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ANNUAL REVIE W 2017 Alexandre de Juniac Director General & CEO International Air Transport Association Annual Review 2017 73rd Annual General Meeting Cancun, June 2017

Note: Unless specified otherwise, all dollar ($) figures refer to US dollars (US$). Illustrations: Martin O’Neill - Cut it Out Studio CONTENTS CONTENTS

04 Members’ List

06 Chairman’s Message

08 Director General and CEO’s Message

10 Industry Story in 2016

16 Safety

22 Security

28 Regulation and Taxation

34 Infrastructure

40 Environment

46 Cargo

52 Passenger Experience

58 Financial Services

62 Aviation Solutions

67 IATA Offices

53 57 IATA 70th IATA Offices Anniversary MEMBERS’ LIST

Air Vanuatu Euroatlantic Airways Aseman A AirBridgeCargo Airlines C European Air Transport C.A.L. Cargo Airlines Camair-Co EVA Air Capital Airlines Aero Contractors Airways J Aero República Airlines F Aerolineas Argentinas AlMasria Universal Airlines Federal Express () Aerolineas Galapagos S.A.—Aerogal Jet Lite (India) Aeromexico JetBlue Israeli Airlines Cemair Air Algerie Airlines JSC Nordavia-RA ASL Airlines Belgium FlyEgypt Juneyao Airlines Atlas Eastern Airlines AtlasGlobal Air Baltic Austral Air Austrian CityJet K G Garuda KLM Air Caledonie Guangxi Beibu Gulf Airlines Airways Air Caraibes Airlines Air China Cubana Air B L Air Air H LACSA —Belarusian Airlines LAM—Linhas Aéreas de Moçambique BH Air D Air Biman—Bangladesh Airlines LATAM Airlines Argentina DHL Air LATAM Airlines Brasil Air DHL Aviation Airlines LATAM Airlines Colombia Blue Panorama Hong Kong Express Airways LATAM Airlines Ecuador Air bmi Regional LATAM Airlines Group Boliviana de Aviación—BoA LATAM Airlines Paraguay Braathens Regional Aviation AB LATAM Airlines Peru E I LATAM Cargo Brasil Airlines Egyptair LATAM Cargo Chile Air a.d. Beograd Air LATAM Cargo Mexico InselAir LIAT Airlines Air LLC Nordwind Nui LOT Polish Airlines Airlines 4 MEMBERS’ LIST

Lucky Air Silk Way West Airlines P Silkair V X Pegas Fly (LLC “IKAR”) Vietjet Airlines Lufthansa CityLine Airways Airlines PGA—Portugália Airlines SriLankan Airlines SunExpress PIA— International Airlines SWISS Volga-Dnepr Airlines M PrivatAir Syrianair VRG Linhas Aéreas—Grupo GOL Airlines Airlines Malindo Air Q T Cargo TAAG—Angola Airlines W International Airways TACA MEA— Airlines TACA Peru Westjet fly TACV MIAT Mongolian Airlines TAM—Transportes Aéreos del Wideroe Mistral Air R Mercosur MNG Airlines TAME—Linea Aérea del Ecuador TAP Myanmar Airways International Royal TAROM IATA represents airlines from all New African members are CemAir, corners of the globe using a multitude FlyEgypt, Mauritania Airlines of business models. Membership is International, Allied Air, and Overland RwandAir International growing. Of particular note is the Airways. The first three carriers increase in new model airline (NMA) are based in Johannesburg, South N THY— members. NMAs now account for more ; Cairo, Egypt; and Nouakchott, Airlines than 10% of IATA membership. Mauritania, respectively, while Allied Air and operate out S TUIfly -Pacific has been a particularly of Lagos, Nigeria. Nextjet Air active region for new membership SAA— T’way Air in the 12 months to May 2017. has two new IATA members. Lao Airlines, and Malindo Air— Neos is a leisure market Italian airline (NCA) operating out of , and Malaysia, based in , and MNG Airlines is respectively—joined IATA, as did a Turkish cargo carrier flying out of Santa Barbara Airlines U fellow NMAs Thai Lion Air and Vietjet. . SAS Bangkok is home to Thai Lion Air, SATA Air Açores International Airlines Hanoi to Vietjet. Elsewhere, new IATA members include SATA Internaçional Iran Airtour Airline, headquartered in In China, new IATA members include , and Air Caraibes, a regional O Saudi Arabian Airlines UPS Airlines SF Airlines, a based in airline in the French Caribbean SF Airlines , and Guangxi Beibu Gulf and headquartered in Guadeloupe. Airlines—also known as GX Airlines— And in , Pegas Fly, based at Airlines at Wuxu International . Yemelyanovo International Airport, Loong Air, flying out of also joined the IATA fold. Xiaoshan International Airport, and Overland Airways SIA— Airlines , based in , also SIA Cargo signed to IATA membership. Airlines 5 CHAIRMAN WILLIE WALSH A VOICE THAT MAKES A DIFFERENCE

What have been your top priorities scheme to avoid this patchwork quilt of as chairman? schemes that were going to be imposed I have thoroughly enjoyed my time as upon us. So I think we have a unique Chairman, and I got to do something that opportunity, and it’s great to see that not many Chairmen of IATA get to do, and today 68 states have signed up and intend that is to oversee the transition from one to participate from the very early stages, Director General to a new Director General. and that’s great news for us. So there’s And it clearly was one of my key priorities still more work to do, but I think it’s a very to ensure that the transition went well. I’m significant development and a great step very pleased to say that both personally, forward for the industry. and on behalf of the Board, we’re delighted with the work that Alexandre is doing. I Does the industry have sufficient think he’s shown great leadership, and infrastructure to meet future the transition has been smooth, but as we demands for connectivity? would expect, he has a different style of Our industry is growing at a significant leadership, and we’re looking forward to pace, driven by the demand for more air that continuing, with Alexandre taking IATA travel, and I think it’s fair to say that current forward from its current strong position. infrastructure doesn’t support what we’re doing today. So when I look forward, I How significant is the ICAO CORSIA struggle to see how our industry will fulfill agreement for the industry? the demands that are going to be made I believe the ICAO CORSIA agreement on it. We have insufficient was probably one of the most significant infrastructure, many around the developments that I’ve seen in my time world are full, there are very few plans to in this industry—about 40 years now—so expand airports, and where those plans I think that gives you a feeling for how do exist they are often at exorbitant cost, important it was that we got this right. and that’s something that our industry We’ve been talking about convincing has to fight against. So this is going to be regulators that we needed a global a challenge for us, and it’s one that the

6 CHAIRMAN WILLIE WALSH industry needs to work with our partners into IATA, they can influence our thoughts, IATA BOARD OF GOVERNORS 2016–2017 to ensure that we do have the right they can influence our lobbying, and that infrastructure, sufficient infrastructure, to has to be a really positive development for CHAIR OF THE BOARD Naresh Goyal Masaru Onishi not just fulfill the requirements for today everyone in the industry. Willie Walsh Chairman Chairman and tomorrow but for the next 10, 15, 20, Chief Executive Officer JET AIRWAYS (INDIA) INTERNATIONAL 30 years. I think that’s going to be a big What are the biggest issues that you see AIRLINES GROUP Rickard Gustafson Douglas Parker challenge for everyone. on the horizon for the industry? (representing BRITISH President and Chief Executive Officer Our industry is always going to be AIRWAYS) Chief Executive Officer AMERICAN AIRLINES SAS How important is it that the industry challenged by the unforeseen, and probably MEMBERS (From November 2016) speak with one voice on critical issues? the most recent event has been the banning Akbar Al Baker Robin Hayes Fernando Pinto Chief Executive Officer President and Chief Executive Officer It’s really important that as an industry of electronic items in the cabin of the Chief Executive Officer TAP PORTUGAL we can try and find common ground. aircraft, which has been I think unfairly JETBLUE AIRWAYS You know we compete for customers, imposed on some airlines and by some. But Saleh N. Al Jasser Calin Rovinescu Director General James Hogan President and we compete for capital, we compete for there’s clear evidence that this may now SAUDI ARABIAN AIRLINES President Chief Executive Officer market access, sometimes we compete for spread to other countries, and that clearly ETIHAD AIRWAYS AIR CANADA talent. This is a very competitive industry, has a big impact on how we as airlines David Bronczek President and Harry Hohmeister Vitaly G. Saveliev but we do have common issues. And where operate and how our customers perceive Chief Executive Officer Chairman Chairman we can identify those common, issues the value of the services that we offer. I FEDEX EXPRESS AEROFLOT it’s really powerful when we can speak think it’s something that we’re going to Yang Ho Cho (From August 2016) Carsten Spohr with a single voice and try and convince have to get together as an industry and Chairman and Jean-Marc Janaillac Chairman and governments and regulators to do the understand. What is the risk? What is the Chief Executive Officer Chairman and Chief Executive Officer KOREAN AIR Chief Executive Officer LUFTHANSA right thing. So let’s not focus on areas of challenge? And are the steps that are being KLM GROUP disagreement but try and identify the areas taken sufficient to address the risk that Andrés Conesa (representing AIR FRANCE) Tan Wangeng where we do agree and then get together we understand? I think this is something Chief Executive Officer President and AEROMEXICO Alan Joyce Chief Executive Officer and really push forward a common agenda. that certainly confuses people, it confuses Chief Executive Officer CHINA SOUTHERN AIRLINES airlines, it confuses customers, and so if we Enrique Cueto QANTAS Chief Executive Officer Why should LCCs join IATA? can bring clarity to this in the short term it LAN AIRLINES S.A. Liu Shaoyong ALSO SERVED It’s important to remember that we have will be very helpful. Chairman (To July 2016) several low-cost carriers within IATA Mark Dunkerley Alexandre de Juniac President and Chairman and today. And indeed many airlines would What should IATA focus on in 2017–8? Chief Executive Officer Pham Ngoc Minh Chief Executive Officer probably not define themselves as low I think that IATA should continue to focus HAWAIIAN AIRLINES President and AIR FRANCE-KLM cost but would be seen by customers as on the key issues that it’s done extremely Chief Executive Officer (representing AIR FRANCE) German Efromovich operating in that segment. So what we well on. We’re transforming the industry, President of the (To October 2016) have to do as IATA is to be relevant to we’re lobbying, we’re a voice that actually Board of Directors Safwat Musallam Temel Kotil AVIANCA Chairman and Chief Executive Officer every business model. Some of our core can make a difference, particularly with Chief Executive Officer and Deputy Chairman activities—the traditional bank or the regulators, to ensure that we have sensible Pieter Elbers EGYPTAIR TURKISH AIRLINES settlement programs that we have, the and safe regulation in place for the benefit President and Chief Executive Officer Mbuvi Ngunze (To May 2017) cargo settlement system—these may not of our customers and for the benefit of KLM ROYAL DUTCH AIRLINES Group Managing Chu Kwok Leung (Ivan) be relevant to new industry models, but our industry. So let’s not forget what we’ve Director and Chief Chief Executive Officer industry models change. Where we do done well, and let’s continue to make sure Tewolde GebreMariam Executive Officer CATHAY PACIFIC Group Chief Executive Officer KENYA AIRWAYS have a big influence is ensuring that we can that we, as an organization, are relevant ETHIOPIAN AIRLINES deal with ICAO, and that’s something that to our members and relevant to the Goh Choon Phong every airline globally has to be interested customers that fly with us. Chief Executive Officer in. So I think if we can get more airlines

7 DIRECTOR GENERAL AND CEO ALEXANDRE DE JUNIAC

THE BUSINESS OF FREEDOM

Aviation is the its cost of capital (estimated at 6.6%). business of freedom While that is normal for almost any other In 2016, that was very clear, as some 3.8 industry, this was only the second time billion passengers safely took to the air that the airline industry has attained this and some 54.9 million tonnes of goods benchmark—the first being in 2015. In were delivered as air cargo. profit and loss terms, the industry’s 2016 net profit was $34.8 billion on revenues Aviation brings people together, transports of $705 billion. On a per passenger basis, vital medicines to patients in need, and airlines earned an average of $9.13, which facilitates the exchange of experiences still leaves only a thin buffer against and ideas. We connect loved ones, support cost increases, shocks, or changes in the trade, and enable businesses to access economic environment. global markets. With these and all the other things that aviation does, it is clear Levels of profitability vary widely by that our activity underpins the value region. North American airlines earned created by our globalized world. As an almost four times more per passenger industry, we can be proud that we help than airlines in Asia-Pacific and Europe. people to live better lives. Latin American and Middle East carriers generated aggregate profits slightly Financial performance better than breakeven, while African Aviation’s vital role in the world has not carriers remained in the red. always resulted in appropriate rewards to airline investors. In recent years, however, Safety airline efforts to restructure and reengineer The industry competes their businesses have resulted in a historic fiercely for every passenger, strengthening of the bottom line. but there is no competition when it comes to ensuring The industry earned a return on invested safety. There was one capital of 9.9% in 2016, which exceeded major accident for every

8 DIRECTOR GENERAL AND CEO ALEXANDRE DE JUNIAC

2.56 million flights using jet aircraft in Reduction Scheme for International bans on large electronic devices in the a major milestone with a 100% on-time 2016. While this was a slight step back on Aviation (CORSIA). This was agreed at the cabin on some flights. settlement of nearly $245 billion of the five-year average (one accident for 39th Assembly of the International Civil payments. Committed to faster, safer, and every 2.77 million flights), flying remains Aviation Organization with the full support United Nations Security Council more cost-efficient financial services, the the safest form of long-distance travel. of a united air transport sector. Resolution 2309 in September 2016 NewGen ISS program has been launched recognized the threat of terrorism to with a collaborative development and Of course, the job is never complete on CORSIA achieves one pillar of the civil aviation and the responsibility of implementation process. safety. In 2017, major updates are planned industry’s long-established four-pillar governments to work together to keep for IATA’s key audit programs—the IATA strategy on climate change. It is a the global air transport system secure. Taking over the leadership of IATA in Operational Safety Audit (IOSA) and market-based measure that will allow Key to that will be enhanced cooperation September 2016 was a great honor. The the IATA Safety Audit for Ground the industry to achieve carbon-neutral between industry and government, a work that IATA’s members do through Operations (ISAGO). growth by offsetting emissions growth better information sharing culture among their association touches virtually every above the 2020 baseline. governments and with the industry, part of the industry and reaches to all Working with some 470 partners, we and government support for the Global corners of the planet. Along with IATA’s continue to strengthen the foundations The ultimate goal is to cut net emissions Aviation Security Plan (GASeP) being global team, I am proud to fulfill IATA’s of the Global Aviation Data Management to half of 2005 levels by 2050. For that developed under the leadership of ICAO. mission to represent, lead, and serve this (GADM) initiative. Already the data is to occur, the other three pillars of the vital industry. helping to reveal potential hazards that strategy are critical—improvements in Major shifts in global politics also bring are prompting mitigation measures before technology, operations, and infrastructure. risks. The political landscape in many parts IATA, through the fortitude of its accidents happen. In particular, we urge governments to of the world is seeing a growing influence membership, is committed to being match industry investments in high- of nationalist, populist, or protectionist the driving force for a safe, secure, and A recent analysis of accident reporting, performing aircraft and sustainable rhetoric. IATA is committed to continuing profitable air transport industry that however, reveals a major gap with global aviation fuels (SAF) by delivering on long- to press the case for borders that are sustainably connects and enriches our standards. Of the 1,000 accidents of all promised air navigation modernization open to people and trade to do business. world. Aviation’s importance goes far sizes and scale over the last decade, programs and establishing viable fiscal beyond the 63 million jobs and $2.7 accident reports are only available for and regulatory frameworks to encourage Your association trillion in economic activity that it about 300. This is a clear deviation from SAF commercialization through IATA remains a strong association of supports. It is the business of freedom, the global standards that are at the core increased supply. 274 member airlines constituting 83% and it helps people to live better lives. of aviation’s solid safety performance. of global traffic. With the support of its We will look to remind governments of Challenging times members, IATA is the voice for the world’s the vital importance of accurate, All indications are that the strong financial, airlines, a global standard setter, and accessible, and timely safety, and environmental performance critical a supplier of products and services accident reporting. will continue in 2017. But there are risks. to the air transport industry.

