Do airline industry associations have a future?: CAPA Airlines in Transition
Following two conspicuous airline defections from regional airline associations in 2015 there must be questions about the role of industry bodies in future – Delta left A4A and IAG left AEA. The issue is further complicated when a European, cross-association grouping is set up to achieve a special purpose.
Whereas Delta's departure from A4A was over fees and ATC privatisation, IAG left AEA on broader policy grounds in a disagreement over liberalisation versus protectionism. IAG then became a member of ELFAA, previously the stronghold of LCCs. Adding further to the density of the manoeuvres, IAG then joined Air France-KLM, Lufthansa, easyJet and Ryanair in forming a new body, A4E, with a very focused agenda.
CAPA's Airlines in Transition (AIT) event in Dublin in Mar-2016 assembled a panel bringing together the heads of four of Europe's airline bodies (AEA, A4A, ELFAA and ERA), the head of its airport trade body (ACI Europe) and the experienced head of the Arab Air Carriers Organisation. Moderated by Kurt Knackstedt, President of the Association of Corporate Travel Executives, the panel addressed the relevance and future of these associations.
A recording of the panel discussion at CAPA's AIT event can be viewed here.
The role of an association: either journey or destination
As with all representative bodies, the purpose of airline associations is to serve the interests of their members. This could be approached in one of two ways. It could be an ongoing mission, with new issues to tackle each time an old one is resolved. Alternatively, it could be more focused on campaigning on a specific issue or set of issues, in which case the association's success would be signalled by its rendering itself obsolete.
Adopting a travel metaphor to redefine this question, the majority of airline associations probably regard their mission more as an ongoing journey than as reaching a particular destination. This certainly seemed to be the prevailing view among the panellists at CAPA's AIT event.
Abdul Wahab Teffaha, Secretary General of the Arab Air Carriers' Organisation (AACO), referred to the continual change in the industry, constantly requiring AACO to consider its relevance to its members.
Simon McNamara, Director General of the European Regions Airline Association (ERA), said that ERA fulfils functions that its members are typically not able to perform alone, for which they pay a fee. Not only does ERA carry out lobbying activities on behalf of members, but it also provides a forum for them to discuss issues of importance to them, according to Mr McNamara.
For example, a regional airline might have a safety department of only two people, but through ERA membership it could gain access to another 50 safety departments.
The Association of European Airlines (AEA) CEO, Athar Hussain Khan, said that his member airlines were more like shareholders, whose goal is a return on their investment. He likened lobbying to running a marathon, rather than a sprint.
The ERA's Mr McNamara also commented on the challenges of lobbying regulators. "It's a bit like nailing jelly to a wall - only a little bit sticks", he said.
ACI Europe Director General Olivier Jankovec said that increased EU regulation of airports had led to significant changes in his organisation's role over the past 15 years. It was important to view it in the context of a client/customer relationship, with a very large and varied customer base consisting of more than 500 airports of different sizes.
John Hanlon, President of the European Low Fares Airline Association (ELFAA), described his body's mission as ensuring that European policy and legislation promote free and equal competition to enable the continued development of low fares, allowing a greater number of people to travel by air. Mr Hanlon stressed that it was not about ensuring the success and profitability of its airline members, but what was good for the consumer, adding that to get this right would translate into benefits for ELFAA members.
Europe's newest airline trade body is Airlines for Europe (A4E), founded in Jan-2016. A4E's Managing Director, Thomas Reynaert, stressed the need for lobbyists to have a business case and for associations to provide benefits to their members' bottom lines.
A4E was established by Europe's five biggest airline groups – Air France-KLM, easyJet, IAG, Lufthansa Group and Ryanair – because they wanted a new focus, he said, and not necessarily because the other associations were doing anything wrong. Mr Reynaert said that the issues that A4E was set up to address were fundamental structural issues that were keeping airline CEOs awake at night.
Compared with the other associations represented on the panel, this specific issues-led focus of A4E suggests that its role may be more analogous to a destination than to a journey. Nevertheless, reaching that destination could be a long journey.
