Annual Report 2011 International Air Transport Association Giovanni Bisignani Director General & CEO

International Air Transport Association Annual Report 2011 67th Annual General Meeting Singapore, June 2011

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IATA Board of Governors 06 Simplifying the Business 32 Director General’s Message 08 Cost Efficiency 36 State of the Industry 10 Industry and Financial Services 40 Safety 16 Aviation Solutions 46 Security 20 IATA Membership 50 Regulatory and Public Policy 24 IATA Offices 52 Environment 28

Note: Unless specified otherwise, all dollar ($) figures in this annual report refer to US dollars (US$).

Airlines are safer, greener, and leaner after a decade of change. But profitability is still pathetic. No single action will be a panacea for four decades of 0.1% average net profitability. But a level playing field and normal commercial freedoms are most certainly the foundation stones of a sustainable future.

Giovanni Bisignani

IATA Board of Governors as of 1 May 2011

Khalid Abdullah Almolhem Andrés Conesa Pedro Heilbron SAUDI ARABIAN AIRLINES AEROMEXICO COPA AIRLINES

Richard Anderson Enrique Cueto Harry Hohmeister DELTA AIR LINES LAN AIRLINES SWISS

Gerard Arpey Rob Fyfe Alan Joyce AMERICAN AIRLINES AIR NEW ZEALAND QANTAS

David Bronczek Naresh Goyal Temel Kotil FEDEX EXPRESS JET AIRWAYS THY—TURKISH AIRLINES

Yang Ho Cho Peter Hartman Liu Shaoyong KOREAN AIR KLM CHINA EASTERN

David Bronczek Chairman IATA Board of Governors 7

Samer Majali Vitaly Saveliev GULF AIR AEROFLOT

Hussein Massoud Jean-Cyril Spinetta EGYPTAIR AIR FRANCE

Fernando Pinto José Viegas TAP—AIR PORTUGAL LAM—LINHAS AÉREAS DE MOÇAMBIQUE Calin Rovinescu AIR CANADA

Emirsyah Satar GARUDA 8

Director General’s Message Aviation is a resilient industry. Fully $9.9 billion in losses in 2009 turned into $18 billion in profits in 2010. In a single year, airlines recovered $72 billion in revenues. Against a capacity expansion of 5.2%, demand increased 10.3% and average passenger yields improved 6.1%.

But the first quarter of 2011 reminded us Forty-eight months later, we eliminated industry’s fuel efficiency. We collected that the industry remains fragile. Demand paper tickets. Common-use self-service and shared industry best practice on was dampened by political unrest across kiosks became commonplace, baggage fuel management, and IATA Green Teams the Middle East and North Africa and performance improved, and in 2010 supported fuel project implementation. by the tragic earthquake and tsunami in we delivered 100% bar-coded boarding At the same time, we worked with our air Japan. Political uncertainty also drove oil passes. Cumulative StB savings now navigation service providers to shorten prices to an average of $129 per barrel total $17 billion. The next target is to over 2,000 routes. Combined with for the first four months of 2011—45% deliver 100% e-freight on capable trade IATA’s other operational cost reduction higher than in the previous year. lanes by the end of 2015 to fully expand initiatives, these efforts have saved the StB revolution to cargo. nearly $19 billion since 2004. 2011 will most certainly be another tough year. But after a decade of constant The price of oil has been one of the Our partners in the value chain needed crises, shocks, and change, the industry decade’s biggest stories. In 2001, even to share the burden of change. IATA’s is stronger and more efficient than ever. with oil under $30 per barrel, the industry External Cost Campaign has netted Since 2001, labor productivity has could not make a profit. Today, fuel nearly $24 billion in cost savings since improved 67%, sales and marketing unit consumes 30% of costs, and airlines are 2004. Of this, $17.5 billion was achieved costs are down 10%, and fuel efficiency capable of delivering profit even in the by driving cost efficiencies with airports, has increased 24%. $100 per barrel range. Your association air navigation service providers, and fuel led efforts to dramatically improve the suppliers. A further $6.5 billion was Working with its members, IATA helped achieved by convincing governments drive these improvements over a decade to stop, avoid, or reduce taxes. of change. Over these three broad areas alone, IATA began Simplifying the Business IATA delivered over $59 billion in industry (StB) in 2004 when low-cost carriers savings. And, at the same time we safely changed the parameters of competition. processed over $2.5 trillion of the Our goal was to reduce costs and industry’s money in our financial systems. improve customer convenience. 9

Not all the challenges were financial. Aviation needed a coordinated, The conclusion of Vision 2050 was responsible and global approach on that there is no silver bullet to help the Even while under enormous financial climate change. IATA rallied the industry industry profitably meet the needs of pressure, the industry continued to to commit to improve fuel efficiency a globalizing world dependent on air improve safety. In 2010, airlines suffered 1.5% annually to 2020, to cap net travel. There is a clear need for airlines one jet hull loss for every 1.6 million emissions from 2020 with carbon-neutral to operate with the commercial freedoms flights. That is a 42% improvement on growth, and to cut net emissions in half that every other global business takes 2001. More impressively, IATA members by 2050 compared with 2005. These are for granted. And we must find a way to outperformed the industry, with one the most proactive targets of any global solidify strong partnerships within the accident for every four million flights. industry sector and have gained aviation industry and with governments and other The IATA Operational Safety Audit great credibility among governments partners to rebalance the distribution of (IOSA), which is a condition for IATA who also agreed on a global way risk and reward to achieve sustainable membership, is making a difference. forward through the leadership of the profits, and to drive change. Governments handled the security International Civil Aviation Organization On 1 July 2011, IATA’s leadership will challenge with little harmonization (ICAO). pass to my successor, Tony Tyler. He will or coordination. Over the decade, Airlines are stronger and in a better inherit a strong association capable of airline security costs rose to an annual cash situation than at the beginning of delivering results that support the needs estimated bill of $7.4 billion. Along the decade. Regional consolidation has of our great industry. with urging governments to accept progressed. More people are traveling their responsibility for the cost as a I am confident that you will award Tony and trading internationally than ever matter of national security, IATA called the same trust that you gave me and that before. But airlines are still caught in for governments to work with each Tony’s leadership will take IATA and the the struggle to make sustainable profits. other and with industry. A breakthrough industry to even greater heights. Many governments still see the industry occurred in 2010 under the leadership as a cash cow for taxation. Critical We are an industry of great people with of US Secretary of Homeland Security infrastructure investments, such as the an important mission to fulfill—connecting Napolitano. IATA agreed on five priorities decades-delayed Single European Sky the world. The future is ours to build. to improve security that must now be and NextGen, have not been delivered. effectively implemented. One of the items And crises and shocks continue. is a Checkpoint of the Future that will combine intelligence and technology How can airlines escape the cycle of to screen passengers without them pathetic profitability? At the last annual stopping, stripping, or unpacking. general meeting, I laid out a vision for the Giovanni Bisignani industry in 2050 and invited a group of Director General & CEO 35 strategic thinkers to challenge it. 10

State of the Industry Airlines are emerging leaner and more competitive from a decade of crises and shocks. Yet challenges—from natural disasters and political instability to rising oil prices and increasing taxation—continue to test the industry’s resilience.