Sustainability The last year has been marked by terrorist Key among industry services are the The flagship activity—some directly targeting travelers. IATA Financial Settlement Systems accomplishment We continue to work with governments on (IFSS), which continue to be the reliable of 2016 was the measures to keep our passengers and crew financial backbone of the industry. historic agreement safe. This includes combating emerging In 2016, over $400 billion of industry by governments landside security threats and engaging transactions was processed through to implement a governments to find an acceptable long- the IFSS. The IATA Settlement Systems ALEXANDRE DE JUNIAC Carbon Offset and term alternative to recently announced (ISS)—the largest component—marked Director general and CEO

9 01 INDUSTRY STORY IN 2016 01 A RETURN FOR INVESTORS: REGIONAL DISPARITIES REMAIN

10 01

11 01 INDUSTRY STORY IN 2016

Air transport connects …and generates wide benefits Aviation’s center of gravity Air freight undergoes a strong people and economies for the global economy continues to shift eastwards 2016 second half Air transport provides a significant boost The global economy overall benefits Asia dominated the ranks of the fastest- Following a modest start to 2016, the to economic development. An ongoing broadly from the impact of air transport. growing origin-destination (O-D) trend for air freight accelerated in the increase in unique city-pair routes has Heightened airline activity raises jobs in passenger markets again in 2016. The second half of the year. This coincided helped to enable the flow of goods, the air transport sector and its supply industry’s center of gravity continues to with a steady increase in manufacturers’ people, capital, technology, and ideas. The chain, and those jobs generate spending shift eastwards. export order bookings over the same number of unique city-pair connections that ripples through other sectors of the period and with a particularly strong peak exceeded 18,400 in 2016, over 700 more economy. It is estimated that aviation Once again, the domestic China passenger season for air freight. In total, industry- than in 2015 and almost double the supported 67.7 million supply-chain jobs market saw the biggest incremental wide freight tonne kilometers (FTKs) grew connectivity by air 20 years ago. in 2016 and underpinned $3.0 trillion in change in journey numbers, with 37 a solid 3.6% in 2016, nearly double the value-added output globally. million more passenger journeys made in five-year average pace of 2.0%. The price to users of air transport, 2016 than in the year before. This increase meanwhile, continues to fall, after was more than in the next two fastest- Global trade, however, remains weak. It adjusting for inflation. Compared with Passenger demand sees another growing markets—domestic used to be considered normal for world 20 years ago, real transport costs strong year worldwide and domestic India—combined. trade to grow at around twice the pace of have more than halved. In addition, Industry-wide revenue passenger gross domestic product (GDP), but this enhanced service offerings and nonstop kilometers (RPKs) grew 7.1% in 2016 when Given its status as the world’s largest relationship has changed in recent years. connections have expanded choice for adjusted for the leap year. Although this air passenger market, the US domestic Trade volumes now grow broadly in line consumers. Chart 1 marked a slight slowdown from the 7.4%, market saw comparatively modest year- with global output. Nonetheless, such oil price–assisted growth seen in 2015, it on-year passenger growth, of 3.9% in fast-growing areas as pharmaceuticals was still a strong performance and well 2016, equivalent to 19 million additional and cross-border e-commerce offer Air transport is crucial to ahead of the 10-year average growth rate passenger journeys. To put this in opportunities for air freight. Chart 5 and international trade… of 5.5%. More than 3.8 billion passenger perspective, the domestic Vietnam market Air transport plays a key role in segments were flown in 2016, an increase surged 33% in 2016, but the absolute facilitating tourism and its attendant of 250 million compared with 2015. number of additional journeys in Vietnam industries and is vital to international Chart 3 was still only around one-third of those trade. IATA estimates that air travelers seen in the United States. Chart 4 spent around $650 billion in 2016. The value of international trade shipped by air, meanwhile, was $5.5 trillion in 2016. Reduced air transport costs and improved connectivity have boosted trade flows. Chart 2 Once again, the domestic China passenger market saw the biggest incremental change in journey numbers, with 37 million more passenger journeys.

12 01

1 2 3 UNIQUE CITY PAIRS AND AIR TOURIST SPENDING AND RPK VERSUS WORLD REAL TRANSPORT COSTS VALUE OF TRADE CARRIED BY AIR GDP GROWTH

1.8 20,000 Unique city pairs 750 Air tourist spending 8,000 16 Industry RPKs 9 Real cost of air transport Value of traded goods carried by air World GDP 18,000 700 14 7,000 1.6 7 650 12 16,000 600 6,000 10 14,000 1.4 5 550 8 12,000 5,000 1.2 500 6 3 10,000 4,000 450 4 % year on year % year % year on year % year 8,000 1.0 1

US$/RTK (2014 prices) (2014 US$/RTK 2 400 3,000 Traded goods (US$ billion) Traded Number of unique city pairs Number of 6,000 350 0 0.8 spending (US$ billion) Air tourist -1 2,000 4,000 300 -2

2,000 0.6 250 1,000 -4 -3

2011 2011 2011 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016

4 5 TOP 10 INCREASING AIR FREIGHT VERSUS GLOBAL O-D MARKETS IN 2016 GOODS TRADE GROWTH

25 25 Domestic China 9.9% Industry FTKs World goods trade Domestic US 3.9% 20 20 23.1% Domestic India 15 15 Domestic Indonesia 14.3% 10 10 Domestic Vietnam 32.6% 5 5 UK - Spain 15.7% 0

% year-on-year growth rates on year % year 0 Domestic Mexico 15.5% on year % year

Germany - Spain 16.6% -5 -5

Domestic 13.3% -10 -10 Japan - 28.6% -15 -15 0 5 10 15 20 25 30 35 40 2011 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016

13 01 INDUSTRY STORY IN 2016

Passenger demand reflects the Passenger loads rise The widening gap between breakeven …but with a wide spread in net impact of competing forces to record and achieved load factors has driven the financial performance at a The upward trend in seasonally adjusted Airlines were able in 2016 to nearly recent improvement in industry financial regional level passenger traffic was moderated during balance robust passenger demand performance. Chart 8 As in previous years, the industry-wide the first six months of the year. This was with passenger capacity. Available seat picture in 2016 masked a diverse spread due to a combination of issues, including kilometers (ASK) flown increased 7.5% in financial performance regionally. High repeated terrorist attacks, ongoing compared with ASKs in 2015, and the Normal return achieved investor returns are still not common in political instability, and a subdued industry-wide passenger load factor for airline investors the industry. economic backdrop. Traffic in the Asia– remained unchanged from 2015 at an all- Such is the intensity of the competition Europe market was particularly sensitive time high of 80.4%. and the challenges of doing business that North American airlines have driven much to terror-related disruptions in Europe. equity investors in the airline industry of the rise in industry profits in recent Growth in freight capacity once again have typically seen their capital shrink. For years and again posted the strongest The second half of the year, however, saw an outstripped growth in demand, partly only the second time on record, in 2016 financial performance in 2016. European acceleration in the growth trend, with RPKs reflecting ongoing additions to belly-hold the air transport industry paid its investors and Asia-Pacific airlines generated solid growing at an annualized pace of nearly capacity in the passenger fleet. Available a normal reward for risking their capital. margins in 2016, with the latter helped 9% between June and December 2016. This FTKs increased 4.9% year on year in 2016, That is, the industry’s return on capital by the improvement in cargo markets— pickup reflected a moderate upturn in the and the freight load factor dropped to exceeded its cost of capital. Chart 9 which are particularly important for global economic cycle and passengers’ 46.9%, 0.8 percentage points lower than manufacturing in Asia-Pacific—in the choice to disregard terrorist efforts to in 2015. The upward trend in seasonally second half of the year. Latin American scare people off travel and tourism. adjusted capacity slowed in the second Operating profits close to airlines are starting to see a turnaround half of the year, and the load factor matching 2015 record... in what has been their otherwise harsh Passenger demand was also supported recovered somewhat. Chart 7 It was a year of near-record operating environment recently. They, and airlines by lower fares in 2016. Despite a recovery profits in 2016: the operating margin of in the Middle East, posted modest in oil prices during the year, the average 8.9% of revenues was up from 8.6% in the profit margins in 2016. Airlines in Africa, price of a barrel of jet fuel was 22% lower Widening gap between break- previous year and more than three times conversely, posted a fifth consecutive year than in 2015. This partly mirrored differing even and achieved load factors that achieved in 2012. After allowing for of losses. hedging practices within the industry, drives improved financial interest charges, taxes, and write-downs, which can delay the impact of oil price performance the $34.8 billion net post-tax profit that It is worth noting that 2016’s laudable movements on airline fuel bills. Jet fuel Fuel remains a major cost for airlines, but airlines generated was slightly down from industry-wide net post-tax profits of prices climbed to about $60 a barrel at its share of airlines’ costs declined to 19.2% $35.9 billion in 2015. $34.8 billion still only represented $9.13 the end of 2016—nearly twice the 12-year in 2016, the lowest proportion since 2004. of profit per passenger, a comparatively low reached in January 2016, yet still much The reduction in fuel costs in 2016 helped Improving the industry’s highly leveraged slim margin and down from $10.08 in 2015. lower than the average between 2011 and to lower the industry-wide breakeven load balance sheets, though, will in most cases Profitability will need to be sustained for 2014. And this helped keep airfares down. factor for the fourth consecutive year. require a prolonged period of better airlines to pay down debt and to repair profits. As a result, only a handful of their balance sheets. Chart 11 Large shifts in foreign exchange markets Trending improvements in investor returns airlines are rated “investment grade” by meant that movements in global jet fuel paid by the industry in recent years, ratings agencies. Chart 10 prices were not felt evenly across airlines however, reflect changes in industry and regions. As in 2015, the limited structure and more returns-focused recoveries of many emerging market behavior on the part of airlines. This currencies against the dollar partially combination has helped to keep achieved shielded airlines in such markets from the load factors at historically high levels. full rise in US dollar–based jet fuel prices. Chart 6 14 01

6 7 8 EXCHANGE RATE–ADJUSTED INDUSTRY PASSENGER AND BREAKEVEN AND JET FUEL PRICES (2016) FREIGHT LOAD FACTORS ACHIEVED LOAD FACTORS

210 85 Passenger load factor 68 Breakeven load factor 68 Freight load factor Achieved load factor 67 Mexico 80 67 190 75 66 66

70 65 65 170 China Europe 65 64 64 United States 150 60 63 63 S. Africa 55 62 62 130 Russia

% of available capacity available % of 50 61 61

45 60 60 % of available tonne kilometers tonne available % of 110 kilometers tonne available % of

Jet fuel prices (Index, Jan 2016 = 100) Jan 2016 (Index, Jet fuel prices 40 59 59

90 35 58 58

Jul Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec 2011 2011 2000 200120022003200420052006 200720082009 2010 2012 2013 2014 2015 2016 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016

9 10 11 RETURN ON CAPITAL GLOBAL COMMERCIAL NET POST-TAX PROFIT INVESTED IN AIRLINES AIRLINE PROFITABILITY ($ PER PASSENGER)

10 10 10 EBIT margin 40 21 Net post-tax profit $18.05 9 9 8 30 8 8 6 16 20 7 7 4 Weighted average cost of capital (WACC) 10 6 Return on capital (ROIC) 6 2 11 $9.13 $8.69 5 5 0 0

$ billion $6.05 4 4 -2 6 $5.16

% of revenues % of -10 % of invested capital invested % of 3 3 capital invested % of -4 $2.26 -20 2 2 -6 1 -30 1 1 -8 -$1.14 0 0 -10 -40 4-

2011 2011 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016 2000 200120022003200420052006200720082009 2010 2012 2013 2014 2015 2016 Africa Industry Europe Asia-PacificMiddle East North America Latin America 15 02 SAFETY 02 FLY I N G SAFELY: THE NUMBER ONE PRIORITY

16 02

17 02 SAFETY

Improved safety resulting in 136 fatalities. Despite the step Detailed information on the industry’s an accident, the industry needs reports Over the last 10 years, the airline back from the exceptional performance safety performance can be found in the that are complete, accessible, and timely. industry has improved its overall safety of 2015, the 2016 result was a continued IATA 2016 Safety Report. And countries need to fully respect the performance 54%. The accident rate in improvement over the annual average of standards and processes enshrined in 2016 was 1.61 accidents per million flights, 13.4 fatal accidents and 371 fatalities in the Air accident investigations global agreements for participation in compared with 3.53 nearly a decade earlier, five-year period from 2011 to 2015. A recent analysis of accident reporting investigations by all specified parties. in 2007, and fully 10% lower than in 2015. has identified air accident investigations There was a substantial safety as a key area where greater cooperation In 2017, IATA will work to encourage In 2016, more than 3.7 billion passengers improvement in sub-Saharan Africa in on global standards is needed. Of governments to improve the accuracy flew safely on over 40.4 million 2016. The region had no fatal jet accidents approximately 1,000 accidents over and speed of accident reporting. The commercial flights. Sadly, there were 10 and an overall accident rate of 2.30 the last decade, accident reports are goal is to strengthen the investigation fatal accidents, involving four passenger per million flights. Its turboprop safety available for only around 300. Of those, process, which is one of aviation’s most flights and six cargo flights, that resulted performance continued to rise, with an many contain insufficient information important learning tools for formulating in 268 fatalities. That compares with accident rate, of 3.31, that was 42% lower or lack rigorous analysis. To learn from global standards to enhance safety. the four fatal accidents, involving two than the 2011–2015 yearly average. passenger and two cargo flights, in 2015,

ADDRESSING THE PRIMARY CAUSES OF ACCIDENTS

Loss of control in flight (LOC-I) Controlled flight into terrain (CFIT) excursions (RE)

LOC-I constitutes only CFIT accounts for just RE represent

...but 8% 5% ...but for 19% ...but less than of accidents... 90% of accidents... 16% of accidents... 1% of LOC-I accidents involve fatalities. of total fatalities. of all fatalities.

