IATA on 03-Dec-2010 announced that its Board of Governors has selected Tony Tyler, CEO of Cathay Pacific, in a unanimous decision to fill the post of IATA Director General and CEO following the retirement of Giovanni Bisignani next year. It would have been difficult for the Board to ignore the importance of Asia in the industry's future and Mr Tyler is undoubtedly highly credentialled to provide the organisation with the regional expertise and industry skills for the coming years.
Mr Tyler will be IATA’s first Director General from an Asian airline and a longtime Hong Kong resident, although he is a British citizen. Each of IATA’s previous Directors General has come either from Europe or North America. IATA’s current Chairman, FedEx's David Bronczek, commented that Mr Tyler's knowledge of Asia "will help IATA take advantage of opportunities in the industry's largest market." Mr Tyler's active role on IATA's Environment Committee has also ensured a solid framework upon which the organisation has been able to provide a powerful leadership role - and following the announcement of his appointment he immediately reinforced the importance he will attach to assisting the industry's development towards a greener future.
The Board will recommend Mr Tyler’s appointment to IATA’s AGM planned for 6-8-Jun-2011. Mr Tyler’s duties as the Association’s head are scheduled to commence on 01-Jul-2011. Mr Bisignani, a former CEO of Alitalia, is the fifth IATA Director General and CEO since its founding in 1945. Mr Bisignani has been in the position since 2002.
Expected to continue agenda pursued by Mr Bisignani
Over the past eight years, Mr Bisignani has transformed the industry body into a vital and highly functional entity, whose representative voice has become central in every major discussion. He has been an outspoken critic of governmental tax and regulatory policy since taking on the IATA role. He has repeatedly called for the airline industry to be treated like other industrial sectors and also steered its work on climate-change initiatives and achieving carbon neutral growth.
IATA, in its biography of Mr Bisignini, stated he has “completely re-shaped and re-focused the organisation to better serve its global membership of 230 airlines”. Mr Bisignani has also driven the IATA Operational Safety Audit, the first global standard for airline safety management, by making it a condition for IATA membership from 2009. Under Mr Bisignani’s leadership, IATA in 2004 also commenced Simplifying the Business, including the e-ticketing initiative which eliminated paper tickets globally on 01-Jun-2008. Mr Bisignani has also engaged airports and air navigation service providers to build a new business partnership with a common goal of cost-efficiency. Mr Tyler is expected to continue the agenda pursued by Mr Bisignani.
Commentary on appointment: Dec-2010
IATA Director General Giovanni Bisignani: “Tony is a great recommendation to lead IATA. His deep knowledge of Asia will help position IATA to deliver even greater leadership in this important region. But I am also confident that the global respect gained during his successful tenure as IATA Chairman in 2009-10 positions him well to fulfill IATA’s mission to represent, lead and serve equally all of our 230 members. After nearly 10 years of crises, challenges and change, I will look forward with confidence to handing over the reins of IATA’s leadership to Tony in July. Until then, I remain fully committed to leading IATA as it strives to make the industry safer, greener and more profitable”.
IATA Board of Governors Chairman and FedEx Express CEO, David Bronczek: “The IATA Board agreed to recommend Tony Tyler as the next Director General and CEO of IATA. Tony’s leadership of Cathay Pacific through challenging times prepares him well for the job. His knowledge of Asia will help IATA take advantage of opportunities in the industry’s largest market. And his global experience gives Tony the right perspective for our global association. Since taking the helm of IATA in 2002, Giovanni rebuilt the association, restored its relevance and set a very high benchmark for its leadership. Finding a successor was a challenging task for the Board’s search committee. We are absolutely confident that Tony is the right person to take the association to even greater heights”.
Cathay Pacific CEO Tony Tyler: “I am excited at the prospect of leading IATA and fully mindful of the responsibility that this important position bears. Giovanni has made IATA’s role critical to the industry by successfully managing IATA’s USD300 billion financial systems while delivering important industry-wide changes. These include making IATA a quality association with the IATA Operational Safety Audit, delivering 100% e-ticketing with the Simplifying the Business initiative and IATA’s leadership on climate change. I look forward to the opportunity to build on this solid foundation. Aviation is a dynamic industry. We constantly have to adapt to changing market conditions, new business models, different traffic patterns and frequent crises. I am fully prepared to lead future changes to help all participants in this great industry be even more successful”.
“I am delighted and honoured to have been chosen for this position by my peers in the international aviation industry. It is an important and responsible job, representing the interests of 230 airlines from 118 countries around the globe. IATA’s mission is to lead, represent and serve those airlines, and that is what I am firmly committed to do when I take up my new role.”