IATA and the regional associations complement each other in general
In spite of the multiplicity of regional airline associations, particularly in Europe, the airline industry has a single trade body at the global level – IATA. Nevertheless, a number of airlines are not members of IATA, in particular LCCs (although there has been a steady trickle of LCCs joining IATA in recent years).
IATA plays a role at the global level but has less of one at a domestic level, whereas the regional associations have relevance to their members on more local issues. IATA is better placed to coordinate discussions on issues such as the market-based measure limiting aviation's carbon emissions, where a global position is necessary.
According to IATA Director General and CEO Tony Tyler, members of regional associations love their association in a way that they do not feel about IATA, but IATA has "huge" resources, in fact.
"IATA also has an interest in strong regional associations, which can provide that regional mirror to IATA," said AEA's Mr Khan. He argued that IATA and regional associations complemented one another, but felt there could be better coordination of the business case behind issues of common interest between them.
Mr McNamara of ERA noted that IATA has international knowledge and expertise, whereas ERA has local knowledge. Both are needed in the fight against regulation. "One thing that we don't do as an industry is deploy enough soldiers in that war against regulation", said Mr McNamara. IATA and ERA work together closely, he added.
AACO's Mr Teffaha offered a note of controversy. "It is not always rosy," he said of the relationship with IATA. He said it depended on how associations and their members viewed each other, as well as how IATA viewed the associations. "The combination of IATA and the regional associations is necessary to work like a well oiled machine," said Mr Teffaha. However, the situation had not always been "so friendly" as it is now.
Mr Teffaha described IATA is "the voice of the airline industry" on global issues. It also oversees issues such as standardisation, and it also runs the bank settlement plans and clearing house. Realistically there is no alternative to IATA in many of its roles. Nevertheless, according to Mr Teffaha, there are regional issues on which regional associations must take primacy.
Sometimes IATA seeks to coordinate regional associations with one voice, but sometimes there are differences. "It needs the conviction of all the three parties involved: the members of the regional associations, the regional associations and IATA to believe that working together is going to actually benefit the industry, rather than each of us trying to replace the other," said Mr Teffaha.
Only a few ELFAA members are also IATA members
Although the majority of ELFAA (European Low Fares Airline Association) airlines are not members of IATA, it also now has some significant members who are (such as the IAG airlines British Airways and Iberia, which left AEA and joined ELFAA in 2015). Mr Hanlon said that this was not a problem for ELFAA, since its members all had a commitment to its guiding principles of low fares and consumer benefits.
It was important for ELFAA to find a way to balance the needs of a membership that varied in terms of size and geographical reach, but Mr Hanlon believed that they were all entitled to the same degree of representation, while acknowledging that common ground was not always easy to find.
Ultimately ELFAA's positions on issues were up to the membership, and his role was only to act as the mouthpiece of the membership that had developed policy. There is no global body for low cost airlines and ELFAA has limited itself to Europe and its institutions, as it feels that is where it can best add value.
It has also limited its involvement in national issues. It has resisted broadening its membership beyond Europe, since it does not want to dilute the benefits it can provide to European members.
ACI Europe: "relationship between most airlines and airports is good"
Commenting on the interaction between his association (representing airports) and those representing airlines, ACI Europe's Mr Jankovec noted that there was often a difference between what happened at the level of individual companies and what happened at the association level.
"Usually, airlines and airports at a local level will find a way to do business together," he said. He added that, even if the relationship between most airlines and most airports was good, "nevertheless, they would still expect that somehow we take a fight with each other at the association level".
However, Mr Jankovec argued that the respective associations still needed to work together to service their members, and said that ACI and IATA had made significant progress through cooperation in recent years.
Airlines for Europe is "a wake-up call"
A4E was formed by its five founder members to coincide with the European Union's new aviation strategy, and to give more focus to the particular issues that they want it to target.
The issues on which A4E will campaign are airspace (including ATC strikes), airport charges and aviation taxes. Mr Reynaert described A4E's agenda as a "no brainer", to which all airlines could relate.
