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CAPA Airline Leader Summit

Dublin, Ireland
17-18 May 2018

CAPA – Centre for Aviation, Executive Chairman, Peter Harbison

We begin with a keynote address from author of “Data for the People: : How to Make Our Post-Privacy Economy Work for You” and Director of the Social Data Lab: “My expertise is the future of big data, social-mobile technologies, and consumer behavior. I study people and the data they create. In today’s increasingly digitized world, consumers share data in unprecedented ways. This Social Data Revolution represents a deep shift in how people make purchasing and lifestyle choices.”
Social Data Lab, Director, Andreas Weigend

Kenya Airways group managing director Sebastian Mikosz highlights how after the airline’s financial restructuring it is now focusing on its industrial development. He discusses the carrier’s soon to launch long haul service linking Nairobi to New York, its push for profitability in a competitive marketplace, the infrastructure challenge across Africa and the volatility in the price of fuel. He remarks on a potential long haul fleet expansion that will be driven by the return of leased 777 and 787 equipment, a further growth of its medium haul operations and development opportunities at LCC subsidiary JamboJet.

CarTrawler CTO Bobby Healy reinforces the opportunity presented to airlines by technology, particularly with mobile platforms and highlights they have a huge amount of work to do to catch up on industry trends. He suggests they need to stop congratulating themselves when it comes to have a good website and embrace technological developments to support the changing wants and needs of customers.

As a market leader in digital commerce for travel retail, Datalex says the future will become more and more personalised. Airlines want to leverage the rich customer data they hold. The emergence of new Artificial Intelligence technologies combined with new industry distribution standards will allow them to achieve this, according to its CEO Aidan Brogan, and algorithms and technology platforms mean that more data can be processed in real-time than ever before, generating valuable retailing insights.

Vincent Harrison, managing director, Dublin Airport charts the rise of Dublin Airport both on a European and Intercontinental scale. Now among the leading European hubs for trans-Atlantic connectivity and with infrastructure investment including a new, longer runway, new flights from Cathay Pacific (Hong Kong) and Hainan Airlines (Beijing) show an increasing interest in Asian connectivity.

Association of Asia Pacific Airlines (AAPA) director general Andrew Herdman highlights a successful past year for airlines across the Asia Pacific region achieving USD8.8 billion in combined net earnings for the full year 2017. The global economy saw broadly based growth in advanced and emerging markets, boosting both business and leisure travel demand, whilst air cargo markets were lifted by an acceleration in global trade activity, he explains.

IAG CEO Willie Walsh provides an update on Brexit and the third runway debate at London Heathrow, while revealing the thinking behind its acquisition of a small shareholding in LCC Norwegian and subsequent takeover offers. He looks at the year ahead, highlights the value of the Hangar 51 accelerator programme and talks about the performance of Aer Lingus and its planned network growth with the Airbus A321neoLR.

Data has become about a lot more than collecting information that your own customers provide you. Every step we take, every move we make is contributing to massive databases that provide the basis for a level of transparency that we could not have dreamt of as recently as a couple of decades ago. This is in many ways fearsome, as much of our business structuring has been built around an absence of transparency, allowing some form of manipulation of the customer. But, as airlines – and their suppliers – seek to open up new distribution avenues that share key information, the ubiquity of data is beginning to threaten, to disrupt the existing system on a much broader scale. Let’s build the history and try to project where things are going.

Moderator: Aviation Strategy & Concepts, Managing Director, Ulrich Schulte-Strathaus
Panel:

  • Amazon Web Services, Head, Worldwide Business Development – Travel, Transportation & Logistics, Massimo Morin
  • Mezi, Vice President, Global Travel Strategy & Partnerships, Johnny Thorsen
  • Social Data Lab, Director, Andreas Weigend

Constrained by ownership and control rules established 70 years ago as a protectionist mechanism, in some ways the airline industry has progressed little – while technical advances have been phenomenal. As airlines cannot operate freely around the world, but need network benefits to succeed, global alliances were established as multilateral extensions of the many bilateral partnerships that existed widely. Much has changed since the Star Alliance began, to be followed by oneworld and SkyTeam. Where the global alliances have provided an umbrella for closed and immunised JVs, so also have deep bilateral partnerships across Alliance boundaries created new models. And Ultra long haul aircraft, the internet, metasearch, long haul low cost airlines and cross border equity relationships are just some of the fundamental leaders of change.The global alliances are designed to stimulate the financial reach of airlines, but they also have a role in reducing costs. Although they may be becoming peripheral to closer bilateral partnerships, there is still an important role for them – especially for their core members.