Passenger markets Air travel markets recovered in 2010. Middle Eastern airlines experienced By cabin class there was more Worldwide air travel, measured by the the largest growth, with a 17.7% convergence in international markets in number of passenger kilometers flown, expansion in revenue passenger 2010 than during 2009, when premium rose 7.5% following a 1.9% decline kilometers (RPKs) flown. They were seat sales shrank by a quarter. Growth in 2009. International air travel grew followed by African airlines, which more throughout the year in the economy and 8.3% after a 2.5% fall the year before, than offset their RPK decline of 2009 premium classes was at an annualized while domestic air travel was up 6.1% with a 12.2% increase in 2010. Asia- rate of around 7%. Premium seat sales following a 0.9% decline. By the end of Pacific airlines grew 9% in RPKs but were 9.1% higher than the previous year, 2010, most markets except, notably, the were held down somewhat by the relative whereas economy seats were up a lesser US and Japanese domestic markets had weakness of the Japanese market. 5.9% because of their earlier recovery exceeded their prerecession peaks. And Latin American airlines also benefited profile in 2009. the expansion was ongoing in the early from regional economic growth, with The number of passengers traveling part of 2011. an 13.2% RPK expansion. economy class is above prerecession Large geographical differences Less successful were European peaks. Conversely, the size of the in the pace of recovery remained, airlines, whose more mature and premium international air travel market reflecting mostly the multispeed nature sluggish markets held growth in RPKs is still 10% below its prerecession peak of economic recovery. The strongest to 5%. North American airlines saw a owing to the extent of that market’s expansion in air travel was seen in the 7.4% rise in RPKs. But even the weaker collapse during the recession that developing economies and among regions saw their prerecession levels of began in 2008. airlines based in those markets. international passenger traffic restored by the end of 2010. Growth in domestic markets varied greatly in 2010 because of structural changes as well as economic cycles. The developed US and Japanese markets, having reached maturity and suffering from weak economic cycles, barely grew. The Japanese market, in fact, shrank 1.4%. By contrast, the rapidly emerging markets of Brazil, India, and China (the world’s second-largest domestic market, with an additional 181 million passengers expected by 2014) saw continued expansion of 19.3%, 20.2%, and 14.6%, respectively.

Demand improved in 2010 Regional variations remain Premium traffic has yet to fully but shows signs of declining an important part of the story recover from the recession

Source: IATA Source: IATA Sources: IATA, CPB Netherlands 11

Cargo markets In 2010, air freight fully recovered its Regional differences throughout As a result, the average growth losses of 2009. International air freight 2010 were less marked for the freight for traffic in 2010 was boosted by markets expanded 20.8% during the year segment than for the passenger a high starting point, compared with as measured in freight kilometers flown. segment. Directional imbalances on a low starting point for capacity. The By the end of 2010, air freight volumes trade lanes from Asian manufacturing result of this profile was that growth in were level with their prerecession peak centers remained. But in terms of the international markets measured from of early 2008. But earlier in the year, air air freight carried by airlines, all but December 2009 to December 2010 freight markets had been 8% higher the European region benefited from show capacity growth of 6.4%, somewhat than that peak. rates of growth in excess of 20%. higher than the 5.2% expansion in Weak European domestic markets traffic. The average passenger load Air freight’s profile of rapid postrecession held European airlines to an expansion factor fell throughout the year as a result, growth to reach a peak in mid-2010 was of 10.8% in the freight they carried, albeit to a level that, by December, was driven by the business inventory cycle. though the weakness of the euro still above pre-recession levels. Air freight was the transport mode of caused outbound freight to pick choice when firms needed to restock at More than 1,200 new jets and up toward the end of the year. the start of the economic recovery. But turboprops were delivered in 2010, 3% when inventory-to-sales ratios regained down on the previous year’s total but equilibrium by the middle of 2010, Capacity still a 5% gross addition to the global shippers no longer needed the time commercial fleet. A significant proportion Capacity returned to air passenger advantage provided by air freight, and of these new aircraft were replacements. and freight markets during 2010, and at sea transport began to regain market There was also a sharp increase in the a slightly faster pace than traffic carried. share. utilization of the existing fleet during By year’s end, load factors had started 2010. The freighter fleet, for example, Air freight, therefore, lost ground through to decline, albeit slowly, from their record saw a 20% rise in average daily hours the rest of the year. There were signs highs earlier in the year. flown. For a capital-intensive industry like in early 2011, however, that expanding This pattern is not apparent from air transport, this improvement in asset consumer demand and business capital the average growth rates for the year. utilization was a critical element driving spending were causing air freight Available seat kilometers rose 4.2% on the improvement in cash flows and volumes to grow once more. average in 2010, compared with the profitability seen in 2010. 7.5% growth in traffic. In international Just under 1,400 new aircraft are markets, capacity rose 4.6%, compared scheduled for delivery in 2011. With with growth of 8.3% in traffic. However, traffic volumes slowing, maintaining the the recovery in traffic was very strong utilization of seats and aircraft will be during the second half of 2009, whereas more of a challenge in the year ahead. capacity remained unchanged during that period.

After careful management in recent Load factors are declining Air freight is being driven years, capacity is on the increase from record highs by the inventory cycle

Source: IATA Source: IATA Sources: IATA, US Census Bureau 12

Yields Revenues Airline yields also rose during 2010 Regional differences largely reflected Global airline revenues grew an but did not recover the ground lost varying developments in capacity relative estimated 15% in 2010, to $554 billion. during the 2008–2009 recession. to demand. US airlines, having taken the This represented a strong rise from the Competitive pressures remained strong, most substantial steps among airlines recession-depressed levels of 2009 but but high load factors, particularly in the globally to cut capacity after the 2008 was not yet a recovery to 2008 levels. early part of 2010, reflected tighter-than- fuel price spike, were able to boost Cargo revenues did recover to 2008 usual supply-demand conditions. Airlines, their international yields 14% in 2010. levels in 2010, rising more than one-third therefore, were able to recover some of Yield improvements amid looser supply- over the 2009 figure, to $66 billion, but the ground lost in fares and cargo rates. demand conditions elsewhere were passenger revenues lagged when yields Airlines also were able to recoup some smaller. failed to recover to prerecession levels. of their added costs from the rise in jet In cargo markets, fuel surcharges rose as Network airlines with significant fuel through fuel surcharges. But the airlines sought to recoup rising fuel costs. long-haul services were hard hit worldwide rise in average passenger Underlying cargo rates, however, declined during 2009 because of the larger fares, excluding surcharges, was only 5% in many markets. Notably, the previously proportion of their revenues made up by in 2010, compared with a much greater strong Asia-to-Europe trade lane saw premium passengers and cargo. Strong decline of just under 13% in 2009. In a 10% fall in cargo rates, excluding improvement in those markets in 2010 international markets, a similar profile surcharges, at year-end from a peak brought a sharp rise in the revenues of left the level of fares up 17% from the reached earlier in the year as increasing this segment of the industry. lows of mid-2009 but some 8% below capacity intensified competition. Higher prerecession levels. Cargo revenues were back to surcharges during 2010 were in part prerecession levels at year-end 2010. offset by a decline in underlying freight And premium passenger revenues rates. rose more than 30% above their 2009 low point. The increase in premium passenger revenues in particular contributed significantly to the rise in the profitability of long-haul network airlines. But revenues from premium passengers in international markets were still only three-quarters of their prerecession levels by the end of 2010. Although premium passenger revenues continue to grow in early 2011, there is a lot further to go before this important revenue segment can be said to have recovered.

