IATA’s new DG Willie Walsh talks exclusively with CAPA

Transcript

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Peter Harbison:

Welcome to our next speaker on CAPALive. Delighted to have with us an old friend of CAPA's, Willie Walsh in a very different role now as Director General of IATA, CEO and Director General of IATA. Willie, welcome back to CAPA Almost Live.

Willie Walsh:

Thank you. Delighted to be here.

Peter Harbison:

Willie, I have to ask you this. This is a silly one to start with, but I spoke to your predecessor, Alexandre, about a month after he started in the job, and he'd just come out of a pretty toxic Air France environment where the unions were beating him up. The government was kicking him in the head from the other side. And he said to me, I said, "how do you feel about this new role?", and he said, "I feel a little bit as if I've died and gone to heaven." Is that the way you feel?

Willie Walsh:

No, no, no. Well, I left at a different environment. You know, I clearly had a great time at IAG. When I had announced that I was retiring back in early, so it was January after November, 2020, so before all of this sort of COVID crisis kicked off, I thought it was a good time to be moving on. Clearly, I delayed my retirement to sort of steer IAG through the initial phases offers and give Luis Gallego a bit more time to get up to speed. So yeah, I loved everything I did. It's sad to leave it in the condition as I left it, but I'm delighted to be involved now with IATA.

Peter Harbison:

Great and I'm sure you'll play a massively important role where you are. That's a certainly a challenging job.

Willie Walsh:

Well, I think IATA has a very important role to play and it's the reason I took on this job because I'm passionate about the industry. I have spent a lot of time involved with IATA and I want to make sure that IATA remains relevant to its members and is an effective voice for the industry, particularly at a time like this.

Peter Harbison:

Yeah, of course you were Chairman for quite some time of IATA. I mean, now that you're on the other side of the fence as it were, and in that respect, what sort of changes do you think need to be made in IATA?

Willie Walsh:

Yeah. You always get a different view when you're inside an organization to the one you get when you're outside. And as a board member, you're sort of on the margin because you're not really inside the organization, you touch it from time to time. So what I've seen here is, is not a great surprise. We've got a very dedicated people. But it is a bureaucratic organization, which I don't think it needs to be. Sometimes it is inwardly focused. Again, I'm not sure that isn't the right thing. And I think there are times when I had just forgotten why it's here. We're here to serve and represent the airline members.

The [HASBA 00:04:46] just talked about IATA leading. I don't see IATA as the leader in the industry or the leader of the industry. I think IATA takes the lead when the industry wants us to lead. And there will be some issues, when that is the case. But in the main, we're here to serve and to represent the members. And everything we do, whatever we will do while I'm here, would be very much focused on that.

Peter Harbison:

Yeah. There's always been a fairly significant lobbying role from the IATA point of view. And I guess that's only going to intensify or has intensified now with the vast array of things that you need to address, which really come down to the survival of the industry.

Willie Walsh:

Yeah. It's very important that somebody can speak for the industry. And it's often easier and stay Director General if I ask them to say things that clearly will upset some politicians, and it is for the CEO in the country involved. I know that from personal experience. You know my style, I've never been shy about criticizing politicians, but I think they deserve criticism. I have great respect for politics, but the political approach to, say risk for example, is very different to a business approach to risk. Politicians can't cope with risk. They shy away from it. Whereas we, in this industry, we manage it. And there's a big difference. And I can see that playing out in this particular crisis because you see some politicians just afraid to make decisions because they're afraid of the consequences.

Whereas the airline industry, we live with that all the time. We're all the time assessing risk. We're all the time having actions in place to mitigate the risk. And then we managed the net risks that we're left with. We know there's risk associated with everything we do. It's very difficult for a politician to think that way. And I think we can help them to understand that approach. And sometimes, you know I think it's necessary for us to be able to be vocal and try and force that approach upon people.