Cathay Pacific Chairman, Christopher Pratt: “Our congratulations go to Tony on being recommended by the IATA Board for this very important position. IATA is fortunate to be gaining a man of his experience and calibre. Tony has worked for Cathay Pacific for 32 years, has been a Director for 14 years and Chief Executive for the last three, when he steered the airline through a very volatile period. He is a well known and respected figure in global aviation and a passionate advocate for the industry.”
Tony Tyler - a well-rounded and experienced airline executive
Mr Tyler is widely respected as a well-rounded and experienced airline executive who has been at the helm of one of Asia's largest and most well-known airlines since 2007. Airbus Sales Director John Leahy added that Mr Tyler has “renowned diplomatic skills” that will make him “a great asset” for IATA.
Mr Tyler has led Cathay Pacific through some of its toughest periods in more than 60 years' history, when the fuel price spike and was followed by the global financial crisis that unfolded in late 2008, leading to a sharp fall in air-passenger travel and global export volumes. The airline cut back capacity and imposed voluntary no-pay leave schemes for employees to reduce costs, but has emerged strongly in 2010 benefiting in part from its location and relationships with and network in China. Last month, Cathay announced that the company expects consolidated profit for the year ending 31 December 2010 "will not be less than HK$12.5 billion, as demand for passenger and cargo services had remained very strong with revenues at high levels", also attributing the remarkable turnaround to "the very strong profits earned by Cathay Pacific’s strategic partner, Air China Limited, for the nine months ended 30 September 2010. Cathay Pacific expects to record a share of HK$1.7 billion in profits from Air China for the second half of 2010." Mr Tyler has been a significant architect of this highly strategic relationship and is well regarded in China.
The result will be the best in Cathay's history - not a bad note to be leaving on.
In a message to Cathay Pacific staff, Mr Tyler said that with his retirement age looming, the prospect of a further period of involvement in the aviation industry was an attractive proposition he found impossible to resist. He added that the excitement of accepting his new challenge at IATA is “tinged with sadness” at the prospect of leaving the company and the colleagues with whom he has worked for more than 30 years.
He continued: “It will be a wrench to go, but I know I will be leaving the company in extremely good hands. John Slosar and I have worked hand in glove over the last three dramatic years – from the highs of 2007, to the lows of 2008 and 2009 to the remarkable comeback in 2010. I have every confidence that he will lead the airline to even bigger and better things, with the support of a team that is quite simply the best in the business”.
Mr Tyler joined the Swire Group, parent company of Cathay Pacific, in 1977 and has worked with the group in Hong Kong, Australia, the Philippines, Canada, Japan, Italy and the UK. He is also Chairman of Hong Kong Dragon Airlines Limited and Director of both John Swire & Sons Limited and Swire Pacific Limited. From Jun-2009 to Jun-2010, Tyler served as Chairman of the IATA Board of Governors. He has been a Director of Cathay Pacific for 14 years and CEO for the last three – since 2007 – replacing Philip Chen.
COO John Slosar to become new Cathay CEO
Mr Tyler will leave Cathay on 31-Mar-2011 to take up the new position. COO John Slosar will succeed Mr Tyler while a successor to Mr Slosar will be announced in “due course”.
Mr Slosar, who has been labelled a logical choice as successor, has been praised for his hands-on approach at Cathay Pacific and the transition between Mr Tyler and Mr Slosar will likely be smooth, with little impact on the carrier.
During his time as COO, Mr Slosar has helped steer Cathay through the worldwide travel slump during the global recession that contributed to the airline’s first annual loss in a decade in 2008. Mr Slosar takes over as CEO as the carrier rebounds from the global financial crisis and as demand for passenger and cargo services remains strong. The anticipated result nearly triples the carrier's full-year profit of HKD4.69 billion in 2009.
There may be challenges ahead, as airlines add capacity this year, with new aircraft deliveries and a ramping up of utilisation. Cathay Pacific is returning capacity to pre-crisis levels and plans to increase capacity by 10% in 2011 to take advantage of "robust demand" in the aviation market. The carrier plans to take delivery of nine new passenger aircraft: six B777s and three A330s in 2011 and six B747Fs with at least two new destinations to be added. It may also lease between two and four more A350s to add capacity, with these aircraft to be delivered between 2016 and 2019. The carrier is also studying whether to add A380Fs or B747-8 orders to its cargo fleet.
Cathay has benefited greatly from its high exposure to the Chinese market. Mr Slosar has said he believes mainland China will become the most watched aviation market over the next five to 10 years and that Cathay and Dragonair will be able to benefit through their network cooperation with Air China. To capitalise on this, Cathay is also forming a freight venture with affiliate Air China, the world’s largest carrier by market value, to access hubs in Shanghai and Beijing. Services are scheduled to commence in Jan-2011. Cathay generates around half its sales in China and Hong Kong but faces increasing competition as China Southern Airlines and China Eastern Airlines add capacity and expand their international networks.