Cargo rates have been affected Fares are decreasing in line Revenues are recovering by capacity increases with dampening demand but remain vulnerable to shocks

Source: IATA Source: IATA Source: IATA 13

Fuel costs Cash flow The cost of fuel is once more The early March 2011 surge in the The airline industry’s cash flow threatening the economics of air price of jet kerosene, to $130 barrel, turned up sharply in the second and transport. Underlying the most recent brings the price of fuel back into the third quarters of 2010, driven largely rise in fuel prices has been a supply realm of the average 2008 price of by improved aircraft utilization. By the shock driven by political unrest in the $127 a barrel, when fuel costs rose second half of the year, cash flow— Middle East and North Africa. During to account for 33% of the industry’s measured by earnings before interest, 2010, it was increasing demand for operating expenses. At that time, the taxes, depreciation, and amortization oil that pushed jet kerosene prices up recession’s onset prevented the industry (EBITDA) as a percentage of revenues— almost $20 a barrel, from $88 a barrel from recovering this surge in costs. In had recovered to or above prerecession at the start of the year to $107 a barrel 2010, however, many economies were levels in North America, Asia-Pacific, by year-end. Jet kerosene prices were strong relative to a year earlier, enabling and Europe. The data available on other driven by oil prices in 2010, rather than airlines to recoup much of the rise in fuel regions, though limited, suggests that by conditions in the refinery sector. costs by year-end. Economic growth this was a widespread experience. Indeed, the crack spread remained at a is expected to continue but, given the Asia-Pacific airlines stand out as having relatively low 15% throughout the year. extent of the recent rise in fuel prices, seen an earlier and larger improvement in On average, jet kerosene prices in 2010 it is far from clear whether airlines will be cash flows than airlines elsewhere. Their were just over $91 a barrel, an increase able to recover the higher cost of fuel. improvement in large part mirrored the of almost 30% over the 2009 average. upswing in the cargo market, which went Hedging and fuel-efficiency gains offered from a negative cash flow in mid-2009 the air transport industry some protection to a positive cash flow equivalent to over from rising fuel prices. Even so, the 16% of revenues in the second half of airline industry’s fuel bill in 2010 rose 2010. more than 11%, to $139 billion. Fuel US airlines’ cash flows had recovered represented 26% of the industry’s 2010 to the prerecession level of 10% of operating expenses. revenues by the end of 2010. European airlines’ performances lagged those of airlines elsewhere early in the year mostly because of the weakness of their domestic markets. By the end of the year, though, their cash flows too had recovered to 10% of revenues.

Fuel prices are rising sharply again and Cash flow is falling are closing in on the 2008 record high after a strong rebound

Source: Platts Sources: Bloomberg, Company reports 14

Profits Airline profitability in 2010 saw its The highest margins were achieved by The airline industries in Latin America largest improvement in more than 60 airlines in the Asia-Pacific region, which and the Middle East are smaller than years. The industry went from net posttax boasted EBIT of 11%. These airlines in other regions. In 2010, though, losses of $9.9 billion in 2009 to net were also responsible for generating, at Latin American airlines were almost as posttax profits of $18 billion in 2010. Its $10 billion, the largest net posttax profits. profitable, in margin terms, as airlines EBIT or operating profit margin improved Their large share of cargo markets and in North America, with EBIT margins more than 5 percentage points. the strength of the economic recovery of 5.2%. Net posttax profits of just in their region were vital in driving their under $1 billion were generated in Latin In previous cycles, the industry has outperformance of airlines elsewhere. America. Net posttax profits were $0.9 achieved higher levels of profitability. billion in the Middle East. African airlines For example, operating margins were The next most profitable airlines were managed a little better than breakeven in 5.4% to 5.6% at the peak of the mid- in North America, where net posttax 2010 but, with an EBIT margin of 1.6%, 1990s’ cycle, but, like the 2010 profit profits totaled $4.1 billion and EBIT remain the financially weakest carriers margin, these margins were insufficient margins averaged 4.7%. Large capacity in any region. to allow the industry to meet its cost adjustments made earlier by North of capital. American airlines played an important part in driving their performance. Airlines What is noteworthy here is the in Europe suffered the largest losses unprecedented scale of the improvement in 2009 and in 2010 were only slightly in the industry’s profitability. Revenue more successful financially. A profit was growth for the industry was boosted made by European airlines, but extremely by economic rebounds driven by weak domestic markets resulting from government stimulus policies. But the the sovereign debt crisis in a number of major difference in 2010 was the sharp European economies limited their EBIT improvement in asset utilization—in seat margins to an average 2.2% and their load factors and in the average hours net posttax profits to $1.9 billion. flown by the aircraft fleet. The high degree of operating leverage generated by these fixed costs meant that the dramatic rise in asset utilization lent a much larger than usual boost to profit from the revenue growth generated in the postrecession economic rebound.

Freight recovery is following Aviation returned the trade in world goods to profitability in 2010

Sources: IATA, CPB Netherlands Source: IATA 15

Cash and balance sheets Financial sustainability Stronger cash flows, profits, and capital Financial sustainability for the industry That said, some airlines did create value markets in 2010 allowed many airlines means not just generating profit but also for their investors in 2010, by generating to repair or improve their fragile balance paying investors a normal return. Such a return on capital in excess of its cost. sheets. In 2009, airlines turned to the a return is generally benchmarked as This group of airlines included long-haul capital markets to raise $32 billion the average cost of equity and debt (the network airlines, regional airlines, low- through issues of new debt and, to a WACC, or weighted average cost of cost carriers (LCCs), and other airline lesser extent, equity. This bolstered their capital). Debt spreads have narrowed, business models. It also included airlines cash balances but left balance sheets but the volatility of airline earnings from most regions of the world. These highly leveraged. In 2010, positive cash means that equity remains expensive. airlines, however, were the exception and flows and a modest $4 billion of new On average, the airline industry’s cost few in number. Despite the encouraging equity helped reduce debt and balance of capital ranges from 7% to 8%. The improvement in profitability in 2010, the sheet leverage. return on invested capital (ROIC) in the question remains whether the industry is airline industry was given a major boost financially sustainable in the long term. Improvements were especially notable by the profits airlines generated, rising to for airlines in Asia, where cash flows 4.5% in 2010. But that return was still were highest and where most of the new insufficient to pay investors what they equity was raised. Leverage for Asian could earn from investing that capital in airlines fell below 60%. European airlines’ an alternative industry with a similar risk leverage fell slightly, to just below 50%. profile. US airlines, meanwhile, showed significant progress, but from highly leveraged levels. Median US airline debt went from almost 100% of total capital to less than 90%. Airline balance sheets in the United States remain vulnerable to shocks. US airlines have few unencumbered assets against which to borrow. Liquid assets among airlines in the United States and elsewhere, though, are fairly healthy. Most airlines had cash balances at the end of 2010 averaging 20% of their annual revenues. After a decade of losses, any black number at the end of a balance sheet is a welcome change. But even 2010, a “good year”, has only generated a pathetic 3.2% margin. This is not sustainable. Giovanni Bisignani (Bogota, Colombia, March 2011) 16

Safety Safety is aviation’s number one priority. The Western-built jet hull loss rate hit a historic low in 2010 with one accident for every 1.6 million flights. IATA members—for whom IOSA is a requirement—continued to outperform the industry with one accident for every four million flights.