IATA published its first edition of theEnvironmental The industry’s efforts to reduce CFIT incidents include the The second edition of Unstable Approaches: Risk Factors Affecting Loss of Control In-Flight: Best Practice development of a CFIT accident reduction strategy. Mitigation Policies, Procedures & Best Practices was for Threat Recognition & Management. IATA analyzed in-depth the effects of reduced enhanced ground written collaboratively by IATA and stakeholders IATA Training, with the support of the Pilot Training proximity warning system (EGPWS) capability on human factors in representing air navigation service providers (ANSPs), Task Force (PTTF), provides guidance for enhanced pilot CFIT accidents between 2005 and 2014. Eleven recommendations air traffic controllers, and pilots to address problems training to help address factors contributing to LOC-I. from this analysis were presented to the industry. related to unstable approaches, a major contributor to RE accidents. IATA also surveyed its member airlines on the implementation of the EGPWS and its integration of GPS data. The survey findings were included in the above-mentioned analysis, and six further recommendations were presented to the industry.

18 SAFETY 02

SIX-POINT SAFETY Aircraft tracking Lithium batteries IATA has also developed the Lithium Airlines track their aircraft in various ways, A pressing safety issue facing the air Battery Toolkit, which includes the STRATEGY and efforts to develop a global standard transport industry is that of lithium following: for aircraft tracking continued throughout batteries. Airlines, shippers, and IATA’s Six-Point Safety Strategy is a 2016. ICAO, industry regulators, and the manufacturers have worked hard to The IATA Safety Risk Assessment (SRA) comprehensive, data-driven approach to identifying organizational, operational, air transport industry worked together establish rules that ensure lithium batteries on the carriage of lithium batteries and and emerging safety issues. Its six points through the Normal Aircraft Tracking can be carried safely. Yet there have been associated matrix. This document has are as follows: Implementation Initiative (NATII) to a number of instances of flagrant abuses been formulated to assist operators in Reducing operational risk develop a risk-based tracking standard, of shipping regulations that have risked devising their own risk assessment and Enhancing quality and compliance for adoption in 2017, to complement aircraft and passenger safety. associated mitigation methods. through audit programs the existing standards and to address Investigation reports and analyses of Advocating for improved outcomes identified in the 2015 NATII Disappointingly, each instance has accidents over the last 10 years where aviation infrastructure, such as the report submitted to the ICAO Air resulted in minimal consequences for lithium batteries were suspected to have implementation of performance-based Navigation Commission (ANC). the offenders. Various international played a part. navigation approaches associations, including IATA; the Portable The second edition of the lithium battery Supporting the consistent implementation of safety In parallel with the new standard, Rechargeable Battery Association, or guidance material, with updated sections management systems guidance material will be available in PRBA; the US Rechargeable Battery that incorporate comments from IATA Supporting effective recruitment 2017 to assist operators with revising Association; RECHARGE, the European Cargo, the IATA Dangerous Goods Board, and training to enhance quality and procedures and processes or with Association of Advanced Rechargeable and the IATA Safety Group. compliance through programs such validating their current tracking Batteries; the Global Shippers Forum as the IATA Training and Qualification procedures against the standard. (GSF); and The International Air Cargo Initiative, which seeks to modernize and harmonize the training and assessment Association (TIACA), are hoping to of pilots and maintenance technicians Guidance material for the Global change this. In a joint letter to the Identifying and addressing emerging Aeronautical Distress and Safety System governments of the largest lithium battery safety issues (GADSS) is also being updated. Ongoing manufacturing and export countries, regulatory work, too, continues apace, they have called for significant fines and and air traffic control (ATC) initiatives are custodial sentences to be imposed on being considered. The hope is that in a those who circumvent the regulations. few years new systems and technology— if adopted universally by air navigation To further eliminate the risks in shipping service providers (ANSPs)—will allow for lithium batteries, the air transport global tracking. industry is developing a set of standards for packaging material designed to contain a fire in the event of a lithium battery mishap. Defining and testing the performance parameters of the packaging are nearing completion.

19 02 SAFETY

Unmanned aerial vehicles Safety audits A 2016 analysis of ground damage International Airline The irresponsible, or malicious, use The IATA Operational Safety Audit (IOSA) database (GDDB) data showed that Training Fund success of unmanned aerial vehicles (UAVs) program is the global benchmark for ISAGO-registered providers exhibited a The International Airline Training Fund near airports and aircraft poses safety airline operational safety management. In better reporting culture than non-ISAGO (IATF) is funded by IATA and its members and security risks. IATA launched an 2016, the accident rate for IOSA members providers. They reported 70% of all the and sponsors capacity-building initiatives awareness campaign in 2016 that leads was nearly half that of non-IOSA airlines damage they caused, compared with for airlines and other aviation industry off with a joint statement from the and more than three times better than only 32% for non-ISAGO GSPs. ISAGO stakeholders worldwide. In 2016, the International Federation of Air Line Pilots’ over the previous five years. providers also experienced significantly IATF trained 3,181 aviation industry Associations (IFALPA) and Airports less severe damage. professionals from developing nations, Council International (ACI). It is hoped IOSA is a worldwide standard that particularly Africa, which accounted for that this campaign, which also features an enables and maximizes the joint use of As of February 2017, the number of GSPs 73% of the IATF’s trainees. educational video, alerts UAV users to the audit reports. To date, this has saved the in the ISAGO Registry had surpassed 200. importance of responsible use. air transport industry more than 6,400 There are almost 440 registered ISAGO Enhancing aviation safety remained the redundant audits and led to extensive cost stations at over 270 airports worldwide. IATF’s priority. As such, it continued the A smart, pragmatic approach to regulating savings for IOSA-participating airlines. More than 1,300 audits have been IOSA Implementation Training Initiative and a firm method of enforcing UAV performed since ISAGO’s inception. (IOSA-ITI) for African airlines in line with use are required. As of February 2017, Since 2008, all IATA members must the Abuja Declaration and the Associated some 93 nations have UAV regulations maintain IOSA registration. Of the 413 Several major improvements to enhance Plan of Action on Aviation Safety in Africa, in place. To help countries define and airlines on the IOSA Registry, 144 are non- the scope and the value of ISAGO which recommends IOSA for all IOSA- implement regulations, IATA, other key air IATA members, a testament to the wide audit results will be rolled out in 2017. eligible airlines in Africa. In 2016, the IOSA- transport industry stakeholders, and civil appeal of IOSA for airlines at large. A new operational audit model has ITI attracted six new airlines to IOSA and aviation authorities (CAAs) worked with been developed in consultation with helped five airlines onto the IOSA Registry. ICAO to develop a toolkit to guide UAV An IATA focus in 2017 will be to address stakeholders, and the transition should be safe operation and governance. The air and initiate the recommendations of complete by the end of the year. transport industry’s main goal is to ensure the European Aviation Safety Agency safety through regulations that are as (EASA)’s assessment of IOSA. IATA will As part of the changes, a Charter of harmonized as possible. also begin the IOSA digital transformation Professional Auditors is being developed with an endorsed roadmap and will that will give IATA greater involvement The focus on the air traffic management continue to ensure that the highest quality and oversight of the recruitment, training, of UAVs is increasing. UAVs need to have standards are maintained throughout the and qualification of auditors. IATA will also the capability to detect other aircraft audit process. allocate the audits on an annual basis to and obstacles and to take evasive action ISAGO Agents (GOA) that will administer to avoid collisions. They also need The IATA Safety Audit for Ground and coordinate the audits in cooperation secure data link technology to enable Operations (ISAGO) is an aviation with GSPs. communication with ground stations industry ground service provider (GSP) and with air traffic control. Research and registration scheme. It is aimed primarily development work is ongoing into an at establishing safe ground operations unmanned traffic management (UTM) and raising cost benefits by, respectively, system, and IATA is actively involved. reducing the risk of aircraft damage and personal injuries and eliminating redundant audits by airlines.

20 02

AFRICA EUROPE/CIS ASIA-PACIFIC 1 In 2016, Africa had its best 2 During 2016, IATA signed a 3 The ICAO Asia-Pacific SAFETY safety performance in a decade, memorandum of understanding Regional Aviation Safety Group with an accident rate of 2.30 with the Finnish CAA (Trafi) for the annual safety report for 2016 accidents per million sectors. This use of IOSA to complement Trafi’s identified the following safety was a substantial improvement oversight activities. Trafi is the focus areas: CFIT, RE, and LOC-I. compared with accident rates of first CAA in the world to take this To mitigate the historical risks and 7.36 in 2015 and 9.73 for the five- step, opening the door for similar to discover and prevent future INITIATIVES year period from 2011 to 2015. agreements elsewhere. risks, IATA proposes to develop and implement a risk-based, Challenges in bringing Africa in line A positive development, meanwhile, data-driven safety strategy with with global performance remain, occurred with regard to the reactive, proactive, and predictive however. IOSA overcomes many European Safety List of banned capabilities that focuses on the of these challenges. The 32 sub- carriers. The European Commission four top regional fatal accident Saharan airlines on the IOSA registry (EC) and the third-country operator risks: approach and landing performed 7.5 times better than (TCO) approval system, managed accidents (ALAR), LOC-I, CFIT, non-IOSA operators in terms of by EASA, began coordinating and midair collisions (MAC). Part accidents in the 2012–2016 period. their efforts in authorizing foreign of the plan involves encouraging carriers to fly into the European participation in IOSA by all airlines African nations should make IOSA Union (EU). By the end of 2016, all in the region. As of the end of a part of their airline certification Kazakhstan operators had been March 2017, seven airlines have process. African governments removed from the EU Safety List, been added to the IOSA Registry, also need to accelerate the following the 2015 removal from and three airlines have been implementation of ICAO’s the list of Air Astana. IATA played a added to the IATA Standard Safety safety-related standards and major role in supporting Air Astana Assessment Registry in Asia- recommended practices (SARPS). and Kazakhstan’s airlines through Pacific. As of the end of December 2016, this process. only 22 of the 48 sub-Saharan Other regional concerns include soft African countries had at least 60% spots at Bangkok Suvarnabhumi SARPS implementation. Airport, which remain an ongoing issue. In 2016, IATA reissued its operational notice to alert airlines of the risk to aircraft operations at the airport. In 2017, IATA will continue to work closely with the local air transport industry for a permanent solution to this problem.

In Indonesia, the focus is on improving safety management 2 system (SMS) implementation initiatives. 3 1

21 03 SECURITY 03 SECURITY PROCESSES: EFFECTIVE AND EFFICIENT

22 03

23 03 SECURITY

Aviation security At the 2016 IATA AGM, the Resolution UN Security Resolution Conflict zones The aviation industry continues to be on the Threat of Terrorism to the Airline 2309 (2016) Risks to civil aviation arising from an iconic target for terrorist and other Industry was unanimously passed. It called UN Security Council Resolution 2309 conflict zones remain a challenge. security-related attacks. The prime for governments to (2016) reaffirms the obligation of Several regions continue to experience responsibility for security rests with governments to ensure the security militarized hostilities that take place in national governments. Measures to keep work in partnership with each other and of citizens against terrorist attacks close proximity to air transport operations. flying secure have evolved in the 16 years with airlines to counter terror threats to conducted against international civil National governments are responsible since 9/11, but challenges remain. Among aviation, recognizing ICAO’s crucial role in aviation, wherever attacks may occur. for the collection and dissemination of the most pressing are the implementation this regard; All governments are urged to ensure protective security intelligence. They must of global standards and the sharing of commit all possible resources, an effective, risk-based, sustainable share this information with air operators in data between governments, oversight particularly intelligence resources, to implementation of ICAO Annex 17 a timely manner to support the validity of authorities, and the industry. To ensure fighting the use of aviation for terrorist standards—which deal with aviation risk management systems. the measures responding to these acts; and security—at all airports under their challenges are effective and cost-efficient, share information to ensure that jurisdiction and to immediately address IATA fully endorses an amendment the aviation industry strives to gain the measures to prevent and respond any gaps or vulnerabilities that are to ICAO Annex 17 requiring nations support of and to work closely with to terrorist acts are appropriate and identified. to provide information in support governments, security organizations, and effective. of operators’ risk assessments. Risk other industry stakeholders. assessment remains an integral The key tenets of the IATA resolution Global Aviation Security Plan component of security management IATA’s security activities cover five main were recognized in United Nations GASeP will be a focal point for industry systems (SeMS), but airlines continue elements: (UN) Security Resolution 2309 (2016), activity leading up to the 40th ICAO to have difficulty in accessing the on aviation security. The UN resolution Assembly in 2019. IATA is supporting security information that makes risk Promoting global standards confirms ICAO’s leadership in aviation ICAO in the development of the plan and management possible. Dealing with emerging threats security and the importance of globally is calling for governments to agree to Encouraging a security culture coordinated efforts based on ICAO’s aggressive and measurable targets for In January 2017, ICAO conducted an Advocating the sharing of security- Global Aviation Security Plan (GASeP). addressing significant aviation security industry survey concerning the usefulness related information concerns. of its web-based conflict zone information Lobbying for the regulatory recognition repository. Initial results indicated of safety and security management dramatic improvement was required systems to provide a more efficient means of disseminating critical information in a timely manner. The IATA Security Working Group is monitoring IATA’s research into security information sharing solutions that could be used by IATA member airlines.