Peter Harbison:

Yeah. These things are, at the moment, we're seeing the U.S., largely thanks to vaccine and not to good judgment previously, UK, and to a lesser extent, the rest of Europe, getting to a stage where vaccination is at a level where they're able to start seriously thinking about traveling again. But that does bring me to the point which has often been an accusation of IATA in the past, certainly was when I was there a long time ago. That IATA caters for the big guys, but really forgets a little bit about the smaller ones. And when we're talking about risk, a lot of these smaller countries, particularly I think of Africa, or even India, where we're seeing such trauma at the moment, are much more at risk because of their inadequate hospital facilities, medical situations. How do you navigate that need to keep the big countries going and actually, but same time with a similar rules, to look after the smaller ones.

Willie Walsh:

Well, that's why we've been very clear that reopening borders shouldn't depend solely on vaccination because there isn't going to be an even rollout of vaccines. I think it would be terribly unfair at every level. It would be very unfair if that were the case. So what we've been arguing for is where it's clear evidence that vaccinations have had an impact on suppressing transmission. And that is the case. You know, that strong, scientific evidence to support that. Well, then those countries should be more relaxed about reopening in other countries. So in the short to medium term, we believe it should be a combination of a relaxation of the rules because of vaccination, but also enabling people to travel when you can pudge effective testing mechanisms in place. And our argument there is, the technology around testing has significantly improved. The cost of testing is much lower than the prices that people are being charged at the moment. And the reason our argument, in fact, that governments should be bearing the cost of this, given that they're mandating the testing.

We've produced some data at IATA earlier this week which showed that the variation in price, just looking at the minimum prices, you have maximum prices go off the wall. But you can get a PCR test in Malaysia for $27 as the minimum price we could find. The minimum price in Japan was $278 for the very same test. So, we think countries should be looking at an effective, cost efficient testing mechanism to enable people to travel. And then countries that have had success through a lot of their vaccination should be prepared to be more relaxed about the rules. They may see a need for some testing, but I can't see any justification for continuing to demand PCR testing for pre-departure and after arrival when there are effective rapid antigen tests that are significantly cheaper available.

Peter Harbison:

It seems to me, particularly when you're looking at UK and Europe, to be a really, really pressing issue at the moment. Because when we're talking about the UK starting to, or the islands up there just off the coast of Europe, starting to travel for the summer, that it's all going to be within Europe. Local short-haul, which is driven by low fares. But if families are going to travel, they're going to be paying several hundred pounds in PCR testing. That just doesn't work. Does it? I mean, what's going to happen this summer with that?

Willie Walsh:

Well, to be honest, that's a disgrace and we shouldn't allow it to happen. You know, because aviation has been a key to freedom all around the world. It has enabled people to travel in a way that if you go back when I started in this industry, back in the late 70s, it still was really the preserve of rich people. You know not everybody could afford to fly. That has changed. And I think that's been a fantastic advance. The idea now that you can have cheap fares available for people, but they can't afford to travel because they have to do these incredibly expensive tests, that's just unacceptable. Particularly when you look at the actual cost of the test, there's very clear evidence that the charges being levied, are way above what they need to be. And these requirements are being levied for health purposes.

And governments are mandating them because they say there's a health requirement. So if that is the case, and these tests should either, as the WHO recommend before, that the cost of the test be borne by the government. All prices should reflect much more concede cost of the test and government should not be taking a big slice of the pie through that. That I find really infuriating that they're mandating this test, that are ignoring the fact that there's clear evidence of people being ripped off by high prices, and then they're happy to charge on top of that as well. So we've got to keep a very clear focus on this issue and do everything we can to ensure that we can drive down these prices to a much more effective and cost efficient level and enable people to travel.

Peter Harbison:

It seems to me though, on that same point Willie, this is going to hit the fan very shortly when the Ryanairs and easyJets and the rest start to try and operate in Europe in the next couple of months. What's going to happen? I mean, is that immovable object going to move?

Willie Walsh:

I think it will because we're seeing evidence already of prices reducing. We're seeing some governments beginning to look, as you kind of do credit to France, for example, that the French government is picking up the tab for these tests recommended by WHO. Other countries are beginning to look at the prices involved. I think we've got to shine the spotlight. You know, there are plenty of consumer organizations to love to look at airlines and comment on airline competition. And they're just ignoring the fact that airline customers are being ripped off by these incredibly expensive tests. And as I said, we've got to challenge whether it is necessary to continue using a PCR test before travel and after arrival, when you can have very effective rapid antigen testing. This is all about managing risk. And this is the issue, what we're trying to do here is ensure that people who have the virus crunch traveling and risking the spread of the virus in countries outside of their home country. And that can be managed very, very effectively through other measures. It doesn't need an expensive testing regime that we have to take.

