CAPA World Aviation Outlook Summit

Peter Harbison, Chairman Emeritus, CAPA – Centre for Aviation

In this session we ask key airline executives to share their thoughts on the market for 2020 and beyond.

Richard Maslen, Content Editor, Blue Swan Daily, CAPA – Centre for Aviation interviews Tarik Bilalbegovic, CEO, FlyBosnia

Mr. Michal Nowak, Marketing Director, EMEA, Embraer

Mr. Ted Christie, President & Chief Executive Officer, Spirit Airlines

Ian Heywood, Global Head of New Distribution, Travelport

Tamur Goudarzi Pour, SVP Revenue Management & Distribution, Lufthansa Group Hub Airlines, Lufthansa Group

Karl Sandlund, EVP & Chief Commercial Officer, SAS

Volantio CEO Azim Barodawala, says airlines need to be structurally well set up to leverage technology. Airlines “need to earn the right to innovate… that shouldn’t come free,” he explains. He argues “getting the basics right is a lot more important than machine learning or data science”. According to Mr Barodawala, airlines can and should use digital technology to offer personalised, curated experiences to passengers and to target offers at the customers most likely to value and accept that offer.

As customers, employees, suppliers and society at large begin to place increasing importance on corporate social responsibility, corporate leaders have started to implement practises which positively contribute to society. The big challenge for airlines is how to develop an approach that can truly deliver on these ambitions. Widerøe, chief strategy officer, Andreas Kollbye Aks highlights how sustainability will drive future airline strategy decisions ranging from flight shaming to electric aircraft.

Sabre’s vice president and general manager of travel solutions in Europe, Alessandro Ciancimino, believes the “battle over the customer is at an all-time high” and to remain competitive airlines will “have to know where their customers shop, pull more intelligence into the shopping experience and capture traveller attention”. He believes that airlines should move away from the new long list of ancillary options that have pretty much become the new industry standard, and improve the relevancy of offers to the passenger.

Loganair CCO Kay Ryan highlights that connectivity is “absolutely key” for regional airlines to succeed against larger rivals and getting scheduling spot on is essential, both inbound and outbound, to maximise traffic flows. Scotland’s airline may have its roots in the country, but is now expanding further across the United Kingdom providing important domestic and international regional

Air Serbia may be one of Europe’s youngest flag carrier brands, but it has a long heritage. Its general manager commercial and strategy Jiří Marek highlights its recent journey to become one of the fastest growing airlines in southeastern Europe. It added nine new destinations in Jun-2019 and Istanbul from Dec-2019. This growth will see capacity increase 12% in 1Q 2020 versus the same period in 2019, supported by increased frequencies in existing markets and will see an additional two to three aircraft arrive in 2020.

In this session we ask key lessors and OEMs to share their thoughts on the market for 2020 and beyond. 

Finance:

• What will lessors look for in an airline business model in 2020?
• How does: credit structure; management talent and capital structure of the business; the competitive landscape, network, long term strategy and break-even point; impact the decision making process?
• How do lessors assess an airline risk? 
• Should airlines lease or purchase outright from the OEM?  

OEMs:

• Can OEMs deliver on their order books for 2020?
• New aircraft types and new engines promise to transform the way we travel:
• Is the number of delays and problems intensifying as a result.
• Will it reach breaking point in 2020?
• What aircraft innovation is set to change the landscape?
• Are things really worse than they were before?
• What needs to be done to deliver what the airlines want?

Europe has seven island markets listed as separate countries/territories in CAPA and OAG databases for aviation data on capacity and aircraft fleets. These are the three nations of Cyprus, Iceland and Malta, together with four much smaller markets: three UK crown dependencies Jersey, Guernsey and Isle of Man, and the Faroe Islands, which are a self-governing region of Denmark. 

In all cases, Europe’s island markets have a much higher propensity for air travel than other leading aviation markets. The small island territories depend much more on air travel to maintain vital links with the rest of the world. In addition, they have often successfully marketed themselves as popular tourist destinations (and as an aviation connecting hub, in the case of Iceland). 

This has made these island markets attractive to airlines with a variety of business models, with no single template applied to all of them. Local airlines have dominated in the Faroe Islands, Iceland and Guernsey, but with different models. LCCs are highly significant in Malta and in southern Cyprus. Jersey and the Isle of Man have no local airlines but are served by a regional airline, a low cost operator and a legacy airline.