Six-Point Safety Program 2. Auditing In 2010, the accident rate for Western- In 2010, 2.4 billion people flew safely A robust auditing program is proven built jet aircraft was the lowest in aviation on 36.8 million flights, including 28.4 to raise safety levels. IATA has developed history. The global accident rate for 2010 million jet flights and 8.4 million turboprop the first global standard audit for airline was 0.61, as measured in hull losses flights. IATA’s aim is for a zero accident safety management and promotes per million flights. This is equal to one rate. It tackles safety issues under a the use of this global standard by accident for every 1.6 million flights comprehensive six-point safety program. governments to support safety oversight. and was an improvement over the 0.71 IATA Operational Safety Audit rate recorded in 2009. Compared with 1. Safety data the rate in 2001, the industry’s global management and analysis IOSA is an internationally recognized accident rate was down a dramatic 42%. audit program that is open to all airlines. IATA member airlines outperformed the Obtaining clear, comprehensive safety Since 2008, it has been mandatory for industry average with a Western-built data is vital to improving safety. IATA all IATA members. It aims to improve jet hull loss rate of 0.25 in 2010. That manages or contributes to several data safety and to make the industry more is equal to one accident for every four analysis programs. efficient by reducing the number of million flights. audits performed. Evidence over the Global Safety Information Center past decade reveals that IOSA- For the first time, there were no The Global Safety Information Center registered carriers have consistently fatalities in scheduled passenger (GSIC) collates and analyzes IATA safety outperformed non-IOSA carriers service in two major regions: North information from multiple databases in safety. America and Europe. North America and provides a controlled access web has had a zero fatality rate for three As of 1 May 2011, there are 359 portal to that information. The GSIC of the past four years, and Europe carriers on the IOSA registry. These was launched in the fourth quarter of achieved the commendable level of zero airlines are able to share information 2009. It provides IATA members with fatalities in 2010. There were, however, through the IOSA Audit Report, unprecedented access to aggregated, increases in accidents and fatalities eliminating the need for redundant de-identified safety information from worldwide over those recorded for 2009. audits. The heightened efficiency has IATA safety databases. More than 450 High accident rates in some regions— led to over $95 million in audit cost organizations contribute data to the specifically in Africa, the Commonwealth savings since the program launched GSIC’s active databases, which are of Independent States, and the Middle in 2003. the accident, operational incidents, IATA East and North Africa—show that more Operational Safety Audit (IOSA), IATA IOSA is certified under International progress is needed. Safety Audit for Ground Operations Standards Organization (ISO) In 2010, the main causes of accidents (ISAGO), Ground Damage/Incident, and 9001:2008 and thus offers quality were runway excursions and ground flight data analysis databases. IATA plans assurance that program requirements damage. Runway excursions were the major enhancements to the GSIC over and processes as well as airline needs most common, accounting for 21% of the next few years (http://gsic.iata.org). will be met. all accidents, compared with 26% in IOSA is constantly updated to Global Safety Information Exchange 2009. Ground damage accounted for reflect best practices. Principal recent 11% of all accidents in 2010, likewise IATA, along with ICAO, the European improvements to IOSA include the an improvement from 17% in 2009. Union, and the US Department of addition of ICAO-mandated Safety IATA continues to develop initiatives to Transportation, signed a Global Management Systems (SMS) provisions address these major areas of concern. Safety Information Exchange (GSIE) to the IOSA Standards Manual, an In the first quarter of 2011, IATA launched agreement on 28 September 2010. The increased auditor emphasis on verifying its Ground Damage/Incident Database. implementation of this groundbreaking the implementation of IOSA provisions, In May 2011, IATA will roll out a major international safety information sharing and the removal of fleet exclusion update to its Runway Excursion Risk program is progressing well, with an provisions for aircraft that can be Reduction Toolkit, which it is expanding initial organization and work plan in upgraded to meet IOSA requirements. to include airport operations and air place. The program is on track to meet Other improvements involve the navigation service providers (ANSPs). the Board of Governors’ industry priority implementation of an enhanced audit Also slated for later in 2011 is the of implementing the GSIE in 2011 while scope for the renewal audits of eligible release of the IATA Ground Operations delivering a program report with program airlines. development recommendations. Manual. Starting in 2011, a revised payment scheme will be implemented where all airlines will pay for their IOSA audits. 17

Regional safety rate (Industry Western-built jet hull losses per million sectors) Source: IATA GSIC

2001 2009 2010 Hull loss accidents 20 19 17 (Western-built)

Accidents 104 90 94 (all aircraft types) Fatal accidents 25 18 23 Total fatalities 749 685 786 Passenger numbers 1.64 billion 2.27 billion 2.42 billion 18

IATA Safety Audit for Ground Operations

ISAGO is a global audit program for The world’s first SMS assessment (SESAR) initiative and integrates IATA’s ground service providers (GSPs). It has standards for airlines are included in GSIC Safety Trends Evaluation Analysis the goals of improving safety by reducing the IOSA Standards Manual (ISM), thus Data Exchange System (STEADES) ground hazards, of reducing aircraft making SMS implementation compulsory analysis with Eurocontrol safety informa- ground damage and personnel injuries, for IATA members. The standards have tion. The first joint Eurocontrol-IATA safety and of eliminating redundant audits. been validated to be in full compliance bulletin was published at the begin- with ICAO standards. To assist airlines ning of 2011. IATA is also assisting the Since ISAGO’s launch in February with implementing an SMS, an SMS SESAR and the US NextGen organiza- 2008, more than 300 audits have Implementation Guide that will provide tions in developing air traffic manage- been conducted and over 70 GSPs SMS program examples is slated for ment safety metrics. have joined the ISAGO registry. ISAGO release in the second quarter of 2011. also has garnered support from 50 governments and airport authorities, A Fatigue Risk Management System 5. Operations and some civil aviation authorities have (FRMS) is an important component The updated IATA Runway Excursion made ISAGO a condition for obtaining of fully integrated SMS. Working Risk Reduction Toolkit will be distributed an operating license. In addition, the with ICAO, IATA took a leadership worldwide in May 2011 in collaboration number of GSP audits for airlines that position and drafted the first FRMS with ICAO and other major international participate in ISAGO can be reduced Implementation Guide for Operators. safety organizations. The enhanced between 8% and 28%. This new guide will be jointly released toolkit will support a new, multiyear, by IATA and ICAO in the third quarter The ISAGO audit pool has grown to comprehensive global runway safety of 2011 and will assist operators in encompass 48 member airlines and program. systematically implementing an FRMS 195 ISAGO-qualified auditors. IATA is to help manage crew fatigue. It contains The IATA Training and Qualification focused on inviting more member airlines guidance material for many types of Initiative (ITQI) remains focused on to join the pool and will complete the operations, including passenger and enhanced technical training for pilots IATA Ground Operations Manual (IGOM) cargo operations. IATA has also been and maintenance personnel using a by the end of 2011. IGOM will provide working closely with the US Federal competency-based approach. Work is the first ever set of harmonized aircraft Aviation Administration (FAA) and with progressing on the Evidence-Based ground-handling procedures, with the the European Aviation Safety Authority Training Manual, and on aircraft-specific aim of improving safety, consistency, (EASA) and the relevant regional guidance to establish a baseline for and efficiency for airlines and ground associations. Both regulators propose industry-wide training improvements. handlers. significant changes to basic flight and These documents will be presented to duty time regulations. ICAO for review by the Air Navigation 3. Safety Management Systems Commission in 2011. IATA’s strategy for maintenance Safety Management Systems (SMS) operations also retains a focus on further are a systematic approach to managing developing and applying operationally safety. They cover all operator activities, driven SMS. including areas such as organizational structures, accountabilities, policies, 4. Infrastructure safety and procedures. SMS are increasingly valuable for improving safety, for airlines Infrastructure safety is focused on and for other aviation business sectors. providing effective and safe communications, navigation, surveillance, and system-wide information in support of airline operations. In February 2010, IATA signed a five-year cooperation agreement with Eurocontrol. This agreement closely ties IATA to the development of the Single European Sky ATM Research 19

6. Maintenance The Multi-crew Pilot License (MPL), As with flight operations, the industry meanwhile, continues to gain popularity must prepare for greater demand for among countries and airlines. IATA is licensed personnel in its maintenance working diligently to assist the industry operations and strive to attract the in establishing metrics to evaluate the best and brightest candidates. IATA is, potential safety advantages of the MPL. therefore, fully supportive of ICAO’s Next At the same time, IATA is maintaining a Generation of Aviation Professionals focus on the benefits of a continuous- (NGAP) initiative, a multifaceted program loop safety system driven by an industry- of education, outreach, and training defined set of knowledge, skills, and for pilots and maintenance technicians attitudes that promote effective threat- that can be tailored to address regional error management. concerns. This forward-looking program will help to mitigate systemic deficiencies Airline maintenance and engineering and to prepare the industry for accelerated training regimes will undergo growth over the next several decades. improvement in the same way as pilot training. A competency-based approach will provide the framework for a broad range of industry safety enhancements.