Peter Harbison:

And that of course leads straight into the whole issue of the passports, or whatever we want to call them, of which there is a proliferation at the moment despite the best efforts of a number of people, the commercial ones, there are national ones, there's one that IATA's promoting, EU seems to be getting there as well. Where's that going to go? It's going to take a long time, presumably, before we get something which is globally recognizable as a real passport.

Willie Walsh:

Well, I think there's a couple of issues there. First and foremost, when there are entry requirements in place, be a testing or proof of vaccination, what we have to do is enable the checking of that in a digital form. Because as you know very well, airports will not be able to cope with any increase in volume. If every customer traveling has to go to an airline check-in desk and show evidence in using paper of having filled in forms, of having evidence of a PCR test, and that these have to be checked by people at check-in counters. The processing time alone goes way beyond the average processing time of that we're used to. And don't forget, most people actually don't go to a check-in desk or haven't. If you go back, I think 2019, most people were actually checking in online or checking in using the airline app.

So what we've done at IATA is we recognize that critical needs to be able to provide a digital solution for the industry. We don't mind if others wanted to develop something as well, but the IATA Travel Pass is designed to be able to be integrated into an airline's app so that the customer can do all of this process before they get to the airport. And if they can do it all properly and they are clear to travel, that they can check-in online, check-in using the app, and go through the airport without having to turn up at a check-in counter. Now that's the only way airports will be able to function because airports have not been designed to process every single passenger at a check-in desk. And we haven't done that for years. I can remember introducing self-service kiosks, I think it's back in 2002, and the idea in there was to take at least 50% of the volume away from the check-in desk, because a lot of people are traveling without the need to check-in a bag. And that's why IATA has focused on this.

Now, what we've also got to do then is to have a process on arrival because there's no point in sorting out the departure process only to create a massive queue on arrival as in itself will be totally unacceptable. And that's why we want to work with governments and we have been engaging with a number of governments who like what it is we're doing and are prepared to work with us and accept the IATA Travel Pass. Whoever develops... And competition in this field is always going to considerably improve the efficiency and clearly the cost. But whoever develops it needs to have it capable of being linked into airline apps, airline websites and ideally into government immigration systems so that you can have a smooth arrival process for you when you do get to your destination.

Peter Harbison:

Yeah. One of the things, of course, which has really been so evident in this whole pandemic has been the rise of nationalism and the impact of national borders. To cite one example, and it's probably not going to be anyone, China, for example, will only accept the Sinovac to allow entry to China. You can see the U.S. perhaps going their own way as they tend to like to do to lead the world, from behind in this case. Is that going to be an issue? I mean, how are you going to get around that? China is a big one, obviously, but I can imagine the U.S. Is perhaps going to be a little bit different from the EU as well.

Willie Walsh:

I think there'll be more alignment as we go through this than maybe you think at the moment. What the EU has said clearly is that they recommend easy travel, maybe no restrictions for people who can show evidence of using, or have been vaccinated using a vaccine that's been approved by the EU. But they've also talked about looking at the WHO emergency list. And so, yeah, I think what everybody wants to say is that there's clear scientific evidence to support the effectiveness of the vaccine. And as we go forward, more and more data will become available, and evidence of the effectiveness of the vaccines will be clear. And then I think people will be more inclined to accept these other vaccines. So I think this is a process and I'm expecting to see it accelerate and more vaccines being approved or recognized as being acceptable for entry into countries.

Peter Harbison:

It is going to be a lumpy process though, obviously. I mean, what's the horizon on this? So we're looking at 2022 before we get some sort of standardization globally?