Moderator: AAPA, Director General, Andrew Herdman
Panel:

  • Air China, Vice President & General Manager, North America, Zhihang Chi
  • DVB Bank SE, Senior Vice President Aviation Financial Consultancy, Albert Muntane Casanova
  • Flybe, CEO, Christine Ourmières-Widener
  • Pittsburgh International Airport, CEO, Christina Cassotis

Ever since Air Canada first floated the concept of combining loyalty with using the FFP entity as a revenue centre in its own right, there has been an uneasy and highly dynamic equilibrium between maximising income and generating loyalty. Later came the recognition that there was intrinsic value in the intimate data that passengers delivered – even those whose loyalty was limited at best. Today, any FFP that does not maximise the benefits from analysing and applying the data it gathers is falling short of its potential. Finding partners who can expand datasets and help in the analytics process is increasingly a must.

Moderator: FFP Investment & Advisory, Managing Partner, On Point Loyalty, Evert de Boer
Panel:

  • Amadeus IT Group, Global Head, Amadeus Loyalty, Dominic Matthews
  • CityJet, CEO, Patrick Byrne
  • Finnair, CCO, Juha Jarvinen

Marketing has taken on many new faces over the past decade. Classical media advertising still has a role to play, but instead of being front and centre, it is now becoming almost niche. Consumers rely increasingly on digital sources for their everyday information and social media influencers dominate decision making. So it becomes increasingly necessary for airlines to channel resources into getting in the mix of those behavioural patterns. But it needs clear, sensitive and flexible strategies.

Moderator: Skylight Aviation, Senior Advisor and former easyJet Group Strategy & Network Director, Cath Lynn
Panel:

  • airBaltic, Chairman of the Board & CEO, Martin Gauss
  • Finnair, CCO, Juha Jarvinen
  • Kenya Airways, Group Managing Director & CEO, Sebastian Mikosz
  • KLM, President & CEO, Pieter Elbers

KLM president and CEO Pieter Elbers highlights how the airline is using social media as a key tool for conversations with its customers. He talks about how the airline is modernising its fleet and how this will help it overcome increasing fuel costs and the continued evolution of the low cost long haul model. He also discusses the recent operational issues at Air France and how they are impacting the Dutch flag carrier.

Social Media Lab director Andreas Weigend shares his expertise on the rise of, and future of, big data, social media technologies and consumer behaviour. He highlights that in today’s digitalised world consumers are sharing data in unprecedented ways and this social data revolution represents a deep shift in how people make purchasing and lifestyle choices. He advises airlines and the travel sector to ’embrace transparency’ as ‘if you’re not doing it, someone else will be on your behalf’.

While sales and distribution seem to have no territorial boundaries, the actual operation of airlines remains trapped in the archaic design of 70 years ago. The constraints of the bilateral system are a massive constraint on airlines’ ability to make truly commercial decisions.Open skies is a chink in that armour, albeit perhaps a diminishing one, but nothing illustrates the shortcomings of the system better than the tremors created by Brexit. Despite the uncertainty created, the UK remains one of the world’s key aviation markets and will now be forced into a transition to an as yet unknown set of bilateral and multilateral relationships.Negotiating a package with the multiple interests of the EU countries is one thing; recreating a complex North Atlantic multilateral is another. An array of innovations has been enabled by the freedom created by both the Single Market and the US-EU multilateral, many of them strenuously opposed by US and other pilots unions, so disruption is clearly on the cards.

