DAY 1 – THURSDAY 10 MARCH 2016
08:00	Registration
09:00	Chairman's welcome
09:10	daa outlook and welcome, CEO, Kevin Toland
	Session 1: The Outlook: ‘Disruption’ to replace ‘Constant Shocks’ as the driver of industry evolution
09:25	CAPA Global Aviation Outlook: DEMAND is the issue for 2016 For 2015, the pivot was cost, as fuel prices astonishingly slumped by some 50%. In those circumstances a lot of inefficiency could be disguised, allowing widespread profitability. Prices have remained low, still defying anyone to predict where they will go in 2016. No-one predicted the slump, so everyone may equally be overlooking the signs that predict a surge. The consensus, for what it is worth, suggests a gradual increase in prices – although that has been the belief for some time and still prices slide. At the end of 2015 the price of crude oil was in the low USD40s. So, many airlines should continue to be profitable in 2016, even unusually so, although 2015 is likely to have been the peak, perhaps of all time. Whatever happens on the cost side of the ledger, one thing is clear. In 2016, the driver will be demand, or lack of it. CAPA - Centre for Aviation, Executive Chairman, Peter Harbison
10:10	CAPA Airline Boardroom Live. Strategy Session 1: How can FSCs regain their short haul markets from LCCs? From the time that the penny finally dropped for full service carriers that LCCs were a fixture and were not going away, the full service airlines have sought many ways, usually without great success, to counter the erosion of their short haul operations by the new entrant, lower cost specialist point to point airlines. The impact has been not only on their regional operations, but usually on their network overall, as the short haul services feed into their respective hubs, fattening the long haul sector loads. This state of affairs was more or less tolerable while the competition on long haul transferring over their hub was stable and their alliances, global and bilateral, were able to protect them. Then the super “Connectors” (Gulf airlines and Turkish) came along, disturbing the comfortable equilibrium – and in turn placing renewed importance on their short haul routes; these were the markets where they could at least aspire to dominate.The experience of European carriers is mirrored in Asia , with many FSCs losing short-haul market share to numerous LCCs while their services to Europe also suffer. A variety of responses has been attempted, from simple discounting, through partnerships, using the pull of FFPs, reducing frequency, dropping uneconomic routes, establishing subsidiaries, modifying existing entities. The Board will be asked to formulate priorities for a strategy to protect and expand the hub carrier. In doing so, it will consider such issues as: What models have shown the ability to respond most effectively? Is fundamental reshaping of their own model in order or is a different model required? Part 1. At the coalface 1. Responding with existing/conventional tools Pricing, discounting Enhancing ancillaries Cost reduction Reformatting product, changing IF product 2. Getting buy-in from employees Addressing security and pay Explaining the plan Moderator: European Aviation Club, Chairman, Rigas Doganis Panel Members: airBaltic, Chief Operating Officer, Martin Sedlacky ANA Holdings, Special Advisor to the Chairman, Keisuke Okada Finnair, Chief Commercial Officer, Juha Jarvinen flynas, Chief Executive Officer, Paul Byrne Lufthansa German Airlines, VP Business Development, Daniel Roeska
11:20	COFFEE sponsored by Holiday Extras
11:50	DISRUPTION: HAVE AIRLINES GOT A FUTURE? Distribution and engagement are key words, but where data is king who are the real masters in those fields? Airlines are not big companies. But they are a vital part of the travel chain. Yet because of the protective cocoon of regulation in which they live they have had little need to be creative or disruptive. Airlines are certainly being slow to react to the changing horizon – if they are reacting at all. The past year has exemplified how some legacy interests will fight to preserve the status quo, using non-market solutions. And while airlines are busy pointing their guns at the traditional distribution modes, the big new kids on the block are focussing on the total travel system and are busily accumulating massive data sets. Air travel distribution revenues might be an important factor in airline economics. But for companies with market caps of hundreds of billions of dollars, they are minimally attractive. Moreover those revenues are tied up in a complex of contracts and legacy practices, making disruption difficult. By contrast, travel overall, in which airline revenues are one small part, leads straight into spending behaviour profiles. Airline customer profiles offer a good entry point to higher value customers, but it is the other expenditures that add up to real value. Travel, in other words, is where the value lies. Its information chain is evolving fast. And every