The largest immediate threat for Mr Slosar relates to industrial relations. The carrier is facing potential labour action in ongoing salary negotiations with pilots; the often-militant pilots last week voted 96% in favour of a work-to-rule labour campaign if the two sides are unable to reach a pay agreement. The campaign could see pilots refuse to work beyond their scheduled shifts unless management agrees to a 30% pay raise over four years. Cathay management stated: "We do not think this sets an appropriate atmosphere in which to commence negotiations." Salary talks are expected to commence on 13-Dec-2010.
John Slosar joined the Swire group in 1980 and has worked with the group’s Aviation Division in Hong Kong, the US and Thailand. He was appointed MD of Hong Kong Aircraft Engineering Co Ltd in 1996, MD of Swire Pacific’s Beverages Division in Jul-1998 and COO of Cathay Pacific in Jul-2010. On 01-Jul-2010, he was appointed Chairman of Swire Beverages in addition to his role as Cathay Pacific COO. Mr Slosar is currently on the Boards of Cathay Pacific, John Swire & Sons Ltd, Swire Pacific Ltd and Swire Beverages.
Cathay shares soar 63% in 2010; 21% since Mr Tyler became CEO
The carrier's share price closed little changed at HKD23.60 in Hong Kong on 03-Dec-2010 following the leadership change announcement. Its shares have risen 63% in 2010, the biggest gain among the 45 companies in the benchmark Hang Seng Index, now valuing the company at HKD93 billion. This makes Cathay the sixth best performer on the 15-member Bloomberg Asia Pacific Airlines Index and the best outside mainland China. The carrier’s shares have gained 21% since Mr Tyler become CEO on 01-Jul-2007. Comparatively, shares in Singapore Airlines have declined 10% over the same period.
An IATA Outlook: quo vadis the Agenda for Freedom?
Mr Tyler's targets will overall remain similar to the track set recently by his soon-to-be predecessor. Mr Bisignani's best remembered legacy, which is now largely completed, was simplifying the business, including the death of the paper airline ticket, a massive boost to efficiency and in many ways a milestone in the evolution of e-commerce in the airline industry. But there are inevitably many major challenges remaining, not the least in the IT area. Mr Tyler clearly recognises the importance - and the threat to the industry - which environmental issues bring with them and will quickly be in the position of dealing with the inevitable conflicts arising as the EU introduces its unilateral charging system in 2011/12.
As well as his operational initiatives, Mr Bisignani was a fervent opponent of airport and airways charges and efficiencies; his most recent attacks, last week, were against the "two steps forward, one step backwards" of the flagging initiative towards a Single European Sky. The European air traffic control system is both an environmental morass and a needlessly costly hindrance to efficient airways. And there are many other regions, not the least in north Asia, where there is room for major improvements.
Mr Bisignani was also a great fighter for freedom in the air. Here he was, for once, thwarted, but from within. A key area which will challenge Mr Tyler's as a businessman with strong competitive instincts is in Mr Bisignani's so-called Agenda for Freedom. His rationale was that the industry consistently underperformed in financial terms because it was constrained from merger and other necessary commercial activities that drive long run efficiencies. If this was ever to change, then the chains needed to be removed from airline entry and commercial behaviour. Getting rid of the "archaic" restrictions in bilateral air services agreements which prevented free entry was a vital part of this.
But only a couple of meetings of the Agenda for Freedom group were held before the more conservative European airline voices quietly put this initiative to bed in recent months. The leaders of the global alliances were reluctant to see new airlines gain too much access. Perhaps the pinnacle of this reactionary trend was seen in Air Canada's recent recital of the virtues of containing sixth freedom traffic and the thrust for a return to balance of benefits, where third and fourth freedom rights form the core of international operations. It was precisely those provisions that Mr Bisignani had described as archaic, but it appears that they are alive and well.
As the head of a highly successful sixth freedom airline, Mr Tyler has been schooled in a different ethic. Whether he is able to reassert Mr Bisignani's forward looking approach, as reactionary forces regroup, remains to be seen. If he is unable to, it will be that much harder for IATA's airlines to complain that they are being shackled by government restraints. So long as they seek to gain refuge behind those same protectionist controls, then there can be little credence to their wailing about being unable to act commercially and make adequate returns on capital.
The logic is inescapable. But, as an airline veteran, Mr Tyler is well aware that this is not an industry where logic has ever been central to the game. Hopefully though, he will be able to guide it away from its longstanding and painful condition of semi-pregnancy. Good luck Mr Tyler, there you have a real challenge - and one which, if you succeed, will be the greatest of all possible achievements.