24 SECURITY 03

Landside security Cybersecurity Smart Security IATA is continuously amending its Smart Airport attacks in Brussels, Istanbul, and Cyberattacks are a threat to aviation. Smart Security is a joint initiative of Security guidance documentation to Shanghai in 2016 and the shooting at The interconnected nature of civil aviation IATA and ACI and is meant to aim for ensure that it is detailed and in step with the airport in Fort Lauderdale in January necessitates a global, regional, and local a future where passengers proceed the latest developments and recommended 2017 demonstrated the vulnerability approach to address this growing risk. through airport security checkpoints with practices in security. Hundreds of industry of public areas within airports. Clearly, minimal inconvenience, where security and government stakeholders have access it is governments that must secure A Cybersecurity High-Level Meeting resources are allocated based on risk, and to this guidance material. As a result, an the landside of the airports in their in November 2016 resulted in the where airport facilities are optimized— increasing number of European airports jurisdictions. But IATA, too, is pursuing Declaration. That document contributing to an improved journey from are rolling out next-generation security initiatives for heightened landside security. promotes cybersecurity awareness curb to airside. Smart Security elements checkpoints and national initiatives aligned and preparedness and contains are being introduced in stages, starting with Smart Security objectives, including Smart Security, One ID, Fast Travel, and recommendations for cybersecurity with process innovations and moving to the Dutch SURE! program, the French the greater use of passenger data will information sharing. IATA, meanwhile, advanced screening technologies and Vision Sûreté program, and the German all play a role. These initiatives underpin continues to partner with the the introduction of risk-based security Easy Security program. innovative solutions that will limit cosignatories of the Civil Aviation concepts. passenger and airport staff exposure to Cybersecurity Action Plan: ICAO, Airports In 2016, Smart Security progress was landside vulnerabilities. Council International (ACI), the Civil Smart Security is not a one-size- made in North America. The Canadian Air Navigation Services Organization fits-all solution, and airports that are Air Transport Security Authority (CANSO), and the International implementing the various Smart Security (CATSA) started rolling out CATSA Plus Coordination Council of Aerospace elements are being assisted with Smart checkpoints at Canadian airports, and Industries Associations (ICCAIA). Security Opportunity Assessments the US Transport Security Administration (SSOAs). These assessments provide experimented with Innovation Lanes at US In addition, IATA aims to incorporate the targeted recommendations to airports for airports. Among the latter is Hartsfield- guidance in its Aviation Cybersecurity the adoption of Smart Security screening Jackson Atlanta International Airport, Toolkit into its Security Management processes and technologies that will which also benefits from a memorandum System Manual by the end of 2017. strengthen security, increase operational of understanding with IATA and ACI to That manual is intended to help efficiency, and enhance the passenger cooperate on Smart Security initiatives. airlines understand and define their experience. IATA has conducted SSOAs at organizational risks. 26 airports around the globe. The global appeal of Smart Security is Cyberattacks are a evident in the various Smart Security trial threat to aviation. Throughout 2017, IATA will also continue projects and implementations under way The interconnected to promote a threat-based, risk-managed, in the Middle East, Africa, and Asia-Pacific. outcome-focused framework for nature of civil managing cybersecurity concerns. That aviation necessitates framework takes account of the industry’s a global, regional, cybersecurity capabilities. and local approach to address this growing risk.

25 03 SECURITY

The first wave of such Smart Security In 2017, IATA will again work closely with Large personal electronic projects as centralized screening, is aviation and government stakeholders to devices ban moving beyond the early adopter overcome impediments to Smart Security In March 2017, several countries stage. IATA expects the number of implementation and to gather additional implemented a ban on personal electronic implementation projects to grow knowledge and information on innovative devices (PEDs) larger than a cell phone— The global appeal exponentially over the next couple security technologies and practices to such as laptop computers, tablets, and of Smart Security of years. The vendor community, for enhance Smart Security. It will reflect portable DVD players—in the cabin on is evident in the example, is increasingly integrating Smart any developments in its Smart Security international flights to their territories. Security concepts into its product design. guidance documentation. It will in addition These actions were based on fears that various Smart And Smart Security checkpoints are continue its efforts to raise awareness of such devices could be used to hide Security trial quickly becoming the norm. and to share knowledge on Smart Security explosives. projects and through workshops and other events. In addition, the air transport industry The second wave of Smart Security The United States banned PEDs on flights implementations continues to address challenges that checkpoint solutions will include but not from 10 airports in the Middle East and under way. prevent the full implementation of the be limited to the following: North Africa. The ’s ban Smart Security vision. Challenges include affected a similar but not identical list of the poor harmonization of performance Next-generation X-ray equipment countries. Based on the same intelligence, standards for security screening Next-generation passenger security Australia and Canada instigated random equipment and the associated certification scanners checks on devices on flights from these processes; the lack of open standards for Advanced checkpoint management regions. the integration of screening equipment systems and data exchange, which is a key focus Open standards for equipment The industry expressed concern regarding in 2017; the reluctance among certain integration and data exchange the measures and publicly called for screening equipment manufacturers to Infrastructure for risk-based, better coordination and information move away from closed to open systems differentiated screening sharing from the authorities. In May architecture; and, in many parts of the 2017, IATA facilitated a security summit world, the low political will and want of to address emerging concerns over the a regulatory framework to advance the restrictions on PEDs. The industry is risk-based, differentiated screening of seeking to work with governments to passengers and their belongings. find an acceptable solution to this issue that keeps flying secure while minimizing inconvenience to passengers.

26 03

All of us are well aware of the challenges we face in terms of integrating the responsibilities and actions of local, regional, and national enforcement and security services. The new Global Aviation Security Plan will help define the roles and responsibilities of all related agencies, and in so doing guide more progressive and coordinated aviation security enhancement measures.

DR. FANG LIU, SECRETARY GENERAL OF ICAO

27 04 REGULATION AND TAXATION 04 SMARTER REGUL ATION: THE FAIR WAY FORWARD

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29 04 REGULATION AND TAXATION

Supportive approaches Smarter regulations Examples of countries implementing a Consumer protection Commercial aviation generates huge Smarter regulations deliver clearly smarter regulation approach include The aviation industry operates in an economic and employment opportunities. defined, measurable policy objectives ultracompetitive marketplace and prizes Within the next 20 years, commercial in the least burdensome way. A smarter the ratification of the 1999 Montreal customer loyalty. Airlines, therefore, are aviation could increase by one-third the fiscal policy, for instance, will encourage Convention by Guatemala (reflecting the highly incentivized to offer good customer number of jobs it supports. That would air connectivity, not restrict it through “consistency and coherence” principle); service and, if problems occur, to try to put mean 99 million jobs generating nearly $6 overtaxation. A policy framework based not applying a social security tax in them right. Airlines have in fact agreed to trillion in annual economic activity by 2034. on smarter regulation principles positions Brazil to foreign airlines (reflecting the core principles for passenger rights that But just a 1% drop in aviation’s growth rate a country for sustainable aviation growth. “fair and non-distortive” principle); governments have endorsed through ICAO. will result in a GDP loss of over $1 trillion. the alignment of advance passenger information/passenger name record (API/ When the circumstances of a flight delay or To maximize the benefits of commercial PNR) requirements in with global cancellation are within an airline’s control, aviation, it is essential that regulations standards (reflecting the “consistency and the industry agrees that passengers have and fiscal policies in support of air coherence” principle); and the right to care and assistance in the case connectivity are implemented. the removal of a proposal to disclose of delays and to rerouting, refunds, or maintenance information to the public other monetary compensation in the case in the Republic of Korea (reflecting the of cancellations. When, however, delays “targeted at risk” and “proportionality” or cancellations are outside an airline’s principles). control, governments should allow market forces to determine the care and assistance available to passengers. SMARTER REGULATION PRINCIPLES If governments feel it necessary to put in place consumer protection regulations that Smarter Regulation Smarter Regulation go beyond what is agreed to with airlines, Policy Design Principles Process Principles it is important that these be developed Consistency and coherence. Regulations Defining a clear need. The objective of a in accordance with ICAO’s consumer should not overlap and lead to contradictions regulation should be identified based on sound protection guidance. It is particularly nationally or internationally and should be evidence, and available alternatives must be vital that governments, regulators, and applied with oversight responsibility clearly considered. the flying public understand the balance delineated. Impact assessment. There should be an Proportionality. The cost of regulations should assessment of the impact of any regulation. between protecting consumer rights and be proportionate to the benefits they promise. Consultation. The drafting of regulations providing sustainable air services. Targeted at risk. Regulations should have should involve those who are potentially specific and well-defined objectives that respond affected. directly to the risk identified. Reducing burdens and regular reviews. The Fair and non-distortive. Regulations should be development and review of regulations should applied fairly and should not place discriminatory focus on reducing the compliance burden. burdens on any particular group. Opportunity to respond and revise. There Clarity and certainty. Regulations should should be clear procedures for responses to clearly define the groups they apply to, should adjudications and appeals and for any needed furnish those groups with clear information revisions to regulations. about what is expected of them, and should give groups sufficient time for compliance.

30 04 2016, despite strong protests by the industry. Without justification or any constructive consultation, the tax was further increased by NOK2 2 on 1 January 2017. SWEDEN 1 WEST AFRICA A report published in November 2016 IATA was successful in obtaining recommended that, for environmental a ruling from the Organization for purposes, a SEK80–430 (depending the Harmonization of Business Law on distance flown) tax in Africa (OHADA) that ensures 3 be introduced for all passengers 4 that foreign airlines are exempt departing a Swedish airport. Such a from rules that contradict various tax would have a significant negative bilateral tax and air service treaties impact on the industry, the Swedish and agreements and that would economy, and air connectivity have otherwise created significant and would not deliver notable corporate tax liabilities for airlines. environmental improvements.

UNITED KINGDOM ASIA-PACIFIC Following the UK government’s 4 AUSTRALIA devolution of responsibility for the Air The government introduced a bill Passenger Duty (APD), in December increasing the Passenger Movement 2016 the issued Charge from AU$55 to AU$60 a draft bill to replace the APD with an effective 1 July 2017, despite strong Air (ADT) at Scottish (APHIS) and US Customs and Border opposition from the industry. As airports. To boost the Scottish TAXATION Protection (CBP), which conducts part of the bill, the government economy, the government plans most of the APHIS inspections, is committed to not increasing the to reduce the ADT 50% starting in ongoing. The suit seeks to prevent AU$60 rate for five years. April 2018, with the ultimate goal of Excessive and inconsistent taxes affect the ability of air transport to meet APHIS and the CBP from collecting abolishing it. demand and impede economic growth. Taxes and fees on aviation should be the inspection fees set forth in a final INDIA commensurate with the service being provided and should not be used to rule, arguing that the agencies are The implementation of a Goods and cross-subsidize other modes of transportation or to plug budget deficits. charging airlines more than the cost Services Tax (GST) is scheduled for 1 of these inspections. MIDDLE EAST July 2017, and there are many issues of 3 AND AFRICA concern for the industry. Acceptance of THE AMERICAS period. The most recent increase, global best practices for international 1 BRAZIL to $50 per international passenger, EUROPE An increase in the Tunisian Tourism air transport taxation, e.g., zero rating, As a result of effective industry occurred without consulting 2 Tax, from TND2.50 to TND20.00 per are highly unlikely, and advocacy advocacy, the Brazilian government the industry. A law was issued in mid-December passenger arriving on international efforts are focusing on workable rules passed interpretative legislation that 2016 confirming that the proposed flights, went ahead without advance and a cost-neutral transition. the Social Security Contribution Tax UNITED STATES 2017 and 2018 increases to the notice or consultation. (CSLL) would not apply to foreign An aviation increase were to be suspended, SRI LANKA carriers (at 9% of taxable income) proposed by the New Jersey resulting in a real cost reduction for GULF COOPERATION COUNCIL A government proposal to subject because of provisions in existing Assembly was ultimately not included the industry. (GCC) COUNTRIES international air passengers and cargo double tax treaties or similar in that state’s final funding package, The six member nations of the to VAT at 15% was removed after the bilateral agreements. following strong industry advocacy. NORWAY GCC will introduce a VAT, most industry highlighted that this would IATA and Airlines for America (A4A)’s A tax on air tickets of NOK80 per likely commencing in 2018. IATA is contradict accepted VAT principles ECUADOR federal lawsuit against the US departure (for domestic flights, closely following developments to espoused by the Organization The Tourism Tax has been subject to Department of Agriculture’s Animal NOK88, including a 10% value-added ensure best practices are applied for for Economic Cooperation and a 900% increase over the 2014–2016 and Plant Health Inspection Service tax [VAT]) was introduced on 1 June international air transport. Development (OECD) and ICAO.