provider is attempting to put an app in front of its customers, to capture their eyeballs. That is increasingly frustrating to users – who really only want one super-app, where all their needs converge. That super-app is not going to emerge – but it is forming where the data converges. In short, information on every dollar that 80% of the earth’s population spends is now being gathered and used by Google, Facebook, Amazon, even booking.com – and whoever comes along next. As they slowly take control of this extensive data – and work out how to use it to communicate with their customers – the airlines risk being severely marginalised. As a recent Economist article observed: “In many cases the successful companies will no longer be the ones that make the best products, but the ones that gather the best data and combine them to offer the best digital services.” If it chose to, Google could buy every major airline in the world out of petty cash. In many cases its local establishment could even own the whole airline. Aside from a strategy to reduce their tax payable, this is hardly likely. But what other indirect options are available to these and other data giants to extracting value from the industry? Does any airline seriously know what it is doing in marketing and distribution? Or are they just following the herd and hoping? Is aviation different from other industries in terms of customer engagement? How might airlines evolve to being part of the “sharing economy”? Moderator: MW Travel Consultancy, Principal, Martin Warner Panel Members: Amadeus, VP Distribution Marketing, Decius Valmorbida Cellpoint, Chief Executive Officer, Kristian Gjerding Datalex, Chief Marketing Officer, Ornagh Hoban Sabre, Regional Director, Strategic Clients, Richard Castle Skyscanner, Director Business Development, Hugh Aitken Travelport, Senior VP & Managing Director Air Commerce, Derek Sharp
13:00	LUNCH
14:00	US BIG 3 VS GULF BIG 3: IS IT LAST YEAR’S STORY? What is the status of open skies after the “subsidy” onslaught? Since the multimillion dollar “White Paper” was issued to much fanfare in 2015, there has been a mass of media hype which so far has been effective mostly in advertising the Gulf carrier products to a previously unknowing US customer base. A casualty of the process has also been Norwegian, whose application to operate under an Irish AOC has been remarkably sat on by a reluctant administration. Meanwhile, the Gulf airlines have continued to add and announce new routes to the US. A ponderous bureaucratic process to examine whether some action should be taken to stop the Gulf 3 is still under way. Many other US airlines are opposed to the proposition, most notably the world’s biggest freight carrier, FedEx, which has a hub in Dubai. Meanwhile, in Europe there are similar divisions between airlines, even provoking International Airlines Group to withdraw from the Association of European Airlines, just as Delta has left A4A. Yet, behind the overtly nationalistic clamour of the Big 3, there was never any clear end goal to be achieved. It was always highly unlikely that the open skies agreement would be unilaterally terminated (and subsidy, real or contrived, is not grounds for termination). And it is hard anyway to find a major airline which cannot be accused of receiving “subsidy” in some form. And, swept up in all the anti-liberalisation backlash have been some relatively minor fifth freedom routings, for example an Emirates service from Milan and Ethiopian Airlines 787 services between Dublin and the US. One very unfortunate outcome of all this noise has been to cast a pall over the momentum towards global liberalisation and open skies. Foreign countries, who were often reluctant in the first place to open their national airlines up to competition from US and other airlines, are beginning to wonder if they too should be more selective in opening their skies. Is the Big 3 great debate behind us now? Who are the casualties and what will be next? How big a roadblock has it created for world aviation liberalisation? To what extent are partnerships likely to change the confrontational posturing? Moderator: John R. Byerly, Consultant, John Byerly Panel Members: AACO, Secretary General, Abdul Wahab Teffaha ACI EUROPE, Director General, Olivier Jankovec Air China, VP & GM North America, Zhihang Chi JetBlue Airways, Senior VP of Government Affairs & Associate General Counsel, Robert Land Lufthansa German Airlines, VP Business Development, Daniel Roeska
15:10	COFFEE