Safety is a constant challenge. You can see the positive results of our commitment, but every fatality is a human tragedy that reminds us that we must do even better. Data-driven measures will ensure further improvements. We must make an already very safe industry even safer. Giovanni Bisignani (Tokyo, Japan, February 2011)

Historical safety rate (Western-built jet hull losses per million sectors)

*April 2009–All IATA members on IOSA registry

Source: IATA GSIC 20

Security Governments must harmonize security measures; take responsibility for security costs, which have risen to $7.4 billion annually; and develop a Checkpoint of the Future.

IATA has two objectives for security: In January 2010, following the The first is to make the system failed Christmas Day terrorist attack, convenient for passengers and more IATA convened a historic Global effective at finding terrorists. Each Security Summit at its Geneva office. security crisis has resulted in new In attendance were US Department of rules and added layers of process Homeland Security (DHS) Secretary and bureaucracy. An overall review of Janet Napolitano, International Civil developments is essential, along with a Aviation Organization (ICAO) Secretary focus on a radically different Checkpoint General Raymond Benjamin, and a of the Future. number of airline CEOs. Since regulatory activity initiated by the United States Second, airlines need help with the often drives the global security debate, cost of security. IATA estimates that IATA welcomes the positive approach airlines are spending $7.4 billion annually of the DHS. Closer collaboration on security—a 25% increase from its between industry and governments, previous estimate of $5.9 billion. The as well as between governments, will bulk of the increase is due to data further facilitate progress toward global collection and transmission, air marshals standards. and air security officer programs, capital expenditure, and security delays and At the summit, IATA put forward five diversions. These should not be airline recommendations to the DHS: costs. Aviation security is national >>Conduct formal continuous security, and that is a government consultation with industry responsibility. >>Align emergency orders with industry’s capabilities >>Eliminate inefficiencies in passenger data collection >>Ensure communications among governments to drive global harmonization >>Develop the Checkpoint of the Future

We must find alternatives to the one-size- fits-all model. We can expedite procedures for pre-identified low-risk travelers and for those who give us access to more personal history. A Checkpoint of the Future will be a dynamic system that will help us to cope with passenger volumes that will increase by 900 million to 3.3 billion by 2014. Giovanni Bisignani (Frankfurt, Germany, November 2010) 21 22

Industry consultation Passenger data Government coordination Security regulations are often written IATA continues to lead industry efforts An unprecedented willingness by ICAO without industry input and review, to ensure that governments’ requests and the DHS to coordinate in 2010 resulting in requirements that are not for passenger data are reasonable and led to the organization of high-level practical to implement or effective in the adhere to international standards and security conferences in all regions. operational environment. Collaboration practices. This includes requests for Likewise, a one-stop security between industry and regulators is vital Advance Passenger Information (API) agreement under Open Skies to developing measures that are effective and Passenger Name Records (PNR). between the European Union and the for all parties. A new IATA message standard United States, scheduled to take effect To address the need for collaboration, was approved for PNR that provides in July 2011, demonstrates a major IATA instigated the establishment of a US a standard format for transmitting step toward the mutual recognition of International Working Group on aviation reservation data to governments. measures. That agreement will affect security in 2010. The API standard was also updated to an estimated six million passengers ensure that all government requirements each year and will save the industry In addition, a declaration adopted at are met in a single, industry-recognized approximately $30 million per annum. the 37th ICAO Assembly in September format. 2010 urged increased cooperation In line with IATA objectives, a among nations and between nations and An agreement was reached in the resolution from the 37th ICAO the civil aviation industry. The declaration United States to establish a blue-ribbon Assembly promotes the development aims to heighten information exchange on commission of airline representatives of mutual recognition processes. To security measures to avoid redundancy, to liaise with the DHS Screening signal their willingness to heed the call where appropriate, and to ensure the Coordination Office on passenger data for closer cooperation, ICAO and IATA early detection and dissemination of issues. IATA service-level standards for have signed an agreement to facilitate information on security threats to civil customs and immigration were developed swift communications between states aviation. and presented to the DHS and ICAO. and regulators. In addition, IATA convinced seven nations Emergency directives to withdraw plans for uncoordinated API provision requirements, saving the industry Prescriptive, one-size-fits-all regulations in excess of $200 million. with numerical targets are not effective in securing a complex global industry operating across different government jurisdictions. Airlines in many countries do not have the legal ability to comply with emergency amendments because of conflicting requirements. Security regulations must give airlines the necessary flexibility to work with governments. In line with this goal, IATA was involved in two major achievements in 2010. Fourteen countries were removed from a US security blacklist, and alternative procedures were introduced to reduce or eliminate the 100% pat down of passengers.

Enhanced security lane Normal security lane Known traveler lane 23

Checkpoint of the Future Passenger numbers are increasing, In support of this statement, in late him and on the international community and security threats are constantly 2010 IATA developed a conceptual to bear in mind four principles when changing. There is, therefore, urgent framework for the Checkpoint of the developing air cargo security programs: need of a new concept in passenger Future and hosted with the Airports the need for a supply chain approach, screening that emphasizes enhanced Council International an ICAO workshop the imperative of deploying technology security while ensuring more efficient for interested countries. An ICAO to complement intelligence and the passenger throughput. Technical Advisory Group comprising supply chain approach, the attributes 19 governments is, as a result, working of e-freight, and the importance of Today’s checkpoints were designed with airlines and airports on refining the targeting risk measures. 40 years ago to stop hijackers carrying checkpoint’s principles and designing metal. To improve efficiency and make and testing its concept. checkpoints more effective, we must Cost savings end the one-size-fits-all approach In 2010, surveys of security checkpoints Cost savings rank high among IATA’s that challenges every traveler to prove were also conducted with three major many security achievements in 2010. themselves innocent. The solution international airports to identify best is a Checkpoint of the Future that practices and opportunities for In the United States, IATA worked combines technology and security improvement. extensively with the Electronic System intelligence. IATA’s vision is to have for Travel Authorization (ESTA) team passengers walk—without stopping, Cargo security to resolve issues relating to improper stripping, or unpacking—through tunnels data input. In a parallel effort, IATA was of technology appropriate to each Cargo security rose to the top of successful in getting the DHS to lower person’s risk level as identified the agenda in October 2010 following the fee it imposes on ESTA travelers, through background screening. a thwarted plot to send bombs to the from $20 to $14. United States from Yemen. These Committee members at the 37th ICAO In the European Union, IATA’s lobbying were discovered on two separate Assembly in 2010 stated that industry efforts helped to remove an obligation to cargo planes in Dubai and the United and government roles in aviation systematically off-load unaccompanied Kingdom. Consequently, IATA met with security should be aligned and that a baggage. That is estimated to have US Transportation Security Administration Checkpoint of the Future should be saved the industry $72 million a year. Administrator John Pistole. IATA called on developed. 24

Regulatory and Public Policy Governments underappreciate, overtax, and misregulate aviation. This destroys the industry’s competitiveness and compromises aviation’s ability to drive economic growth.