31 04 REGULATION AND TAXATION

There are signs that some countries Montreal Convention 1999 Unruly passengers The industry has already implemented with strong aviation growth potential Montreal Convention 1999 (MC99) is a Continued cooperation is needed to ensure responsible service of alcohol training understand this balance. These countries treaty for an up-to-date, fair, and universal that unruly passengers, who represent for cabin crews. The industry does not are positioning themselves to maximize system of airline liability. It ensures better a tiny minority of travelers, do not believe that the heavy-handed regulation the economic and social benefits of protection for passengers, especially compromise flight safety or interfere with of onboard alcohol sales is necessary. aviation by adopting a balanced regulatory in cases of death or injury. MC99 offers the travel experience of other passengers. A voluntary, cooperative approach is approach. None of the consumer governments the ability to implement preferred that embraces airlines, ground protection regulations or draft regulations consumer protection that is consistent The latest statistics reported to IATA by its services, and airports and their hospitality issued in 2016 by India, Malaysia, South with ICAO’s high-level, non-prescriptive member airlines point to a growing unruly and duty-free concessions. Evidence from Africa, and China feature the type of delay principles. It is a prerequisite for the much- passenger problem. For the period from trials in the United Kingdom shows that compensation of the . needed digitization and transformation 2007 to 2015, there were 49,084 reported coordination and communication reduces China’s tarmac delay provision does not of air cargo. E-cargo initiatives, such as cases, or one incident per 1,613 flights. But instances of intoxicated and potentially levy the disproportionate fines seen in the electronic air waybill (e-AWB) and in 2015 alone, there were 10,854 instances unruly passengers on board. the United States, and Argentina took e-freight, which improve accuracy and of unruly passengers, amounting to one action to roll back some of its prescriptive speed up shipment times, require MC99 incident per 1,205 flights. A deterrent to unruly behavior is regulations. ANAC in Brazil is revising its to be in place. appropriate prosecution and enforcement regulations to bring them more in line The type of incidents vary significantly, powers for nations and airlines. Montreal with ICAO and IATA principles, although By the end of 2016, 123 countries, or from low-level disobedience of crew Protocol 2014 (MP14) clarifies the powers provisions removing a mandatory baggage 64% of ICAO’s membership, had ratified instructions to major incidents involving of countries, but 22 nations are required allowance continue to be challenged. MC99. Of particular note in 2016 was an aircraft diversions and passenger to ratify MP14 before it can come into Indonesian presidential executive order deplanement. Some 11% of unruly force. As of the end of 2016, only 8 In more mature markets, conversely, the giving approval for Indonesia to ratify passenger reports were at level 2, which nations had ratified MP14, while a further inclination is still toward overregulation. MC99—almost two years to the day includes verbal aggression, and around 22 countries—among them France, Kenya, Canada announced its intention to after the tragic loss of Air Asia 8501. To 23% of cases mentioned alcohol as a factor. Singapore, South Africa, and Spain—have create a passenger rights regime that ensure that passengers, shippers, and signaled their intention to ratify. combines elements of US and EU laws. airlines can benefit from the provisions And in Europe, much-needed revisions in MC99, IATA is promoting the universal to Regulation 261 remain stalled. In the ratification of the treaty. IATA is United States, airlines face an almost especially engaged in local campaigns constant barrage of attempts to re- to persuade key holdouts to ratify. These regulate a deregulated industry under the include the major markets of , UNRULY PASSENGERS banner of consumer protection. In 2016, Bangladesh, , Ghana, Mauritius, the US Department of Transportation Sri Lanka, Thailand, Tunisia, and Vietnam. 2007–2015 1 (DOT) finalized rules requiring airlines to incident disclose their codeshare partners and to every 49,084 1,613 file reports on the on-time performance, flights reported cases of unruly incidents mishandled baggage, and oversales 11% data of their flights. A number of these 2015 IT IS ONE OF THE 1 regulatory actions have been scaled back incident considerably, but several are yet in process. every TOP 3 10,854 1,205 of reports indicated safety concerns flights reported cases of unruly incidents physical aggression for cabin crew

32 REGULATION AND TAXATION 04

Slots At the 39th ICAO Assembly, a working Regional issues Europe With passenger numbers set to paper was submitted detailing the Europe remains the most significant double over the next 20 years, aircraft importance of the WSG. The paper The Americas problem region, with nearly 60% of all movements will increase substantially. It highlights the significance of stakeholder Progress was made in Colombia and level 3 airports. is essential that governments and airport collaboration in developing slot policy. It Peru following training and education IATA continues to object to Eurocontrol’s operators plan for and construct airports garnered significant support from ICAO that focused attention on implementing proposals to implement a centralized with sufficient capacity. The aviation member countries for the continuation of the WSG. service to identify no-slot operations in industry, however, is realistic in assuming a single, global, consistent approach to IATA and the International Airline the network manager area. IATA’s review that many airports will continue to be slot airport slot management. In addition, IATA Training Fund (IATF) delivered critical of the cost-benefit analysis found no constrained. and ACI issued a joint statement pledging slot training to Cuba in anticipation of basis for such an implementation, which, collaboration in evaluating the slot heightened demand for flights to Cuba in furthermore, could have unintended IATA’s Worldwide Slots Guidelines process during the strategic review of the 2017 and beyond. negative consequences for airlines and (WSG) is the global standard for the WSG and in reporting on their progress at passengers. policies, principles, and procedures of the 40th ICAO Assembly, in 2019. Asia-Pacific airport slot management. Consistent The slot process at , the North Asia application of the WSG provides for the , was enhanced to better The Civil Aviation Administration of certainty, sustainability, flexibility, and utilize available capacity and thereby China (CAAC) undertook a slot auction transparency that the industry requires reduce delays. trial in 2016 at two international airports, and that passengers benefit from, Shanghai Pudong and , including dependable services and an involving only domestic airlines. The trial expanding route network. In 2016, IATA demonstrated the costly impact of even began a comprehensive strategic review small-scale auctions on the industry. The of the WSG to ensure that it retains its terms of the trial auction were that a slot relevance. The review is strongly focused is held for three years only, ignoring the on stakeholder engagement, such that WSG’s basic principle that an airline can industry partners, particularly airports, are retain a slot that it operates at least 80% involved in the review process. of the time. IATA’s work with Hong Kong International Airport and Hong Kong’s Civil Aviation Department on plans to GLOBAL SLOT NUMBERS implement a quota scheme to manage night flights resulted in changes to the proposal to lessen the impact on the airlines while maintaining the objective of incentivizing airlines to operate quieter 177 4.2m aircraft at night. level 3 airports 125 passengers depart level 2 airports from slot-constrained 60% airports every day. Nearly half, 43%, of long-haul or 1.5 billion global journeys passengers depart need a slot from slot-constrained to operate. airports annually.

33 05 INFRASTRUCTURE 05 MEETING NEEDS: THE RIGHT WAY TO BUILD

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35 05 INFRASTRUCTURE

Operational and financial Cost-efficiency and lower charges In 2017, airlines will continue to challenge Unfortunately, there have been many improvements Infrastructure charges must be set at unfair infrastructure charges in national cases where a lack of regulation has Air transport requires access to high- levels that are fair, justified, and reflective aviation policies. Notable here is the resulted in unsatisfactory airport quality infrastructure at competitive costs of a value service offering for airlines and Indian government’s decision to promote privatizations. This has involved the if it is to meet the rising demand for air passengers. Economic regulation that the use of a “hybrid till” approach to following problems: freight and for passenger travel, which promotes transparency, consultation, setting charges despite the regulator’s is set to more than double by 2035. The efficiency, and productivity to establish favoring of a “single till” approach. A The underinvestment, unnecessary industry’s collaboration with infrastructure an equitable charges structure is key to single till counterbalances the lack of investment, or pre-funding of airports partners—especially airports, air navigation improving airport cost-efficiency. competition between airports and enables Movement from a single till to a hybrid service providers (ANSPs), and fuel airlines and passengers to benefit from or dual till suppliers—is critical to maximize customer Despite ongoing work to ensure that fair the complementary commercial activity The predetermined evolution of charges service and to boost air connectivity. and transparent consultation processes generated at airports. levels, the unfair use of concession fees, or are in place for infrastructure charges, the increase of unregulated aviation fees The air transport industry is prioritizing challenges remain. Commercial agreements leading to infrastructure activities that will Sustainable airport governance opaque charges structures In 2016, there was an attempt to weaken Airport privatization is a growing trend, Cross-subsidization within an airport drive cost-efficiency at airports and the ICAO guidelines on airport charges. and the desire for commercial discipline network lower charges; These guidelines provide a framework for in managing airports is understandable. Conflicts of interest promote sustainable airport governance; meaningful consultations on airport and Privatization, however, must have align airport investment with airline needs; air navigation services charges. But it was mutual, sustainable benefits for the An airport ownership or regulatory secure a reliable supply of jet fuel at moved at the ICAO Triennial Assembly overall air transport network. Whatever structure that does not ensure the correct competitive and transparent prices; that clauses ensuring cost-efficiency and the ownership structure of an airport, balance between investment and fair shape a common vision of the airport of cost-effectiveness priorities be removed the airport must provide the capacity, charges can result in the underutilization the future; and from the guidelines. IATA rebuffed the efficiency, and affordability required by of the airport and additional costs build modernized, efficient air traffic proposal, and the guidelines continue to the growing aviation industry, and its to airlines and passengers. Potential management (ATM) systems. promote collaboration. operations must benefit local communities connectivity options may be unfulfilled. and national economies. These factors can affect the sustainable The European Commission’s regulatory and efficient growth of the industry. forums to improve Europe’s Airport Privatization, moreover, needs to be Charges Directive, meanwhile, provided driven by real user consultation from IATA will continue to work with the industry an opportunity for IATA to participate start to finish. There needs to be to formulate guidelines on a regulatory in and contribute to the EC guidelines. ironclad regulation to ensure that the framework for airport privatization. That These emphasize the importance of privatized entity does not become an framework will safeguard the needs and consulting users on changes to airport out-of-control monopoly. The success of interests of all stakeholders in a sustainable charges, of transparency to justify airport privatization must be measured air transport network. charges, and of the parameters used to by service levels and improved cost- calculate the cost of capital. effectiveness rather than by financial gain for governments or investors.

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AIRPORT THE AMERICAS EUROPE 1UNITED STATES 2THE Industry efforts helped block IATA secured an average 7.1% a proposal to increase the US reduction in charges at Passenger Facility Charge (PFC) by airports for 2017, saving the $2 per enplanement, which would industry $62 million. CHARGES AND have cost the industry an extra $1.5 billion annually. ITALY IATA also saved $61 million through CANADA reductions in charges at The industry opposed the airports for 2017–2018. government’s proposals for the FUEL CAMPAIGN light-handed economic regulation of airports in the government’s review AFRICA of the Canadian Transportation Act. 3GHANA The industry is also opposing the With the support of its members, privatization of Canadian airports, IATA was able to reduce government- which could place additional risk and set fuel prices 25%. IATA continues HIGHLIGHTS cost on airlines and their consumers. to negotiate with the government Instead, IATA is promoting effective to improve Ghana’s reference to economic regulation and the removal international quotations in the ex- of ground rents. refinery price.

ECUADOR ZAMBIA Lobbying efforts by the industry Industry efforts led the government to challenge a fuel price increase of Zambia to liberalize import pegged to the highest fuel price pricing for jet fuel, which will among Ecuador’s neighbors lead to reduced prices. brought positive results. There was a noticeable reduction in the difference between the ex-refinery price and ASIA the international price benchmark. 2 4INDIA Industry efforts helped prevent a MEXICO 1 2016–2019 increase in charges in Following a major revision of Mexico’s excess of 100% at Mumbai airport. The constitution, IATA engaged with regulator decided that the charges Mexican authorities to develop a should instead be reduced 4.5% but 4 regulatory system that ensures a still increase in line with inflation. 3 competitive market for jet fuel.

37 05 INFRASTRUCTURE

Airport investment aligned with Secure, reliable jet fuel Common vision of the airport As part of the work to enable TBO, airline needs supply at competitive of the future improved common situational With more than 177 capacity-constrained and transparent prices Passenger traffic is forecast to double awareness has been facilitated through airports worldwide, the lack of runway A sustained period of low oil prices and over the next 20 years, and the number the introduction of the System Wide and terminal capacity is of growing successful hedging programs resulted of freighters flying is expected to increase Information Management (SWIM) data concern. Airlines need adequate facilities in jet fuel accounting for about 20% of 30%. Many airports are operating at or near exchange by means of a new system: that match demand with capacity airlines’ operating costs in 2016. This is capacity and will need to undertake major SkyFusion. This information exchange while delivering the functionality, levels significantly less than the 30% average infrastructure investment to handle the will eventually allow more efficient flight of service, and operational efficiency over the past 10 years. Many airlines, increased traffic. In the next 15 years, over operations by helping various countries to support operations and customer especially those in Africa, did not reap the $1 trillion is predicted to be spent on airport better understand and coordinate the air experience requirements now and in the benefits, though, because of unjustified development. It is essential that the capital traffic that is planning to operate in future. And all of this must be delivered in duties, fees, and taxes on jet fuel. is well spent for the betterment of the their airspace. a cost-effective manner. industry and the benefit of all stakeholders. Airlines need access to a reliable Also in 2016, IATA continued its worldwide Unnecessary capital investment leads to supply of jet fuel priced transparently IATA is collaborating with others in the efforts to engage with regulators and higher costs, which can reduce demand and competitively. During 2016, IATA industry to develop a common vision for the ANSPs to reduce costs and improve for air travel and weaken the case for scrutinized Africa and the Americas, airport sector that provides a seamless end- operations. In Europe, service disruption investment in required infrastructure. where the average price of jet fuel can be to-end journey for passengers, baggage, due to industrial disputes and equipment Airline and airport owners and operators more than 30% higher than elsewhere. and cargo. New and existing concepts in air failures increased over the previous must partner in aligning the business travel are being considered in developing year. The report Economic Benefits of needs of the former with the business The air transport industry continues to this vision for the airport of the future European Airspace Modernization, which plans of the latter. remind governments that it is a tenet of so that those airports can cope with the identified a potential GDP increase of the Chicago Convention, of ICAO policies, anticipated growth in traffic. This common ¤245 billion by 2035, is being used to Since infrastructure providers often and of bilateral air service agreements that vision underpins the industry’s shaping of persuade several European countries to enjoy monopoly or quasi-monopoly jet fuel not be taxed. Industry campaigns airport infrastructure and its future. put new momentum into national airspace status, governments and regulators must to remove or prevent taxes on jet fuel modernization and the Single European maintain vigorous oversight of charges and continue. Recently, IATA supported the Sky initiative. In 2017, the objective is to development. If necessary, airports should association of US carriers, Airlines for Modernized, efficient work with ANSPs in Europe to develop be mandated by regulators to consult America, or A4A, in successfully opposing ATM systems national airspace strategies and to set with airline experts to ensure that airport New Jersey’s plans to tax all jet fuel uplifts Efficient air traffic management is a crucial out programs to reduce disruption and expenditures are necessary, functional, and at an increased rate. And in Gabon, IATA component of a high-performing aviation improve efficiency. a potential good return on investment. successfully lobbied against 18% VAT being network that safely provides sufficient applied to jet fuel for international flights. capacity and value for money. Throughout Close airline-airport working relationships 2016, IATA, assisted by a number of do exist. But too often airlines are Unjustifiably high fuel fees nevertheless airlines, worked within the ICAO framework excluded from airport-related decision are an issue. Working with airlines, IATA toward more efficient, cost-effective, making. was able to avoid an increase in fuel fees and environmentally friendlier trajectory- at Narita International Airport that would based operations (TBO). TBO involve have totaled $44 million by 2019. IATA is airline operations centers collaborating also working with local stakeholders at with ANSPs to improve flight operations’ , where fuel fees have tripled predictability and airline choices. since June 2016 to pre-fund a fuel farm.