• How can aviation be used to support tourism growth?
• What are the main source markets for inbound tourism?
• Is the region well positioned to attract key inbound markets?
• What routes will be opened up to Europe thanks to new long range aircraft technology? 
• What impact can overtourism have on European markets?

The digital economy has transformed consumer expectations around the way they research, purchase and experience the airline product. As a result airlines need to work hard to differentiate their product offering and delivering a personalised and seamless experience for customers throughout the entire travel process. Airlines and airports that invest in technology stand to gain from a more engaged and loyal customer base, unlocking top line revenue opportunities and improving efficiencies in the process.

• What new technologies exist to improve how airlines optimise both revenue and customer experience?
• Will this technology allow for dynamic offers and individual offers?
• How can airlines and airports turn big data into actionable insights that intelligently understands and delights the customer (and enhances revenue)?
• How can each player work together to personalise and enhance the traveller experience/journey?
• What are the opportunities and implications of AI and robotics? How can airlines and airports improve customer experience, especially as travelling continues to increase in impressive manners and airports continue to become more crowded and stressed?
• What opportunities exist for airlines and airports to become more efficient in their operations due to AI and new technologies? 

While unmanned aircraft technology is not new, the thought of thousands of drones constantly buzzing around our skies still feels as if it belongs in a futuristic movie. However, such a sight is closer than may be expected. With flying cars among the next steps forward in innovation, it could ultimately be a partial solution to the pilot crisis that is already impacting the commercial aviation sector.

Much of the progress will depend on regulatory authorities developing robust standards, enabling new applications “and the ability of innovators to understand what technology is available to enable their vision of the future,” according to one industry leader.

As customers, employees, suppliers and society at large begin to place increasing importance on corporate social responsibility, corporate leaders have started to implement practises which positively contribute to society. The big challenge for executives is how to develop an approach that can truly deliver on these ambitions. Some innovative companies have managed to overcome this hurdle by partnering with other businesses with social responsibility at its core. In this important discussion, we will hear from organisations who live and breathe social responsibility, with a specific focus on the environment and sustainability.

In Europe the enormous publicity attracted by a sixteen year old Swedish girl has rattled the airline industry and is prompting government talk of aviation taxes to reduce flying.

• What impact is flight shaming having on global aviation?
• How will governments respond?
• Airlines and aviation are a soft target for environmental activists
• Airlines led the world with a programme for reducing emissions and are increasingly efficient, but they have not got the ear of the public. What should they do? 

Back in 2010, CAPA conducted a study on the state of airline gender diversity around the world, asking “why don’t women run airlines?” The study demonstrated that 18 airlines were led by women, noting that a “velocity of change” was needed. Since then CAPA has conducted a number of panel discussions on the topic at its Summits.

Fast forward to 2019, the bad news is that the number of female airline CEOs hasn’t improved at all over the past decade and in fact has diminished. Today, only 12 airlines currently have a female in the role of CEO, president or managing director. 

• What processes can be put in place to improve gender balance in airlines?
• What role can the industry play in improving gender diversity?
• Will we see this improve in 2020?

EU Regulation 261/2004 requires airlines to pay high levels of compensation to their passengers in many cases of long delays and cancellations of flights – in certain cases even where the delays and cancellations are beyond the airline’s control. Jim Callaghan, CEO of One Sky Solutions (OSS) and partner at Croon Callaghan Aviation Consulting highlights how the start-up provides a cloud-based platform that links airlines to legal experts in all major European markets, who can then assist airlines in quickly determining whether they need to pay compensation or defend the cases in court.

In addition to industry challenges, we have faced challenges of our own, acknowledges Robin Kamark, chief commercial officer, Etihad Aviation Group. “We have made tough decisions to achieve necessary change. We are making solid progress – but there is more to be done,” he explains. The company has launched a five-year transformation plan and key reforms to date have included exiting unprofitable routes; simplifying its fleet and reducing aircraft orders; more closely matching capacity to demand, including seasonal aircraft changes; cutting costs and exploring new revenue opportunities focusing on quality revenue; and restructuring our workforce. Mr Kamark acknowledges that next step in the plan will see “strengthened partnerships” and a strategy “to drive innovation to deliver efficiencies and personalised service”. Mr Kamark says the transformation plan is working. “We have made tough decisions, and will keep doing so… we are heading in the right direction, but we still have a way to go.”