Industry taxation Consumer issues In 2010, despite IATA’s best efforts, IATA believes such taxes are International carriers continue to passenger taxes increased $3.6 billion. counterproductive. It accepts many be confronted with unnecessary and This included the disappointing increases governments need to finance their counterproductive regulations drafted in the UK Air Passenger Duty and in the deficits, but targeting aviation as a in the name of consumer protection. Canadian Air Travellers’ Safety Charge. revenue source is a mistake, as aviation In the United States, the Department Additionally, the German government is a proven driver of economic growth of Transportation (DOT) issued a Final introduced a new air transportation and thus tax revenue over the medium Rule on Enhancing Airline Passenger tax of $1.5 billion annually starting 1 to long term. Protections, expanding existing January 2011. Austria quickly followed To further explain this argument, in 2011 passenger rights regulations on the German initiative and introduced IATA is facilitating a Benefits of Aviation US and foreign air carriers. a similar air travel levy starting 1 April campaign, to detail aviation’s economic 2011. IATA regrets this decision by DOT to contribution on a country-by-country intervene into airline business practices, There were some positive developments basis. The campaign will demonstrate which is inconsistent with the Airline during the year. IATA achieved a record factually and clearly to governments the Deregulation Act of 1978. There is $2.4 billion in taxation savings for the positive impact aviation has on economic great concern that the extraterritorial industry. The People’s Republic of China growth. As part of this effort, IATA has application of this regulation will removed a domestic business tax that commissioned 54 studies by Oxford undermine the efficiency of the required Chinese carriers to pay 3% on Economics on the value that commercial international aviation system. The rule revenue from international flights. India aviation brings to particular nations or puts the burden for delays on carriers, capped the Indian Service Tax, resulting regions. when the majority of delays are outside in a net savings of $152 million. In the of airline control. United States, the announced increase Airport privatization of the Animal and Plant Health Inspection DOT would better serve the customer Service user fees was withdrawn, bringing Another result of government deficit- by focusing on delivering on NextGen a cost avoidance of $45 million. Grenada reduction strategies is that a number targets, which will significantly reduce replaced its government ticket tax of state-owned airports are being delays. Meanwhile, IATA and the industry with a value-added tax from which air considered for privatization. Experience are exploring their legal options to transportation is exempt. More recently, shows that there is a wide variety of challenge this re-regulation of the the Irish government confirmed in its privatization models, with varying degrees airline industry. December budget announcement a of success. IATA has published some In Europe, IATA and three UK airlines reduction of the country’s air travel recommendations for airport privatization, are pursuing a legal challenge to a 2009 tax. That tax is likely to be abolished including the following: European Court of Justice ruling that altogether by the newly installed Irish >>A strong focus should be placed deals with the European Commission’s government. on the more efficient management passenger rights regulation (EC In addition to its campaigns against of airport assets Regulation 261/2004). That ruling national taxes, IATA is proactively effectively means that passengers who >>Independent and robust economic opposing broader taxation initiatives. reach their destinations three hours or regulation is vital These include solidarity taxes, the least more after their originally scheduled developed country (LDC) adaptation >>Mechanisms to incentivize cost arrival time should be compensated levy, environmental and carbon taxes, efficiency must be built in as if the flight had been canceled. tourism taxes, and many others that Oral hearings on this challenge are >>Customer involvement in new single out and penalize the aviation anticipated in late 2011, with a infrastructure planning is essential industry. decision in 2012. The European Commission has also regulated passenger rights for other transport modes and has launched a study on the protection of passengers in case of airline bankruptcy. It also intends to revise the directive on the protection of passenger data. IATA will follow these activities closely to protect the interests of member airlines and ensure the results are consistent with airline business practices to the fullest extent possible. 25

When things go wrong, being a hyper- competitive industry provides every incentive to treat the passenger well. Fines—no matter how large—will not melt snow, stop thunderstorms, free up airport gates, build new infrastructure, or deliver more customs personnel. Giovanni Bisignani (New York, United States, March 2011) 26

Slots Legal issues IATA’s Worldwide Scheduling The European Commission (EC), There is a growing concern within Guidelines (WSG) are the global meanwhile, continues to pursue an the industry over the consequences standard for the management of slots impact assessment on slot allocation of the current trend toward the opening at congested airports. IATA continues to 95/93. This opens up the possibility of criminal prosecutions following an urge governments to accept the WSG’s of either the EC or the European aircraft accident. The industry does not four cornerstones of global scheduling to Parliament seeking to impose new seek unreasonable or unique protection, maintain and promote global connectivity and potentially dangerous concepts but it is crucial that any criminal and ensure continuity and predictability on the system, including requiring the investigation does not hinder the free of service for the customer: different treatment of incumbents and flow of safety information that is used new entrants. The assessment report to enhance aviation safety generally. >>Certainty of access. Enables next- is expected in September 2011. season scheduling and advance The judgment of the French court reservations In the United States, the Federal in criminal proceedings arising out of Aviation Administration (FAA) has the Air France Concorde accident in >>Flexibility of operation. Allows carriers been considering how best to manage July 2000 illustrates the point. In this to adjust timing and equipment to congestion at New York–area airports. case, Continental Airlines and one of its meet customer needs and challenges Slots at those congested airports have mechanics were convicted of involuntary resulting from unforeseen events, such been managed in a fashion consistent manslaughter over 10 years after the as weather with the WSG since 2008. However, accident. Airline employees are likely >>Sustainability of costs. Provides the existing New York rules, already to be advised by their legal counsel to airlines with the certainty needed to extended from 2011, are due to lapse cooperate in accident investigations to make long-term capital investments in October 2013. IATA is engaging with the minimum extent possible, or not at and to implement operational plans the FAA to advise against introducing all, to avoid any future criminal liability and training programs new concepts that are not consistent many years down the line. with the WSG and that undermine >>Transparency of management. Opens The industry has been attempting to the globally harmonized system. slot databases to all stakeholders address the issue for quite some time. to allow for a fair and coordinated The work of the Eurocontrol Just Culture distribution of limited assets. Task Force has been a major driver in the process. And, at the 37th ICAO IATA recognizes that countries have the right to modify the guidelines to meet their particular needs, and several countries have challenged the principles and provisions of the WSG. For example, IATA is working with the authorities in China to adapt WSG policies and procedures and to release more airspace from military control to allow greater growth in the commercial aviation sector. 27

Assembly, IATA urged nations The seven-day shutdown cost Some improvements have been to ensure that their investigation airlines $1.8 billion in lost revenue and made in the 12 months since the authorities protected safety information a further $296 million in passenger eruption. There have been structural from premature and inappropriate compensation. changes put in place to better manage disclosure to criminal authorities. and communicate a crisis—principally The response to the eruption revealed the creation of the EUROCONTROL In addition, ICAO has established flaws in the regulatory approach, a lack European Aviation Crisis Coordination a Safety Information Protection Task of coordination between aviation sectors, Cell. But it remains the case that Force to be made up of government a cumbersome political process, and individual countries make decisions and industry representatives. The uncertainty in technical knowledge. relevant only on a national basis. aim of the task force is to provide IATA proposed four changes: recommendations for enhanced Initial moves to accelerate the roll out >>Leaving the decision on whether provisions and materials related to of the Single European Sky have faded. operations should continue in the protection of safety materials. If a volcano were to erupt again, a potentially contaminated airspace patchwork of airspace closure options to airlines Eyjafjallajökull volcano eruption could still prevail. Airlines need a >>Enhancing information on volcanic ash process that provides good, reliable On 14 April 2010, the Eyjafjallajökull modeling through the application of information and by which safety risk volcano in Iceland erupted. Acting the processes and procedures that are assessments can be conducted prior on a forecast model, the Volcanic being developed by the International to flight. Ash Advisory Centre in London Volcanic Ash Task Force (IVATF) The event demonstrated a need for recommended that most of the airspace >>Accelerating the implementation enhanced global guidance. At IATA’s in northwestern Europe be closed. This of the Single European Sky request, ICAO rapidly set up the IVATF, resulted in the cancellation of 100,000 which has been working effectively flights and transport chaos as planes, >>Continuing IATA’s assistance in to address this issue. crews, and some 10 million passengers implementing and testing Europe’s were stranded. Political and regulatory Crisis Contingency Center confusion followed as politicians failed to grasp the seriousness of the situation and the fragmented European airspace system acted on a national basis without effective coordination. 28

Environment

The aviation value chain is committed to cut net CO2 emissions in half by 2050 compared with 2005. Governments must support solutions to achieve this target—driving the development of sustainable biofuels and delivering a global framework for economic measures.