38 05

The alignment of the capital expenditures and business strategies of airports and airport owners with the needs of airlines is crucial to ensuring critical and affordable infrastructure and to sustaining traffic growth. MAJOR AIRPORT

MEXICO CITY’S input from users. User consultation enabled the airport to make 1NEW AIRPORT improvements to its preliminary IATA continues to offer expertise and DEVELOPMENTS design that took stakeholder to seek increased airline involvement requirements into consideration. as this $9.2 billion project progresses. Recently, IATA worked with the principal architects to develop and approve a multidimensional check-in INDIAN solution for the new airport that allows 4AIRPORTS WORLDWIDE airlines to customize their check-in India’s economic regulations oblige products. Airlines have welcomed this airports to consult with airlines on flexible solution, which will allow them capital development plans. This, to easily and inexpensively change however, rarely occurs, and the their check-in allocations and improve regulator’s lack of enforcement their space utilization. is resulting in costly airport development plans that appear unlikely to address airline and passenger needs. IATA has been 2HEATHROW lobbying the regulator on this issue 3 while pursuing dialogue with Delhi AIRPORT and other major airports on their 2 IATA welcomes the British master planning. government’s decision to support a third runway at London Heathrow. But it has cautioned that expansion NEW 5 should come at the right cost, be INTERNATIONAL paid at the right time, and not entail 5 1 4 excessive operational restrictions. AIRPORT IATA is maintaining airline involvement in the $13 billion project to build Beijing’s new airport. Construction of 3ARLANDA the terminal has begun, and airlines are focusing on operational readiness AIRPORT plans; surface access to the city; and Following requests from IATA and airline terminal occupancy, including the airlines, Stockholm Arlanda the transition of airlines from Beijing Airport engaged with the airline Capital International Airport to the community on its $800 million new airport. capital expenditure program, which it had earlier announced without

39 06 ENVIRONMENT 06 ENVIRONMENTAL COMMITMENTS: REDUCING IMPACT

40 06

41 06 ENVIRONMENT

Global market-based measure This GMBM provides a scheme for capping Carbon Offset and Reduction As of 1 January 2017, 66 countries have The aviation industry is committed to the growth of aviation’s net emissions Scheme for International Aviation indicated their intention to participate in mitigating and reducing its environmental from 2020 onward, and its implementation The 39th ICAO Assembly concluded on CORSIA’s voluntary phases. According to impact. A robust sustainability strategy is one pillar of the industry’s four-pillar 6 October 2016 with the adoption of the ICAO’s analysis, some 80% of the growth provides the industry with the license to strategy to manage its carbon emissions. Carbon Offset and Reduction Scheme in carbon emissions above 2020 levels grow and deliver the social and economic As implementation of the GMBM moves for International Aviation (CORSIA). between 2021 and 2035 will be covered benefits of air connectivity. forward, the industry continues to push for This is the first time that governments by CORSIA. That figure will likely increase progress on the operational, technical, and have agreed to a GMBM on economic as more nations volunteer to participate The industry’s major environmental infrastructure improvements that complete regulation in the climate change field for a in the scheme. The industry will continue achievement in 2016 was a historic this long-standing four-pillar strategy. single industry sector. to encourage countries to participate in agreement on a global market-based The aviation industry aims to achieve CORSIA in the period up to 2021. measure (GMBM) by all 191 ICAO member commitments for carbon-neutral growth The adoption of CORSIA by ICAO is the nations at the 39th ICAO Assembly. starting in 2020 and for a 50% cut in culmination of several years of extensive, 2005-level carbon emissions by 2050. industry-wide advocacy. Through IATA’s Environment Committee, IATA member In addition to carbon emissions, the airlines and associations industry seeks to manage and where provided invaluable input on policy and possible reduce its environmental impact were instrumental in ensuring industry in such other areas as noise and waste. consensus in the final stages of the The industry is also committed to raising negotiations. awareness of the trafficking of animal and FOUR-PILLAR STRATEGY plant products.

1 THE AVIATION INDUSTRY'S THREE Improved technology, including EMISSIONS REDUCTION GOALS the deployment of sustainable low-carbon fuels 2 More efficient aircraft operations 1 22 33 3 Improving fuel Capping net Cutting Infrastructure improvements, efficiency emissions net carbon an average of through emissions in including modernized air traffic 1.5% annually carbon- half by 2050, management systems to 2020 neutral growth compared from 2020 with 2005 4 (CNG2020) A single global market-based measure to fill the remaining emissions gap

42 ENVIRONMENT 06

The next important step in the ICAO Sustainable aviation fuels Approximately 4.5 million liters of SAF The main challenges to SAF deployment process is to finalize the technical One of the most promising elements in were produced globally, representing are more economic than technical. work that will produce the necessary IATA’s technology pillar is the development about a 100-fold increase from 2015. A policy framework provided by mechanisms for CORSIA’s implementation. of sustainable aviation fuels (SAF). These More than 3,000 flights were operated governments is vital for increasing SAF The need for capacity building and support are sourced from a variety of renewable using a blend of SAF. use. Sustainable aviation fuels must at for the reporting of emissions have been or recycled feedstocks, and each SAF can The first continuous SAF supply least be able to compete at the same level identified as crucial by industry and deliver up to an 80% reduction in carbon commenced at Los Angeles International as automotive biofuels. Given that aviation government stakeholders. Throughout emissions over its life cycle. Airport, sponsored by United Airlines. lacks the alternatives of ground transport, 2017, IATA and the International Emissions JetBlue made history by signing one of such as electrification, there are valid Trading Association (IETA) will cooperate On an industry-wide scale, 2016 saw a the largest renewable jet fuel purchase arguments to prioritize sustainable fuels in holding capacity-building regional number of important milestones in the agreements to date. The agreement is for aviation. Effective policies can reduce workshops to assist IATA member airlines deployment of sustainable aviation fuels. with SG Preston for a 10-year supply of SAF production risks and enable access to prepare for the implementation of CORSIA. renewable jet fuel derived from a quickly more competitive debt and equity capital. renewable bio-feedstock that does not User-friendly SAF accounting methods, As emphasized in the preamble of compete with food crops. the global recognition of sustainability ICAO Resolution 39-3, ICAO member standards, and the effective recognition of nations and the aviation industry SAF within CORSIA are equally important strongly support a global solution for policy enablers of SAF usage. emissions from international aviation, as opposed to a patchwork of national and regional market-based measures. The implementation of CORSIA from 1 January 2021 obviates the need for existing and new economic measures to be applied CORSIA IMPLEMENTATION TIMETABLE to international aviation emissions on a regional or national basis.

TRIAL PHASE FIRST PHASE SECOND PHASE

VOLUNTARY MANDATORY 66 countries have volunteered to be part Although they can volunteer, exemptions of the scheme from 2021, and more are are in place for small islands, least- being encouraged to volunteer. developed countries, landlocked developing countries, and countries that have less than 0.5% air traffic. Monitoring, reporting, and Operators in the countries involved will Operators will offset Offset obligations Offset obligations offset emissions based on the average emissions based shift to include over shift to include verification CO growth of the aviation sector over 70% 2 on average CO2 20% of individual to set the growth of operator growth of individual operator growth BASELINE the sector 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035

Over 80% of the growth in air traffic CO2 after 2020 will be offset.

43 06 ENVIRONMENT

SAF economic activity, including offtake Wildlife trafficking At IATA’s 72nd AGM, IATA member IATA Environment Assessment agreements, is enhanced wherever a The illegal trafficking of endangered airlines unanimously condemned illegal The IATA Environment Assessment (IEnvA) favorable SAF policy framework exists, wildlife and plants is estimated to be worth trafficking. IATA and 27 member airlines program provides airlines with a framework such as in the United States. To that $19 billion a year, with most of the money have also signed the Buckingham Palace for compliance with global regulations end, IATA engaged in government and supporting criminal gangs. At current rates Declaration, an initiative from the United and for continuous environmental industry advocacy for SAF initiatives in of poaching, many of the world’s most for Wildlife (UfW) foundation set up by improvement. It has been adopted by 14 2016, including proposing revisions to iconic and precious animals will be extinct the Duke of Cambridge and Prince Harry, airlines. In 2016, Aeromexico and Philippine the EU Renewable Energy Directive. IATA in the wild within the next 20 years. which has founded a transport taskforce Airways joined Stage 1 of the program, also worked on SAF initiatives with the to tackle illegal trafficking in wildlife. Icelandair and Air New Zealand moved Australian and Queensland governments; The responsibility for prosecuting to Stage 2, and Finnair had its Stage 2 the Indonesian and Mexican governments; traffickers lies with governments and IATA has also joined the core team of the compliance reassessed in its favor. The Thai and Etihad Airways; the United Arab their customs, border, and wildlife USAID ROUTES Partnership to help raise IEnvA and its standards manuals have been Emirates’ MASDAR Institute; Air Canada; protection agencies. The aviation industry, awareness of illegal wildlife trafficking. revised to ensure their compatibility with Canada’s Biojet Supply Chain Initiative however, is committed to playing its ISO 14001 standards. (CBSCI); the US’s Commercial Aviation part in preventing this appalling trade. Alternative Fuel Initiative biennial meeting; and Brussels-based policy advocates. In addition, IATA held the second annual Alternative Fuel Symposium, in Hanoi, Vietnam, which attracted 150 delegates.

WILDLIFE TRAFFICKING

of seizures relate to MORE THAN passengers. OVER ivory/rhino horns and 16,000 OVER 48% 5,300 of passenger-related live animals were 74% seizures occur over seized at airports multi-leg journeys. worldwide in 2016.

44 06

The adoption of the CORSIA resolution was a historic moment for aviation and for the world, but it is just the beginning. A lot will need to be undertaken, by both ICAO and governments and in concert with industry, to make CORSIA fully and meaningfully operational. We will need to complete our work in developing and establishing its registry framework; the monitoring, reporting, and verification process; and the Emissions Unit criteria, but I am greatly encouraged that states representing more than 86% of international traffic have now volunteered to participate as of the pilot phase in 2021.

DR. OLUMUYIWA BENARD ALIU, PRESIDENT OF THE ICAO COUNCIL

45 07 CARGO 07 FASTER PROCESSES: FASTER DELIVERY

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47 07 CARGO

Preferred mode of transport In addition, governments are being 2016 focus transforming the business by simplifying Air cargo is an essential part of the asked to improve trade efficiency by Throughout 2016, IATA worked in processes, enhancing industry alignment, global trading system. In 2016, airlines reducing tariffs and ratifying international partnership with shippers, freight harmonizing objectives, and measuring transported 53.9 million metric tons of agreements that make global trade forwarders, and the entire air cargo the performance of the end-to-end goods, representing about 35% of global easier. The focus of this activity is value chain to further a common air cargo chain. Many programs in this trade by value. That is equivalent to $5.5 Montreal Convention 1999 (MC99), agenda based on area are grouped under the StB Cargo trillion worth of goods annually, or $15.3 the revised Kyoto Convention, and (Simplifying the Business of Air Cargo) billion worth of goods every day. Without the World Trade Organization (WTO) enhancing industry digitization through initiative, which from 2017 will become the air shipments, global supply chains Trade Facilitation Agreement (TFA). the increasing adoption of e-freight and umbrella for all transformational initiatives could not function, and the availability The economic importance of enabling e-air waybill (e-AWB) and developing in air cargo. of many time- and temperature-sensitive measures was confirmed in an IATA enhanced data-sharing platforms and tools; products, such as flowers, fruit, and study that calculated a 6.3% increase in a improving safety, security, and efficiency pharmaceuticals, would be restricted. country’s total trade volumes for every 1% through the implementation and increase in air cargo connectivity. enforcement of international regulations Air cargo growth picked up in 2016 after and standards; and several years in the doldrums. Freight tonne kilometers (FTK) expanded 3.4% compared with FTKs in 2015, the fastest growth since the post-financial crisis bounce back in 2010. The air cargo industry nevertheless remained under pressure. Yields fell 12.5%, as capacity outstripped demand, and revenues decreased $5.0 billion.

To strengthen its connectivity, the air cargo industry is building on its position as the preferred mode of transport for THE SIX GOALS OF CARGO TRANSFORMATION high-value-to-weight manufactured products, such as microelectronics, pharmaceuticals, aerospace components, and medical devices. The focus is on developing customer-centric supply chain solutions that enhance quality, provide greater visibility, and enable better predictability.