Moderator: John Byerly, Consultant, Principal, John Byerly
Panel:

  • Croon Callaghan Aviation Consulting, Partner, Jim Callaghan
  • European Aviation Club, Chairman, Rigas Doganis
  • European Commission, Director General for Mobility and Transport, Henrik Hololei
  • IAG, CEO, Willie Walsh

Everyone’s keen to expand reach and leverage revenue, ancillary or otherwise. Achieving optimum value is an elusive and constantly shifting goal, as new competitive entities arrive in the market, both at the operating level and using tech to find smarter new ways of doing business. Creating a bridge between traditional and future systems, where many – often uncomfortable – bedfellows must coexist is vital to medium term success.

ModeratorMezi, Vice President, Global Travel Strategy & Partnerships, Johnny Thorsen
Panel:

  • Datalex, CEO, Aidan Brogan
  • Ryanair, COO, Peter Bellew
  • Skyscanner, Senior Director, Global Strategic Partnerships, Hugh Aitken
  • Travelport, Senior Vice President & Managing Director, Air Commerce, Derek Sharp

Literally tens of thousands of travel related apps are under development and fundamentally new forms of transacting business are emerging. Combining that with the growing effectiveness of artificial intelligence adds another dimension to the equation. Then add to that the proliferation of large web based entities like Amazon, google, Facebook, Alibaba and others who have massive potential for data mining across the travel spectrum. Coming to grips with the new potential and how all of these might fit together offers myriad opportunities. However, sorting out what is important and sustainable is key to making the right executive decisions.

Moderator: Mezi, Vice President, Global Travel Strategy & Partnerships, Johnny Thorsen
Panel:

  • Google, Global Travel & Expense Lead, Michael Tangney
  • Lufthansa Group, Head of Distribution, Xavier Lagardère
  • Winding Tree, Founder & COO, Pedro Renaud Anderson
  • WTMC, Founder & CEO, Sarosh Waghmar

When it comes to cooperation, airports and airlines typically revolve in separate hemispheres, colliding only when discussions turn to charges and “who owns the passenger”. Yet each of them collect enormously valuable granular data about customer behaviour that they can only maximise if they combine it with the other. There are visionaries on both sides who see the opportunities, but mutual suspicion mostly prevails.

Moderator: CAPA – Centre for Aviation, Executive Chairman, Peter Harbison
Panel:

  • Belfast City Airport, Chief Executive, Brian Ambrose
  • Eurowings, CCO, Oliver Wagner
  • ForwardKeys, CEO, Olivier Jager
  • VietJet Air, Member of Board of Directors, Cuong Chu

Flybe CEO Christine Ourmières-Widener highlights how a recent fleet strategy study has found that the Bombardier Q400 turboprop remains the best aircraft for the business and will see the departure of some of its larger Embraer regional jets. She remarks on the ongoing right-sizing of the business, the performance of its domestic routes into London Heathrow, a move from a demand-driven rather than capacity-led strategy, Brexit and the implications of Stobart Air’s takeover interest in the company.

European Commission director general for mobility and transport Henrik Hololei provides an update on the ongoing discussions over a new aviation agreement between the European Union and the United Kingdom after Brexit and warns of the real threat of no flights operating on day one. He highlights the progress of discussions on the EU-ASEAN open skies agreement and optimism an agreement could emerge before the end of 2018, while also highlighting the conclusion of agreements with Armenia and Tunisia; proposed agreements with Qatar, Turkey and Azerbaijan; and new mandates to negotiate with Mexico and Oman.

Amedeo CEO Mark Lapidus says it is a “fascinating time and challenging” for the leasing business as a continued widespread focus on airline costs brings down lease rates. He outlines how the leasing business is having to adapt to the changing operating environment and lower rentals; how current market needs are allowing older aircraft that would previously perhaps have ended up in storage, to remain to service; and the lessor’s role in supporting airlines in what is increasingly becoming a commoditised world. He also highlights how the lessor is working on ways to place its Airbus A380s and how the aircraft can succeed in a role as an “efficient mass transport mover”.

Travelport global head of product & marketing, air commerce, Ian Heywood highlights that it is no longer ‘if’ but ‘how’ and ‘when’ NDC becomes a reality, but says concerns remain over the time it is taking to deliver the proposed change. He highlights the size of the task from a technology and human processes standpoint; how Travelport are developing platforms to take further steps in the process while we await the industrial sized solutions to arrive in the marketplace; and urges the industry to be open to collaboration in order to successfully move forward.