Willie Walsh:

Yeah, probably. I think that's fair. We'd like to think it would be sooner than that. Our industry can work at a much faster pace than governments can, but on the other side of that, we're used to having to deal with a multitude of restrictions. And the industry is good at being able to adapt. Yeah, we'd prefer not to, but you look at security regime, state change. People see countries introducing new restrictions that other countries don't have. You get differences in requirements as to what you have to do when you're going through security at an airport. We cope. We prefer if it was a single, simple system applied globally. And we see some evidence that it's moving in that direction, but if it doesn't, we'll still be able to cope. It'll just mean airlines have to continue to deal with complexity or we're greater dealing with complexity. And we clearly be much happier to operate in an environment where we have to deal with complexity and the environment that existed anywhere people can travel. So the critical issue is that we get international travel up and running again.

Peter Harbison:

Yeah, let's hope so. Let's go off at a tangent, but it's still on that nationalism issue. It indulged me a little to lead into this question, but quite obviously, business travel is not going to come back very quickly. And even Lufthansa, for example, just a couple of weeks ago said, "we're not expecting to get back to 80% of business travel until 2024." So we're talking a very, very significant hit on, particularly on long-haul full-service operations, which tends to be what long-haul needs to be. The corollary, this has been of course, with bailouts and government intervention. The great likelihood that governments are going to start to take a much more active role particularly in long-haul flying, do you see that as something that's inevitable? Is it irresistible? Is it inevitable?

Willie Walsh:

No, I don't think it's inevitable or irresistible because it can be resisted by airline management. And that's the job of the airline management team to ensure that everything they do makes commercial sense. You know, I ran an airline Aer Lingus back in 2001 through 2005, that was owned by the Irish government. They made comments, they made suggestions, at times, they tried to tell me what to do. I didn't do it. I did what was necessary to ensure that Aer Lingus survive and most successful. That was my job. I wasn't being paid to carry out the demands of a government, I was paid to ensure that the airlines succeeded. And if the airline failed, it was going to be my responsibility, in that offense, not a politician's.

Now, there will be some countries where governments have exercised influence over airlines and did so effectively. I don't see this changing. So I think where we've seen airlines receiving state bailouts, and with that, has come some participation. These airlines haven't been taken over by politicians or by governments. They have governments as shareholders. Many of them have had governments as shareholders for a long time, but they're only minority shareholders. And airline management teams have responsibilities to all shareholders to ensure that everything they do is for the benefit of all stakeholders. So I honestly don't see it changing. I think it will be potentially a test for the caliber of airline management teams around the world. But I've no doubt. Even the knowledge that I have of the management teams that are in place, that they're going to continue to do everything that's needed to ensure that the airline can be successful. Because if you look at the damage that has been done to airline balance sheets, there's going to be massive hard work required by management teams to repair those balance sheets and they have to be repaired.

So I don't see that [inaudible 00:23:50], like the structure of the industry changing as a result of things. I don't see the behavior of the industry, I think it's going to continue to be incredibly competitive. And when it comes to business travel, I think it is important for us to remember that not all business travelers travel in premium cabins. I think there's often a confusion between that because people immediately associate business travel with premium. I know from my own experience in IAG, and particularly with British Airways, a significant number of people traveling in British Airways premium cabins are traveling on leisure. And I expect that that actually will remain strong.

If anything, I suspect too, will become stronger because what we've seen through this crisis is people have saved a lot of money. Consumers have a lot of money available to spend. And I think one of the things that they're going to be prepared to spend on is travel again, because I want to travel. And all of the evidence we have says that people really do want to get traveling again. So yes, the industry will be impacted by a reduction in business travel, but I think the industry can cope with that and will be rebuilt in a cautious way to ensure that the network that they have in place will support the recovery of their financial position and will critically address, repairing the balance sheet of the airline.

Peter Harbison:

Yeah. But of course airlines, however good the management is, operate within a regulatory framework. And I remember you telling me a few years ago, your opinion was that we'd probably reach the zenith of liberalization internationally. The reflex has surely got to be from a number of governments, and we're already seeing a bit of pushback in the U.S. Congress, for example, against North, coming back onto the North Atlantic. Do you see that as a real potential threat that we will see a reversal of liberalization?