15:45	A NORTH ATLANTIC OUTLOOK: Are metal neutral JVs good for the industry, the travelling public and airports? When the US DoT and the EU Commission approved metal neutral joint ventures over the North Atlantic, among the major airlines of the three large global branded alliances, the justification was that they would be in the public interest. In a more rational aviation environment, they would allow for better capacity and frequency coordination and deliver a better product for consumers. There were some who disagreed; these included alliance members and other airlines who are excluded from the JVs, some corporate travel groups and some consumer groups. Five years on, the JVs have expanded a little. They have, by unanimous agreement among the JV partners, been profitable in a market which was previously treacherously fickle. And there has been a good variety of service to suit business travel needs. Yet issues remain about the standardisation of pricing – there is rarely more than a dollar or two difference among all the JV airlines from whatever alliance on a particular North Atlantic city pair. And, with four out of five seats operating inside this closed environment, arguments are growing that this represents excessively dominant market participation. The doubts are reinforced thanks to the various strenuous attempts to prevent any destabilisation of the “triopoly”. Perhaps most insidious is that the JVs have been the unspoken cornerstone of opposition to new entry, whether by Norwegian or the Gulf airlines. A cross-Atlantic coalition of opposition has formed against any airline that might divert sixth freedom traffic from beyond Europe away from the longer established hubs. Interestingly the bilateral air services system, with all its faults, was never intended to give any preference over sixth freedom traffic flows. Indeed some of the loudest protesters today were equally vociferous against any such form of transfer traffic when sixth freedom operators first started applying the concept back in the 1970s. Meanwhile, JVs are now appearing in other markets, such as across the Pacific and between Japan and Germany. Are the JVs proving beneficial to consumers, as anticipated by the regulatory authorities? How does traffic growth and pricing behaviour compare with other major markets? Are the JVs a constraint on new entry? Are they a useful model for extrapolation globally? How adequate are competition authorities outside the US and Europe in dealing with applications for similar antitrust immunity? Moderator: John R Byerly, Consultant, John Byerly Panel Members: Finnair, Chief Commercial Officer, Juha Jarvinen Star Alliance, Chief Executive Officer, Mark Schwab ELFAA, Secretary General, John Hanlon
16:45	DO AIRLINE INDUSTRY ASSOCIATIONS HAVE A FUTURE? Following two conspicuous defections from regional airline associations in 2015, there must be questions about the role of industry bodies in future. The issue is further complicated when a European, cross-association grouping is set up to achieve a special purpose. The effects of rapid industry change, both in operations (LCCs and the Gulf carriers) and distribution (the new players and attempts to regain product control) are driving wedges between airlines who previously had a greater commonality of interest in lobbying governments. In the US, Delta argued that “The $5 million that Delta pays in annual dues to A4A can be better used to invest in employees and products to further enhance the Delta experience, and to support what we believe is a more efficient way of communicating in Washington on issues that are important to Delta customers and employees”. The trigger difference was over A4A’s lobbying for airways privatisation. IAG left AEA on broader policy grounds: "We believe global liberalisation of our industry is fundamental to our future growth and we are not willing to compromise on this fundamental matter"; IAG then joined ELFAA, saying, "We look forward to working with ELFAA and its member airlines on a full range of policy and regulatory issues including the pursuit of further aviation liberalisation." That association had previously been the stronghold of LCCs. Then, to add spice to the situation, applying the formula that my enemy’s enemy is my friend, the CEOs of Air France-KLM, Lufthansa and IAG, along with their peers in Ryanair and EasyJet, joined forces to promote measures for greater efficiency, better airport regulation, reduced taxes and prevent ATC strikes. Meanwhile the global association, IATA, seemingly continues from strength to strength. Are regional associations still valuable as lobby groups? Can they effectively represent group views on economic regulatory issues? Should they restrict roles to lobbying for less consumer regulation and on matters such as airport charges? How is it that IATA can remain intact while regional bodies appear to be embroiled in conflict? Does IATA really represent the global industry when 30% of seat capacity (on LCCs) is not represented? Moderator: Association of Corporate Travel Executives, President, Kurt Knackstedt Panel Members: AACO, Secretary General, Abdul Wahab Teffaha ACI EUROPE, Director General, Olivier Jankovec AEA, Chief Executive Officer, Athar Husain Khan Airlines 4 Europe, Managing Director, Thomas Reynaert European Low Fares Airline Association, Secretary General, John Hanlon European Regions Airline Association, Director General, Simon McNamara
17:30	End of Day 1

CAPA Airlines In Transition Summit