The past 12 months have seen continued IATA is focused on delivering the three Government representatives at the progress by the aviation industry toward sequential goals adopted by the IATA Assembly, inspired by the industry’s its vision for a sustainable future. Global Board of Governors in June 2009: three sequential goals, called for aviation

emissions of CO2 from aviation rose to improve its fuel efficiency 2% a year 4.5%, to 660 million metric tons in 2010, 1. Improve fuel efficiency an average of to 2020 and to cap carbon emissions from 628 million metric tons in 2009. 1.5% annually to 2020 with carbon-neutral growth from 2020. Overall passenger growth, however, was 2. Cap net carbon emissions with The closeness of these targets to the up 7.3%, showing that aviation has been carbon-neutral growth from 2020 industry’s goals indicates how realistic successful in decoupling traffic growth IATA’s targets are. The 2% target will from emissions. Despite the troubling 3. Achieve a 50% reduction in net CO2 be difficult to attain, but IATA believes global economic conditions of the past emissions by 2050 compared with that increased government investment in two years, airlines continued to invest 2005 better air traffic management will make in new equipment and better operating realization possible. The Assembly also techniques to reduce fuel burn and IATA continues to work through ICAO agreed on 15 principles for the design carbon emissions. to achieve policy consensus in line with and implementation of market-based its stated position that the global problem measures that reinforce the need for of climate change requires a global avoiding carbon leakage and market solution. In September 2010, ICAO’s distortion. 37th Assembly established the first-ever The success of the Assembly put global policy framework for emissions aviation in the strongest possible position reductions in an industrial sector. going into the United Nations Framework Convention on Climate Change (UNFCCC) COP (Conference of Parties) 16 discussions in Cancun in December 2010. In the words of the Secretary General of ICAO, Raymond Benjamin, aviation “had done its homework.” That the industry had established a global

target for CO2 reductions was in contrast 29

3. Infrastructure to other industry sectors and reinforced Certification for a 50-50 blend of IATA works with industry partners to aviation’s proactive reputation. Without biofuel with Jet A-1 is expected in 2011. shorten air routes and lessen emissions. the ICAO global policy resolution, the With the technical hurdles substantially Two good examples of this work are industry’s lobbying effort in Cancun overcome, commercialization and the the IATA iFlex and Performance-Based may well have been more difficult. The scale-up of aviation biofuels production Navigation (PBN) projects. resolution, moreover, cemented ICAO’s are a priority for the industry. For this, The IATA iFlex project brings together position as the UN agency to deal with the support of governments is essential. industry stakeholders to identify and aviation emissions. Establishing the correct sustainability introduce more flexible routing options credentials is vital to retain confidence on long-haul flights through low-density The four-pillar strategy in biofuels as an environmentally friendly airspace. The project involves IATA, fuel. As a member of the Roundtable on ICAO, the Civil Air Navigation Services 1. Technology Sustainable Biofuels, IATA is working Organization (CANSO), and air traffic to establish agreed-upon biofuel control experts from the countries Each new generation of aircraft is sustainability criteria. involved, who work closely with the 20% to 30% more fuel efficient than airlines to agree on and implement its predecessor. Clearly, bringing new 2. Operations changes. technology into the fleet is essential if iFlex began in late 2010, and pilot aviation is to reach its carbon goals. IATA continues to help its member projects are planned in 2011. Emirates airlines realize fuel savings and additional will be involved in the work on the In 2010, IATA worked on the TERESA cost reductions through improvements Dubai–São Paulo route, while Delta Air (Technology Roadmap for Environmentally in operations. Fuel savings in operations Lines will concentrate on the Atlanta– Sustainable Aviation) project with the were achieved through intensified Green Johannesburg service. Data suggests German Aerospace Centre DLR and Team support. IATA Green Teams that airlines operating a 10-hour the Georgia Institute of Technology. supported 152 IATA member airlines intercontinental flight can reduce fuel That project is evaluating fuel-efficiency through various initiatives, such as burn up to 2% and save 3,000 improvements for aircraft generations regional workshops, remote support, fuel- kilograms of CO . through 2020. It is estimated that future efficiency training, Fuel-Efficiency Gap 2 aircraft could save from 25% to 35% Analysis (FEGA), and implementation New PBN implementations avoided of fuel compared with state-of-the-art of fuel saving initiatives. In 2010, airlines nearly 678,000 metric tons of CO 2 2005 aircraft. realized total savings of $828 million in 2010. Airlines saved $152 million as through their implementation of Green a result. PBN implementation at São Alternative fuels Team initiatives. Paolo Airport in Brazil alone resulted in With the possibility of offering up to 79,000 metric tons of CO savings The goal is to have all IATA members 2 an 80% reduction in emissions over the ($17 million saved). PBN also enhances complete the FEGA and the IATA Fuel complete carbon lifecycle, biofuels are the safety, efficiency, and accessibility Book supports recommendations in a key part of aviation’s future. In 2010, of airports. fuel management efficiency. Since United Airlines and TAM added their 2005, IATA has conducted 108 on-site IATA’s support for new navigation biofuel test flights to those conducted by visits, and operational savings in 2010 techniques included the development other airlines in 2008 and 2009. United amounted to 3.42 million metric tons of the first ICAO guidance material on Airlines evaluated a 40% Fischer-Tropsch of CO Improvements included flight civil and military cooperation. The aim blend using a twin-engine plane. TAM 2. management enhancement, flight is to optimize airspace use and the tested a 50% jatropha blend. planning optimization, auxiliary power implementation of airspace changes to unit usage, maintenance, and aircraft allow more flexible routings for airlines. weight management. Meanwhile, an important EU-US memorandum of understanding was signed in June 2010. It will further the political resolve to ensure that SESAR and NextGen are harmonized, interoperable air traffic systems. 30

4. Economic measures Carbon Offset Program IATA remains focused on ensuring IATA will continue to lobby for a formal By the first quarter of 2011, some that inefficient taxes are not levied on global framework for economic measures 30 IATA airlines had independently aviation by governments, especially through ICAO. In December 2011, established carbon offset schemes. The for environmental purposes. Following UNFCCC COP 17 will take place in IATA Carbon Offset Program, meanwhile, the comparative disappointment of Durban, South Africa. It is hoped that has made significant progress during the UNFCCC COP 15 meeting in similar cooperation between industry the last six months. Seven airlines are Copenhagen, COP 16 in Cancun in partners will continue our strong operating the program, and 17 others December 2010 was conducted in united front at COP 17. have signed up. In addition, a growing a more measured atmosphere. Once number of airlines are embedding the again, IATA was present, together with European Union Emissions offset mechanism on their websites. a number of industry partners, ensuring Recently, IATA commenced Phase II of that aviation’s priorities were reflected Trading Scheme the IATA Carbon Offset Program. The in the discussions. ICAO progress on a framework for aim is to offer the offset methodology COP 16 did not formalize a global treaty, positive economic measures is all the and a bespoke web tool to corporate but references to aviation ticket taxes more urgent given the inclusion in 2012 customers by means of a dedicated were not retained in any of the support of aviation into the European Union travel agent network. In this way, small, papers. Moreover, there was evidence Emissions Trading Scheme (EU ETS). medium-sized, and large companies will that many country representatives had The EU ETS, which is being challenged gain a tool to neutralize their business absorbed the key aviation emissions in the European Court of Justice by a travel carbon footprint. targets and were interested in the number of US airlines, will be unfair The IATA Carbon Offset Program progress toward them. This is a major and costly and will do little to reduce calculates carbon emissions based on advance on previous years. IATA and emissions. a methodology developed by ICAO and the Air Transport Action Group (ATAG) Interest in emissions trading schemes enhanced with actual airline data. The were nevertheless active in promoting has waned around the globe, including program uses high-quality carbon offset the industry’s 50% emissions reduction in Australia and the United States. credits linked to renewable projects in target, including with billboard posters Yet the European Union is intent on developing countries and issued under and advertising at Cancun Airport and expanding its ETS. IATA is strongly the Clean Development Mechanism the placement of over 100,000 seat- against the regional and unilateral nature (CDM) and the Kyoto Protocol. It also is back flyers on flights to Cancun and of the EU ETS. It is supporting, through accredited under the UK government’s to Mexico City. amicus brief, an action brought by Quality Assurance Scheme for Carbon three US carriers and the Air Transport Offsetting. Association of America against the extraterritorial scope of the ETS. At the same time, IATA is providing technical support for member airlines faced with complex and confusing EU ETS monitoring, reporting, and verification requirements. 31