A4E has the full support of the CEOs of the five airline groups, according to Mr Reynaert, who called A4E "CEO-driven". As he also stressed, this is the first association formed both by legacy airlines and LCCs. Since its initial launch, new members Norwegian and Finnair have joined the founding five. "On those common issues, they are all on the same page," said Mr Reynaert.
Mr Reynaert described the launch of A4E in Jan-2016 as a "wake up call" for a number of issues.
A4E may add momentum on its agenda topics, but many other issues are not part of its remit
For Mr Khan of the Association of European Airlines (AEA) it is a question of getting the message across, "not only on behalf of your membership, but, in an ideal situation, on behalf of the entire industry".
Mr Khan commented that there was agreement among the airline associations on a number of topics, such as environmental issues, the single European sky and passenger rights. Nevertheless, he conceded that they needed to be more forceful in finding key topics on which they could all align themselves to reinforce the message. He noted that a number of topics were not included in A4E's remit, but which he believed AEA had dealt with effectively and would continue to progress. Examples included cargo security issues on the trans-Atlantic, shaping the global market-based measure on carbon emissions and the European emissions trading scheme.
AEA was also tackling the issues that A4E was prioritising and he argued that the industry needed to deal with all of these matters collectively. "I don't see why one would have to pre-empt the other, or have privilege over the other," Mr Khan said.
Mr McNamara agreed that A4E's topics were very important and said that ERA would be happy to work alongside the new body. He added that the ERA would also need to tackle a number of other issues, particularly those that affect small and medium-sized airlines.
He said that all the European associations were in contact with one another and that they had common issues where they could fight together. "We are not in competition," Mr McNamara said, "we are on the same side here, fighting the same battle".
However, he believed that ERA had an additional relevance to its members, most of whom were too small to have their own government and regulatory affairs staff (unlike a number of larger airlines, many of whom had offices in Brussels to lobby on their behalf).
ELFAA's Mr Hanlon accepted that there were too many airline associations in Europe and that there were some issues where the industry would be better off with a single voice. On the issues being addressed by A4E, he doubted that the differences between the associations were as great as they have been made out to be, but conceded that it would be for the good of the industry if A4E's creation stimulated greater progress on those issues.
However, Mr Hanlon noted that the associations had generally evolved around different business models. They had typically had differences over issues such as competition liberalisation versus protectionism, employment practices and state aid. "I would like to hear how these differences can be reconciled," Mr Hanlon said.
ACI Europe: "no willingness to engage with A4E"
For Mr Jankovec of ACI Europe the creation of A4E had made the situation "more complicated", because of its decision to prioritise airport charges. "It is making it more difficult for us to try to establish common ground," he said.
He added that this was happening just when the European Commission was seeking to bring all the stakeholders together behind a clear aviation strategy for Europe. ACI Europe would like to develop a common agenda with the airlines, but the advent of A4E and its attack on airport charges had forced ACI to "deal with issues that are not the priority of European aviation".
Mr Jankovec lamented, "I have no willingness from my board to engage with A4E, because they put airport charges on the top of their priority agenda". He suggested that airport charges became a priority for A4E because its members could not agree on many other things. The European Commission did not regard airport charges as a priority.
Mr Reynaert responded by saying, "if the CEOs of the five largest airlines in Europe say airport charges are a problem…, then there is a problem". He added that this was not the only issue that A4E was considering.
"You can't please everyone". The industry association's dilemma
Speaking with the slightly more detached position of the onlooker who is not embroiled in Europe's current aviation association squabbles, AACO's Mr Teffaha summarised by saying that airline associations were relevant as long as members agreed on what is common between them.
Not all airlines agreed on all issues, but Mr Teffaha suggested that there was no reason why they could not form subject matter-related associations. "For example, European Airlines Against Gulf Airlines", he suggested.
Associations provide airlines with greater weight on an issue than if they acted alone. "But where they can't agree, they are individual airlines, let them do what they want to do".
Mr Teffaha drew on all his 27 years of experience at AACO when he said, "Associations are a difficult job to carry. You can't please everyone."
Europe's airlines are clearly hoping that increasing the number of trade associations will increase the number of airlines that are pleased. That also could well be a difficult challenge.