Modernizing Capitalizing on Optimizing the Moving to data on Developing real- Making quality cargo distribution e-commerce end-to-end demand time interaction relevant journey

Making air cargo easier, smarter, and faster

48 CARGO 07

Cargo digitization Challenges remain, however, in digitizing In 2016, this new messaging standard was Harmonized regulatory IATA’s e-freight vision is to build an the supply chain. Trade lanes and airports adopted in the United Nations’ ASYCUDA standards and industry end-to-end paperless transportation in countries not signed up to MC99 face system, which is used by border agencies cooperation process for air cargo. A digital process will regulatory limitations in the transfer of in over 90 countries. The Cargo-XML Addressing advance cargo information increase the air cargo value proposition by digital data and are unable to adopt the standard was also endorsed by US security is a critical element of the air enabling innovative services and solutions. e-AWB. Perceived complexity and a lack Customs for exports from the United cargo supply chain. Regulators and of harmonization in e-AWB procedures States, which makes for a positive start to industry are working together to further The air waybill is a critical air cargo among stakeholders also needs to be its adoption in that country. In addition, secure the supply chain while ensuring document, and its digitization to an e-AWB overcome. The industry will continue to the World Customs Organization (WCO) the flow of goods. Most advance cargo is a first step toward the e-freight vision. address these challenges to sustain the has developed a risk assessment tool electronic information is required growth in e-AWB penetration in 2017. that will soon be available to interested before the arrival of the aircraft. Several To accelerate the global adoption of the customs administrations, and it is fully countries—in particular, Canada, the e-AWB, IATA developed e-AWB360. The compatible with IATA’s Cargo-XML. United States, and the member countries e-AWB360 program is designed around One digital language of the European Union—also request an airport community approach to e-AWB Achieving alignment in digital messaging IATA’s aim in 2017 is to increase the global some advance cargo information prior to implementation, and e-AWB360 use has standards across the air cargo industry adoption of the Cargo-XML standard the loading of the aircraft. This preloading started to proliferate. To date, e-AWB360 will help trade grow, improve security, to elevate message harmonization advance cargo information, or PLACI, has been adopted by 24 airlines at 15 and accelerate market access for air worldwide among air cargo stakeholders assures additional scrutiny to mitigate airports. This development and the cargo. Cargo-XML is emerging as the and to facilitate compliance with customs security risks. November 2016 launch of the e-AWB preferred messaging standard for requirements. desktop tool, eAWBLink, will help small and electronic communication about air cargo IATA is working with Canada (Pre-Load medium freight forwarders create, send, and data among airlines, forwarders, ground Air Cargo Targeting, or PACT); the United manage e-AWBs easily and efficiently. handlers, other air cargo stakeholders, States (Air Cargo Advance Screening, or and customs authorities. ACAS); and the European Commission (Pre-Loading Consignment Information for Secure Entry, or PRECISE) to develop electronic targeting systems that identify E-AWB PENETRATION high-risk cargo prior to its loading. Previously, IATA worked with the WCO to develop now-published global customs Acceleration in the standards regarding electronic targeting second half of 2016 systems. IATA continues to work with Up increased from the WCO and with ICAO to incorporate robust global response protocols and 1.9 guidance following the processing of 0.5 data by targeting systems. 48.9% to 2016 Industry target:

year-end figure 12.5 percentage percentage points points compared with 56% January to July.

49 07 CARGO

Collaboration with Simplified processes and IATA’s Center of Excellence for freight forwarders measuring performance Independent Validators in Pharmaceutical In 2016, IATA and FIATA (the Logistics (CEIV Pharma) addresses issues representative body for international Targeting quality management related to pharmaceutical transport. Some 46 cold freight forwarders) reached an important and benchmarking CEIV Pharma, operated in partnership chain logistics agreement on a jointly managed air The Cargo iQ (formerly Cargo 2000) with industry stakeholders worldwide, cargo program (the IATA-FIATA Air special interest group targets quality offers a standardized, global certification businesses and Cargo Program, or IFAPC) designed to management. Specifically, it assists airlines program that trains people to handle facilities are CEIV modernize the relationship between and freight forwarders to monitor and pharmaceuticals and to conduct Pharma certified, freight forwarders and airlines. The IFAPC benchmark delivery performance against consistent, on-site assessments of the reflects the contemporary business their service promise, define common handling of pharmaceuticals for transport. with 88 more relationship between freight forwarders processes and procedures, and promote undergoing the and airlines, not the historic, agency- best practices. In 2016, the Cargo iQ group Some 46 cold chain logistics certification based relationship. The IFAPC program embarked on the Smart Data Project and businesses and facilities are CEIV features a simplified governance structure; an audit and certification scheme. The Pharma certified, with 88 more process. a reinforced, bottom-up consultation Smart Data Project will monitor over 150 undergoing the certification process. process; and a joint board to facilitate million lines of performance data annually the key industry goals, including e-cargo that will help air cargo businesses improve Smart facilities priorities and reduced risks of liability their processes and add value to the air Managing quality for customer safety and legal challenges, by addressing the cargo industry overall. and customer service is a challenge principal-to-principal relationship between when more than 70% of global handling freight forwarders and airlines. Handling special cargo is performed by independent third By 2018, the transport of time- and parties. The Smart Facility program temperature-sensitive goods is projected (previously the Facilities Capability to be worth $10.28 billion. Standardized Matrix) addresses this priority with self- air cargo processes are critical to manage assessment checklists. In 2017, this will be this growing area. In shipping such special strengthened with an independent audit cargo as pharmaceuticals, for example, procedure that is aligned to the enhanced the air cargo industry is working toward ISAGO program. globally consistent, recognized, and standardized supply chains to satisfy the concerns of pharmaceutical shippers, which are increasingly turning to data loggers to track shipments.

50 07

The coming into force of the WTO’s Trade Facilitation Agreement is very good news for world trade. The agreement seeks to improve the efficiency of customs and other border agencies, which will reduce the cost of trade and lead to an increase in cross-border trade volumes. Industry and governments must now work together to make sure the treaty is implemented quickly and ambitiously.

CARLOS GRAU TANNER, DIRECTOR GENERAL, GLOBAL EXPRESS ASSOCIATION

51 08 PASSENGER EXPERIENCE 08 TAILOR-MADE: THE JOURNEY OF THE FUTURE

52 08

53 08 PASSENGER EXPERIENCE

Personalized travel Fast Travel Baggage Automated Border Control Aviation is a customer-focused industry. Fast Travel is an StB program to transform The End-to-End Baggage Program aims IATA’s Global Passenger Survey revealed Travelers want each touch point in the passenger’s airport experience so that for efficient and hassle-free baggage that 48% of passengers have used their journey to be as uniquely tailored, a passenger can walk from the door of the handling. It focuses on improved tracking Automated Border Control (ABC) with seamless, hassle free, and efficient as terminal to his or her seat on the plane and modernized messaging standards. 89% satisfaction. The success of ABC has possible, from booking and check-in, with minimal inconvenience. paved the way for a new generation of through security, to collecting their Tracking passenger processes based on biometric luggage at their destination airport. With The program provides self-service options The majority of travelers expect their recognition. In 2016, a number of airports passenger numbers set to double over the at six touch points: self- or automated airline to know where their bag is. Part installed automated kiosks with facial, iris, next 20 years, delivering this personalized check-in, self-tagging of baggage, of the solution for airlines is recording or fingerprint recognition capabilities. experience will benefit passengers self-checking of documentation, self- when a bag changes hands and sharing and facilitate the most efficient use of rebooking of flights, self-boarding, and that tracking information with the next Future developments for the passenger constrained airport infrastructure to cope self-recovery of baggage. airport in the journey. This is exactly what experience are endless. Biometric data, for with demand. IATA Resolution 753 calls for. Compliance example, can be employed as a single travel In 2016, 39% of travelers had access to with Resolution 753 will help the industry identification method to drastically improve The key to delivering on passenger the complete Fast Travel experience. The reduce baggage mishandling and allow passenger throughput. The use of a digital expectations is innovation. Since 2004, target is to increase that to at least 80% of airlines to offer tracking to passengers identity is very promising and critical to a the Simplifying the Business (StB) passengers by 2020. The focus in 2017 will if they wish it. The industry is working more positive passenger experience. program has focused on developing and be on removing obstacles preventing airlines toward a June 2018 deadline to put the implementing innovative solutions to meet from implementing Fast Travel solutions. resolution into effect. the changing needs of passengers and to One ID accommodate growing demand. The main obstacles to offering Fast Messaging The vision of the One ID initiative Travel services are regulatory rather than Effective data sharing is essential to (previously One Identity) is to create technological. Mobile boarding passes, for realizing the benefits of Resolution 753. a streamlined, frictionless process that example, are accepted in some countries The cost of baggage messaging is high allows individuals to assert their identities, but not in others. Similarly, the delay in because of such factors as legacy system online or in person while maintaining the permitting home-printed baggage tags support. To address this, messaging is privacy of personal data and enabling for travel to and from the European Union being modernized. Trials of systems are improvements to operational efficiency is regulatory not technical. under way using baggage brokers and and security. XML messaging in the hope of introducing modern, secure, low-cost messaging. A Passengers should have valid, live messaging operational trial will be government-issued identification, in held during 2017. combination with which they enter their SIMPLIFYING THE BUSINESS HAS THREE GOALS personal biographic and biometric data on a secure digital platform to perform their “pre-identification screening” 1 2 3 ahead of their journey. A digital or AIRLINE PRODUCTS REAL-TIME SEAMLESS AND virtual tokenized passport on a mobile Helping airlines differentiate INTERACTION HASSLE-FREE device is the backbone of the One ID their products and services in Providing customers with trusted, FAST TRAVEL initiative. The concept was presented in all sales channels and accurate, real-time information from Eliminating or optimizing an StB white paper in 2016 and will be offer customized products everyone involved in their journey processes and related wait times developed in 2017. and services from start to finish throughout a passenger’s journey

54 PASSENGER EXPERIENCE 08

2016 GLOBAL PASSENGER SURVEY KEY RESULTS New Distribution Capability UK-based Flybe, meanwhile, is using NDC New Distribution Capability (NDC) will to advance its offerings to corporate play a transformational role in enriching buyers and to achieve a cohesive and personalizing air travel from the distribution strategy. The latter grants largely commoditized model of today. products the same sales potential across As airlines continue to enhance their all channels and devices. distribution capabilities through bundled deals, ancillaries, and personalization, According to the 2016 NDC passengers need to be able to shop and Implementation Report, around 93% of 72% compare the value of these propositions airlines that have implemented NDC are across airlines, just as they do when able to use it to push content about flights of travelers want shopping for other consumer goods. and ancillaries, whereas 7% of airlines to be able to print their luggage tags NDC makes this possible through the distribute only ancillaries. A majority remotely or to use an development of a modern, XML-based of airlines offer ancillaries a la carte or electronic bag tag. 61% data transmission standard. The NDC bundled with a flight. More than 48% of of passengers want the ability to track standard is for communications between the airlines using NDC are offering rich their bags throughout their journey. airlines and travel agents. With it, air content in the form of images and videos travelers benefit from transparency and that enable customers to see what they access to an airline’s offerings when are buying and airlines to differentiate shopping through a travel agent or online their products. travel site. For customers who choose to 85% 51% identify themselves, NDC will generate An NDC milestone was reached in June personalized offers. 2016 with the launch of the NDC Registry. of passengers The registry identifies companies that would prefer to use their own devices Since 2015, NDC has moved from pilot to have implemented part or all of the onboard to access implementation phase. Some 113 airlines NDC standard. It also lists airlines; travel of passengers want airlines entertainment have confirmed plans to adopt the agents; and aggregators, such as global and airports to offer them options. a more customized travel standard, and 33 airlines are already using distribution systems, that have achieved experience and are willing to NDC, primarily in support of flight and NDC certification and IT providers provide more personal data ancillary sales. that have demonstrated NDC standard to make this happen. capability. To date, some 82 companies Latin American carrier GOL, for are listed on the registry. example, has tested NDC to improve its collaboration with travel agencies and thereby offer customers access to the airline’s content. Promoting new technologies and a new distribution model complements GOL’s vision to provide customers with greater choice at an affordable price for airline and customer.

55 08 PASSENGER EXPERIENCE

Also in 2016, more than 100 participants ONE Order For airlines, ONE Order continues the in the air travel value chain participated ONE Order leverages the data business transformation that began with in the first IATA Business Travel Summit. communication advances from NDC the e-ticket. It will modernize back- Representatives from corporations, to modernize and simplify airline order office processes by replacing multiple ONE Order will travel management companies (TMCs), management. It encompasses the delivery, rigid, paper-based booking, ticketing, IT providers, global distribution systems fulfillment, and accounting processes delivery, and accounting methods with greatly simplify (GDSs), and airlines met in Geneva and related to airline products and services. a standard order management process. the passenger explored the opportunities for business And that process will be based on a single travelers and travel management made For passengers, ONE Order means customer order record that includes experience and possible by the NDC standard. the gradual disappearance of multiple all the data: customer details; order remove one of the reservation records associated with a items, including the flight segments and hassles of travel— This was followed in September with customer purchase, such as the GDS additional products and services; and the launch of the North American Travel reservation number, the ticket number, payment, billing, and fulfillment status trying to find the Manager Advisory Forum, which mirrors and the airline reservation number. With information. correct document the Europe-based Travel Manager ONE Order, the only thing that passengers when dealing with Advisory Group. The existence of these will need to locate their itinerary and be ONE Order took a major step forward in groups ensures that IATA and the recognized throughout their journey is late 2016 when the Passenger Services an itinerary change. corporate travel buyer community have a single order number. ONE Order will Conference (PSC) adopted a resolution on an ongoing collaborative environment to greatly simplify the passenger experience a standard for the initiative. The role of the discuss NDC and related issues affecting and remove one of the hassles of travel— resolution is to put in place the framework corporate airline programs. trying to find the correct document or for the industry to work with a single number when dealing with an itinerary order. In 2017, the industry will develop its In 2017, the priority continues to be change or a travel disruption. ONE Order first set of ONE Order standard messages. NDC’s adoption by airlines. NDC has also has the potential to facilitate greater Various trials are expected to ensure seen strong traction from IT providers interoperability between traditional the robustness of the standard and to delivering NDC-capable solutions, and this and ticketless carriers, bringing further demonstrate its benefits. should accelerate the adoption of NDC benefits to air travelers in terms of by airlines. In addition, NDC hackathons network opportunities. The full adoption of ONE Order is and other initiatives will stimulate anticipated to be a multiyear, multistage creative solutions in business and leisure process. It will require cooperation travel. Engagement regarding NDC with with the industry’s IT partners and a travel agents and the corporate buyer fundamental change in back-office community, in Europe and North America procedure and in mindset. in particular, will also intensify in 2017.

56 08

With passenger numbers increasing dramatically, air transport is under increasing capacity pressure. Innovative solutions to tackle terminal congestion are required to provide passengers with a seamless experience and minimal disruption. ACI-IATA joint industry initiatives and recommended practices on technology, customer service, and airport security, allow travelers to be better served and airports and airlines to develop better businesses. New tools offer more options, and passengers are increasingly comfortable with digital services and expectant that they be tailored to their travel experiences. Airports and airlines are committed to working together to deliver this future for our customers.

