", particularly with the "new generations, the millennials".
  • On the potential of technology, noting airlines could organise more aircraft with more passengers if technology turned a three hour wait at the airport into 10 minutes. She cited an example of one flight in Berlin, where up to 50% of passengers still travelling through security ended up delaying the flight.
  • The worst experiences for passengers before boarding tend to happen in security and when passengers arrive at the airport. Ms Guevara said passengers often have to wait hours to go through immigration, noting: "Going home, why do we need immigration?". She said immigration should have technology providing such information in real time to governments, as one way to reduce queues.