Eurowings CCO Oliver Wagner discusses the Eurowings development journey and how it is delivered tremendous growth within the Lufthansa group over recent years. He notes that this has delivered some complexities to the airline’s operations, but that the business is working to standardise its activities and looking at innovative ways to develop, such as recent marketing campaigns asking passengers to vote where it should fly. He says airlines are no longer facing competition directly from other airlines but also technology companies and he highlights why Eurowings has chosen to launch its own digital business.

airBaltic chairman of the board and CEO Martin Gauss discusses how a record 2017 performance has been a platform for further success over the first four months of 2018. He highlights the strong performance of its Bombardier CSeries fleet; how the aircraft has become a natural fuel hedge in a current environment where costs are on the rise; and charts the airline’s ongoing transition to becoming an exclusive operator of the type. He also provides an update on the search for a new strategic partner.

Underlying cost is necessarily a key part of an airline’s revenue outcome. Maintaining cost discipline is a complex art. It is made more difficult by the fluctuations in uncontrollable input costs such as fuel, but every full service airline is continually seeking to reduce costs by 3 to 4% per annum.This continually raises the bar – or lowers it. The fact that fuel prices slumped over the past three years has in many cases reduced the intensity of management determination to cut every cost possible. The resulting 10-20% reductions in cost thanks to lower input costs tended to make marginal attempts appear futile, in turn making it harder to persuade employees to accept frugality. As fuel prices rise again, the need to regain cost discipline becomes imperative; but only so much can be achieved when starting from a high base.
Meanwhile low cost carriers have proliferated and intrude increasingly into areas where full service carriers previously dominated, both long and short haul.This has created the need for new initiatives which necessarily extend beyond mere cost saving in the legacy airline. Achieving adequate cost reductions to meet future market conditions simply are not possible from the current levels; to use the Irish idiom, if you want to get there, I wouldn’t start from here. On the basis of if you can’t beat ‘em join ‘em – or at least emulate them – new approaches are being adopted.
These include: establishing a formal alliance with one or more LCCs; creating a low cost subsidiary, or even more than one, thus forming a group of segment-sensitive operators; or combinations of all of these. Then again, there is also the option of acquiring an independent operator…

  • What are the barriers to achieving significant cost reductions in legacy airlines?
  • What are the preferred strategy options for preparing for a lower cost competitive environment in future
  • How effective are LCC subsidiaries and what factors determine their success or failure?
  • Managing an FSC-led “group” of multi-segment airlines is complex; for example, aside from the potential cannibalisation, managing brand perception in codesharing and partnerships can raise significant issues. What are the secrets for success?

ModeratorSkylight Aviation, Senior Advisor and former easyJet Group Strategy & Network Director, Cath Lynn
Panel:

  • AACO, Secretary General, Abdul Wahab Teffaha
  • AAPA, Director General, Andrew Herdman
  • Amedeo, CEO, Mark Lapidus
  • Eurowings, CCO, Oliver Wagner
  • IAG, CEO, Willie Walsh

Cathay Pacific CEO Rupert Hogg discusses the ongoing transformation of the Cathay Pacific business which includes around 700 different initiatives at different stages of development. He highlights the airline’s four pillar strategy – how the airline is looking to make better use of data to deliver more informed future business decisions, operational excellence, productivity and value management and high performance teams. He discusses the airline’s growth strategy and in particular new aircraft arrivals, how Cathay Pacific is seeking to build a balanced network to support its home market and also the wider Asian region, as well as sharing his views on the low cost long haul market.

Pittsburgh International Airport has now enjoyed two full years of monthly traffic rises. The airport’s CEO Christina Cassotis highlights how the airport has emerged from the shadows after losing its hub status and how it is working with airline partners to explore a collaborative approach to development across multiple operational models. She highlights work being doing ahead of the arrival of its first Chinese leisure link later this year and how digitalisation will play an important part in its roadmap for the future.