ANGELA GITTENS, DIRECTOR GENERAL, AIRPORTS COUNCIL INTERNATIONAL (ACI) WORLD

57 09 FINANCIAL SYSTEMS 09 SETTLEMENT SYSTEMS: THE FINANCIAL BACKBONE OF THE INDUSTRY

58 09

59 09 PASSENGERFINANCIAL SYSTEMS EXPERIENCE

An integrated global system Global standards and systems that ensure the $219 $26.4 $54.34 $32.42 $66 $3.5 swift, secure, and reliable movement of funds among BILLION BILLION BILLION BILLION BILLION BILLION the participants in the air travel value chain are essential components of IATA’s Billing and IATA’s Cargo Account The IATA Clearing IATA Currency IATA’s Simplified IATA’s Enhancement & the global aviation system. Settlement Plan Settlement System House (ICH) provides Clearance Services Invoicing and Financing (E&F) helps IATA Financial Settlement (BSP), part of the IATA (CASS), also part of fast, secure, and cost- (ICCS) offers global Settlement (SIS) air navigation service Settlement Systems the ISS, is designed to effective settlement cash management is the highly cost- providers (ANSPs) and Systems (IFSS) have been (ISS), processed simplify the billing and services to more than that enables airline effective electronic airports improve the the back office of the global $219.0 billion. The settling of accounts 430 airlines, airline- treasurers to centrally invoicing platform efficiency and quality air transport system for six BSP facilitates and between airlines and associated companies, control and repatriate developed by IATA of their invoicing and decades. They are so reliable simplifies the selling, freight forwarders. It and airline travel their worldwide sales to remove all paper collection processes. they often go unnoticed, reporting, and operates through CASS partner participants. In funds. The ICCS is from the invoicing E&F processed remittance procedures link, an advanced, 2016, the ICH processed used by more than 330 and settlement of $3.5 billion in 2016. despite the very significant of IATA-accredited global, web-enabled $54.34 billion with a airlines and is available industry services. SIS is sums of money that they passenger sales agents e-billing solution. At financial settlement in over 200 IATA BSP streamlining processes handle. In 2016, the IFSS and improves financial the end of 2016, CASS rate of 100%. and CASS operations by enabling the processed $401.4 billion. control and cash flow was processing 93 worldwide. The ICCS exchange of electronic for IATA’s roughly 400 operations serving was responsible in data between airlines participating airlines. At over 500 airlines, 2016 for repatriating and between airlines the close of 2016, there general sales and over $370 million from and direct operating were BSP operations service agents (GSSAs), countries with severe cost suppliers. The use in 181 countries and and ground handling currency liquidity of a single standard, territories. Their overall companies. The on-time issues and restrictions, the IS-XML, simplifies on-time settlement rate settlement rate for including Nigeria and business activity for was 100%. CASS was 99.999%, Egypt. Overall, in 2016 the industry and allows and $26.4 billion the ICCS processed suppliers to use one was processed. $32.42 billion. invoicing standard for all their airline customers.

In 2016, SIS had more than 2,140 participants, including 398 airlines, 297 suppliers, and 1,449 others enabled as receivers of SIS e-invoices to maximize efficiency on the IFSS PROCESSED invoice sender side. SIS processed over 1.5 million interline and supplier invoices during the year and settled $401.4 BILLION $66.0 billion in volume.

60 FINANCIAL SYSTEMS 09

ISS The ISO 9001 certification obtained NewGen ISS will deliver IATA has taken a collaborative approach IATA devotes constant effort to improving by IATA during 2016 for its quality to introducing NewGen ISS. Forums the two elements of the ISS: the BSP and management system and the ISS provide three levels of travel agent accreditation, such as the Passenger Agency Program CASS. An improved ISS achieved the the foundation for better customer enabling agents to choose the one that Global Joint Council (PAPGJC) and following in 2016: satisfaction and continuous improvement. best fits their business model; Agency Program Joint Councils (APJCs) IATA will strive in 2017 to maintain its a remittance holding capacity that will provided IATA’s travel agent partners Safer funds, with unrecovered global ISO 9001 certification. ensure a safer selling process; with the opportunity to contribute to the debt of 0.023% IATA EasyPay, a secure and cost- development of NewGen ISS. Higher average rate of on-time effective pay-as-you-go solution; and funds, at 100% New Generation ISS a global default insurance (GDI) product In September 2016, the Passenger Agency Lower operating unit fees Since its launch in 1971, the BSP has that will offer a cheaper financial security Conference (PAConf) adopted resolution - BSP program: 49% below the facilitated the distribution and settlement option to travel agents and help to reduce changes that will enable the introduction 2010 actuals of funds between travel agents and default losses for airlines. of the new accreditation levels, IATA - CASS program: 48% below the airlines safely and securely. Its rules, EasyPay, and GDI. Early in 2017, IATA 2010 actuals however, were established in an era of In line with the goal of putting customers selected the firm Euler Hermes to develop paper tickets, brick-and-mortar travel at the heart of its financial settlement and offer the GDI as an option to travel In the interest of furthering this agencies, limited payment methods, and systems, IATA is restructuring how it agents. Payment solutions providers were performance, IATA has initiated a review high airline industry regulation. These works internally to offer customer service also selected to deliver IATA EasyPay. of ISS targets intended for application rules fail to address the diverse and 24 hours a day, seven days a week. IATA from 2017 through 2023. The aim for 2017 complex needs and risks of today’s airlines expects to implement this level of service Resolution text related to remittance is to keep the net default rate on gross and travel agents. by the end of 2018. holding capacity will be presented to the sales at or below 0.023% and the on-time PAConf in 2017 following the reaching of settlement rate at 99.980% or higher. NewGen ISS is a program launched by a joint agreement between travel agency IATA to ensure the continued relevance associations and airlines. Trials of NewGen and value of the BSP to airline and travel ISS in various countries will begin in the agent customers. For airlines, NewGen ISS second half of 2017 and will center on the means faster settlement, safer funds, and a IATA EasyPay solution. The plan is to have lower cost of distribution. For travel agents, NewGen ISS rolled out to all BSP markets NewGen ISS will offer more products and over the period 2017–2020. services, greater flexibility, and new and more cost-effective solutions.

61 10 AVIATION SOLUTIONS 10 SUPPORTING SUCCESS: SOLUTIONS IN ALL AREAS

62 PASSENGER EXPERIENCE 10

63 10 AVIATION SOLUTIONS IATA Consulting

IATA Consulting has comprehensive SOLUTIONS FOR AIRLINES experience of the full array of the aviation sector’s business challenges. DDS (Direct Data Solutions) Airs@t Airs@t is the only It draws on IATA’s more than 70 years passenger satisfaction of service to the airline industry and thus unrivaled experience to offer its clients the Direct Data Solutions (DDS) is a game-changing, industry- benchmarking survey best solutions. sponsored program that provides the travel industry with timely, specifically designed for the airline industry. accurate, cost-effective access to global airline market data. IATA Consulting’s depth and breadth of aviation industry knowledge enables it to Participating carriers gain easy access to the most It tracks and compares help its clients maximize the value of their comprehensive global data set, aggregated from such multiple airline customer operating models, realize their growth sources as ARC Air Logistics, Inc.’s Area Settlement Plan (ASP) satisfaction ratings in- ambitions, and gain insights that translate transactions, IATA’s available billing and settlement plan (BSP) depth, with research into into sustainable competitive advantages. transactions, and carriers’ contributions. all travel service aspects of the preflight, in-flight, and No matter what business intelligence you require—network postflight passenger travel planning to fleet planning, revenue management, sales and experience. IATA Consulting’s numbers marketing, or business and product development—DDS delivers. for 2016 are as follows: See below “What is one aspect that will improve 80+ projects your travel experience?” 45+ countries

It is forecasted that by mid-2017, the AIRS@T INCLUDES 25+ airports DDS will encompass the following: Traffic studies preflight, in-flight, postflight, Passenger terminal optimization and other attributes and Security enhancement passengers had their travel documents had their travel passengers in 2016. Timatic through verified 80 involves surveying 350,000,000 Airport development 93% 20+ airlines of worldwide agency sales; 60,000 Strategic planning PASSENGERS A YEAR FROM Fuel and operational efficiency of global Timatic NDC consulting services airline Safety enhancement tickets; and Timatic is the industry 49% & standard for ensuring 40 30 airlines’ compliance with 5+ CAAs and AIRLINES, AIRLINES AIRPORTS passenger travel document requirements. governments 50 of them providing direct sales worldwide, as was Civil aviation restructuring data, with the data of 15 more Its flexibility allows it to the case in 2015. Capacity enhancement 68 carriers to be added by year-end. be integrated into airlines’ departure control systems What is one aspect that will and into kiosk and mobile 4 other aviation improve your travel experience? check-in procedures. stakeholders BY AGE Timatic is updated at least 72 times daily every (financial institutions -24 25–44 45+ day of the year to ensure In-flight Timely Attentive its application of the latest and ANSPs) WI-Fi e-notifications cabin crew regulations. Connectivity studies Air traffic management optimization

64 AVIATION SOLUTIONS 10 SOLUTIONS FOR CARGO Dangerous Goods Regulations The Dangerous Goods Regulations (DGR) are the global reference for shipping dangerous goods by air.

CargoIS The DGR has been the only standard recognized by the global airline industry for almost 60 years. CargoIS is the In 2016, CargoIS leading source for It is the most complete, up-to-date, and user-friendly air cargo business offered market dynamics reference for dangerous goods handling in the industry. intelligence. 140k across more than 140,000 airport-to-airport trade lanes; Its information spans the entire supply chain: airlines, general sales agents, freight CEIV Pharma forwarders, ground handlers, airports, IATA’s Center of Excellence for Independent and many others. Validators in Pharmaceutical Logistics (CEIV reflected the business of Pharma) aims to improve the handling of It sources its data more than 30,000 freight pharmaceutical products by introducing from CASS, the Cargo 30 k forwarders and more than a standardized pharmaceutical-handling Accounts Settlement 200 airlines and GSAs; process at airports globally that complies with Systems operated pharmaceutical manufacturers’ requirements. by IATA and used by airlines to settle with freight forwarders. CEIV Pharma’s numbers for 2016 It is thus the only are as follows: air cargo intelligence provided data sourced from As of the end of 2016, there were solution based on CASS, meaning the more than actual transactional 19 million records of airway bill CEIV Pharma people data. 19 m information per annum that trained; are fed into Cargo IS; and The CargoIS 11Communities: 450+ Direct Data (CDD) North America project is designed to complement the 1 entities information received assessed; from CASS with and Europe 76 data directly from participating airlines. 2 Amsterdam entities certified, including offered data representing 3 Athens The CDD will be $26 billion worth of 17 freight forwarders, 6 26b 4 launched as a product air freight charges. ground handlers, and 5 28 airlines at 22 airports. in 2017 and will be 5 Basel based on the strength 6 Brussels of both data sources. 7 The CDD will 8 Liege include information on commodities 9 Madrid transported airlines representing all regions, and will thereby meanwhile, have joined the CDD Asia achieve unrivaled working group and are participating in 10 Hong Kong geographic coverage the development of the CDD product. and marketing 20+ 11 Singapore penetration.

65 10 AVIATION SOLUTIONS

SOLUTIONS FOR In 2016, IATA Training SOLUTIONS FOR CARGO AIRPORTS trained more than AirportIS TACT AirportIS offers the most comprehensive passenger 100k and cargo traffic data available and is used by more people from The Air Cargo Tariff, or TACT, is the only industry source for than 70 airports globally for marketing and air service 1,000-plus published rates and rules for air freight. development activities. organizations in 150-plus countries; TACT and TACT Rules provide air cargo professionals with the As of March 2017, the data in AirportIS will be comprehensive information they require to efficiently transport air enhanced by data sourced from the Direct Data cargo worldwide. Solutions (DDS) database of ticketing information. offered over

TACT Rules is the definitive source for shipping and accepting As of the 2016 year-end, 70 airports were air cargo, comprising as it does industry, country, and carrier using AirportIS. 350 regulations, while TACT Rates provides access to the most current courses and industry, carrier, and preconstructed rates. more than 40 SOLUTIONS FOR diploma TACT Rates contains nearly five million rates for 350,000 city pairs programs; and and is the most comprehensive global rates database in the industry. TRAINING TACT Net IATA Training worked with Rates (Formerly, IATA Training and Development Institute, or ITDI) 450 TACT Net Rates will TACT’s numbers include IATA Training puts participants from around the resellers and introduce the dynamic the following: world through realistic business scenarios and gaming partnering and automated delivery situations to promote industry standards; to help institutions, of private air freight aviation-related businesses operate safely, efficiently, including rates and charges from and sustainably; and to foster career paths in support of airlines to forwarders the more than 58 million jobs related to aviation. 7,961 and eliminate the active users of TACT Online cumbersome manual It carries ISO 9001:2015 certification in recognition of creation and e-mailing of its high quality and its solid quality management system. 20+ 45,721 thousands of rate sheets. regional sessions, January to February training partners It will launch in 2017. SOLUTIONS FOR 171.27 TACT Net Rates is STRATEGIC PARTNERSHIPS minutes as the average length per session running as a trial with seven airlines and IATA Strategic Partnerships four forwarders. 270+ 4,862,364 IATA Strategic Partnerships is a community rates included in TACT Rates at the end of authorized of more than 400 partners worldwide who 2016, versus 2,237,871 in June 2000 training centers, and share ideas and collaborate to improve aviation 18,241 practices and technologies. copies of TACT shipped in 2016 The numbers for IATA Strategic Partners in £££££ 2016 include 400 partners, 160+ 115 accredited nations in TACT customer base 40 areas of involvement, training schools. 09/05/1969 100 workgroups and task forces and is the date TACT was first published 17 strategic partners at the AGM.

66 IATA OFFICES IATA OFFICES

Geneva Asia-Pacific Middle East Executive & North Africa Office TripleOne Somerset 111 Somerset Road Business Park 33, Route de l’Aéroport #14-05 Somerset Wing Building No. 8 P.O. Box 416 Singapore 238164 King Abdullah Street CH - 1215 Geneva 15 Airport Al Shaab Roundabout Amman 1194 China & Tel: +41 22 770 2525 North Asia Jordan Fax: +41 22 798 3553 3rd Floor, China Digital Harbor The Americas Montreal No. 1 Wangjing North Road 703 Waterford Way Head Office Chaoyang District Suite 600 People’s Republic of China 800 Place Victoria Miami, 33126 P.O. Box 113 United States of America Montréal, Québec H4Z 1M1 Canada Europe Tel: +1 514 874 0202 Torre Europa Fax: +1 514 874 9632 95 Paseo de Castellana Madrid 28046 Spain

67 www.iata.org/2017-review