Willie Walsh:

No, I don't think so. You know, the issues around North, they were there for the whole period Norwegian was operational so it never went away. And because you've got some of the same personalities involved in that entity, because you did have in Norwegian, it's just a continuation of the debate that has been going on for, I don't know, probably the last 5, 10 years. And it'll play out in exactly the same way. So personally, you may see a minor change. I don't think we're going to see a steep change in behavior. I don't think anybody wants to see that because when you look around at the airlines that have managed their way through this crisis, and everybody has been effected by it. They all want to get going again. Everybody wants to start rebuilding, and rebuilding as quickly, and as sensibly as possible. And that's only going to be possible if the regulatory framework remains pretty much as it is. So I don't think anybody wants to see that framework become more restrictive.

Peter Harbison:

Yeah, I do think, I won't push it too far, but I do think back to the battles that the gulf carriers had, particularly in Europe, they're likely to intensify surely with the greater investment the governments have got in their airlines since COVID.

Willie Walsh:

You know, that debate has raged for as long as I've been an airline CEO. It hasn't changed. It hasn't abated and it will continue. It's an interesting debate and I've expressed my views loud and clear. I'm lucky now that I sit in a position where I can be an observer to the debate rather than necessarily participating in it. But honestly, I don't see it changing significantly, because what I see is a continuation of a debate or an argument that has been going on for many years. The players are largely the same. It's always fun when you can get a change in one of the CEOs to see this day to abate change. It has, so I think we should be pretty relaxed about all of that.

Peter Harbison:

Well, I hope you're right. Will the UK's withdrawal from the EU, the UK as a liberalizing voice, will that shift the balance in the EU do you think? France and Germany [crosstalk 00:28:25]

Willie Walsh:

I think, in general, EU politics, yes, it will. I've been disappointed by both the UK's reaction to the coronavirus when it came to travel in the EU. Because to be honest, I thought that in a post-breaks in the environment, the EU would want to clearly demonstrate the value of the single market and freedom of movement. And it was very disappointing to see that freedom of movement, in effect, suspended through this crisis. Because I think it's been one of the fantastic achievements of the EU. As you know, I'm Irish, I had the opportunity to vote on the referendum and I voted for the UK to remain in the EU. And I'm disappointed that the UK left, but it has and the world moves on. So things will settle down and adopt. I think the UK could have exercised a lot more influence within the EU if they wanted to.

It's disappointing from a political point of view that the UK has effectively disengaged from the EU, many years before they actually formally left. Because I think the UK could have been a very influential voice and an effective voice in setting the agenda in many areas. But I think EU [inaudible 00:29:49] to look at itself and really ask themselves whether the EU has operated effectively since this crisis broke out. Have they secured the fundamental freedoms that people have enjoyed that the EU has been built up? I don't think they have. I think they should have done a better job. I think the EU should have been working much more closely with one another. So it will be interesting to see how that debate continues in the EU.

It'll be an interesting debate after we come out through this crisis. What everybody starts looking at, "could we have done things better?" And anybody who believes that we've handled this in the best way possible, I think is incredibly naive because there's no question that wrong decisions were made at different times through this and coming forward, I'd like to think that we all learned from it. Because we can see something like this again. A global pandemic was on every airline risk register that I know of. And we had all done the tabletop exercise as to what was going to happen.

The one thing that I don't think we factored in was that governments globally would shut down. I think people felt that there would be some regional restrictions, but the idea that everybody just said, "no, you can't travel", I certainly didn't see that. And I saw it impacting on the number of people who would be available to work. Therefore, how much of your operation could you continue with the number of people who will be ready to fly? I don't think anybody anticipated that we'd see a pandemic like this stuff would cause international aviation to effectively stop. You know, so we've got to learn from this and clearly I'd like to think that we, when faced with a similar event in the future, we'll be able to handle it much better.

Peter Harbison:

Yeah. I share your optimism Willie. Although having lived through SARS back in the early part of the century, to the extent that that geographically spread, there was shut down. And we didn't learn from that. So I'm right with you. Willie, I have to apologize. I really wanted to get into some of the big issues like environment as well. As always talking to you 30 minutes goes far too fast, but let's hope we can do it again. Congratulations on your appointment. I hope it is a little bit heavenly on the way through. Hope we get to share a beer sometime, maybe down here.

Willie Walsh:

I look forward to it Peter. Thank you very much.

Peter Harbison:

Thanks for being with us Willie.

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