Environmental communications

IATA is committed to communicating Emissions reduction roadmap aviation’s role in the environmental debate. As such, it supports the ATAG www.enviro.aero website and its successful campaign to educate policy makers and the public of aviation’s environmental role, environmental targets, and ongoing efforts to reduce emissions. The website has been viewed by well over two million people since its inception and is a resource used by journalists and other researchers seeking to understand aviation’s impressive environmental record. In addition, the IATA environmental stand project is scheduled to conclude in mid- 2011, after visiting 16 airports in Europe, Asia, and the Middle East.

Our commitment to cut emissions in half by 2050 compared with 2005 is the global benchmark. The entire aviation industry is committed to working together under the leadership of ICAO to achieve this. Giovanni Bisignani (Montreal, Canada, December 2010) 32

Simplifying the Business Simplifying the Business is making air transport more convenient for passengers and reducing costs for airlines. It has achieved all targets to date and will continue to deliver measurable success.

Since 2004, IATA’s Simplifying the >>E-freight replaces paper documents >>Automated Carrier Baggage Business (StB) program has delivered with electronic messages, resulting in Rules (ACBR) enable airlines to industry change in the form of lower a more efficient, reliable, and secure electronically file their own baggage costs and improved service. To date, the supply chain. Potential annual savings: allowance policies and charges to a program has completed three initiatives: $4.9 billion centralized database developed by e-ticketing, common-use self-service the Airline Tariff Publishing Company >>IATA e-services replaces paper kiosks, and bar-coded boarding passes (ATPCO). This will allow travel agents, miscellaneous documents with a (BCBP). BCBP was the most recent to check-in agents, and interline partners standard electronic version, simplifying be completed, in December 2010, and to correctly assess carrier baggage back-office processes and providing delivers a $1.5 billion annual cost saving policies and deliver consistent more distribution channels for ancillary to the industry. information to passengers. Potential services. Potential annual savings: annual savings: $800 million Five further initiatives have the potential $2.9 billion to save the industry another $12.6 billion >>The Baggage Improvement >>Fast Travel provides passengers with a year. Program (BIP) aims to cut baggage more choice, convenience, and control mishandling in half by the end of 2012 through a range of self-service options. through a mix of diagnostic visits and Potential annual savings: $2.1 billion a self-help program. Potential annual savings: $1.9 billion

StB potential annual savings ($ billion)

TOTAL $12.6 billion 33

Simplifying the Business Current Status Initiative 1 May End 2011 target

Diagnosis performed 49 60 BIP Self-help airports delivered 32 70 EMD-capable GDSs 1 6 IATA e-services EMD-capable airlines 14 40 Fast Travel Airports with full Fast Travel suite 0 5 E-freight Penetration in live trade lanes 4.33% 10%

We know e-freight works. The network is there, the cost savings are being realized, and expectations have been set with aggressive targets. Now it is up to all of us to meet the targets—10% on capable trade lanes by the end of 2011 and 100% by 2015. Giovanni Bisignani (Istanbul, Turkey, March 2011) 34

E-freight IATA e-services Each international air freight item can IATA’s e-travel vision is a three-step IATA’s electronic miscellaneous require more than 30 different paper process for removing the need for document (EMD) standard ensures a documents, increasing the cost of air passengers to have paper documents paperless environment. The e-services freight and lengthening transport times. for any part of their journey. Step one, project is mobilizing the industry to E-freight is an industry-wide initiative e-ticketing, was completed in 2008. adopt IATA’s global EMD standard. involving airlines, freight forwarders, Step two, BCBP, through which IATA has What does that mean for the ground handlers, shippers, and customs enabled the mobile phone boarding pass, passenger? By creating a paperless authorities. It replaces paper documents was completed in 2010. Step three is environment, EMD enables passengers with electronic messages, increasing the IATA’s e-services project. to book a whole range of optional speed and the reliability of air freight. The mobile BCBP removed the need to services, from fast-track security to a In the first phase of the e-freight project, print out boarding passes. Passengers limousine ride home, across multiple which lasted through the end of 2010, equipped with a mobile phone can gain airlines and journeys. Previously the emphasis was on building the access to flights using a scannable bar passengers could only book ancillary e-freight network. By the end of the code that appears on their phone screen. services directly with the airline year, 44 locations were e-freight live, But a range of other paper documents, concerned. representing over 80% of air cargo such as excess baggage tickets and tour The IATA EMD standard means that volumes. orders, stand in the way of an entirely airlines and travel agents can sell these smooth and seamless experience for The focus now is to build volumes services quickly and easily and that passengers. And proprietary airline on that network. By the end of 2011, airlines benefit from lower costs due electronic versions of these documents e-freight is anticipated to represent 10% to simplified revenue accounting and don’t provide the flexibility interline of all air cargo on capable trade lanes, a back-office processing. They will also passengers need. step toward the 100% e-freight vision on be able to track and attribute revenues capable trade lanes by 2015. faster. The relevance of e-freight has grown By the end of 2010, 12 airlines in the wake of the October 2010 were issuing EMDs. The IATA Board cargo security incident. IATA is calling has set a target of 40 airlines by the on governments to expand the use end of 2011, 100% industry capability of e-freight from inbound shipments to process EMDs by the end of 2012, to outbound as well and to use the and 100% usage of EMDs in IATA electronic data to intelligently manage distribution systems by the end of freight security. 2013. 35

Automated Carrier Baggage Improvement Fast Travel Baggage Rules Program Fast Travel is made up of five projects: More and more airlines are defining BIP provides the industry with free- their own baggage allowances and of-charge solutions that address all >>Bags ready to go enables passengers charges. This adds complexity for travel causes of baggage mishandling. to deliver their bags tagged and ready agents, check-in agents, and interline Once implemented, BIP will reduce for acceptance by a check-in agent, partners, who are unable to correctly mishandling 50% by the end of 2012. speeding the check-in process assess carrier baggage policies. The program focuses on 200 airports >>Document check allows passengers The existing simplified standard responsible for 85% of passenger to scan travel documents at kiosks approach to defining baggage claims. Eighty of the top airports will for transmission and validation by allowances and related charges expired receive diagnosis visits from the BIP government authorities on 31 March 2011. A new standard, team and will benefit from customized >>Flight rebooking allows passengers Resolution 302, has been defined and solutions. The remaining 120 airports to obtain a new boarding pass for came into effect on 1 April 2011, but its will be part of the self-help program, canceled or delayed flights at a self- adoption was too complex to be handled which enables airports and airlines using service channel correctly by a manual process. the BIP toolkit to reduce mishandling, lower costs, provide better service, and >>Self-boarding provides automated The solution is a centralized baggage benchmark performance against the boarding gates for passengers, as in rules database developed by the industry. a train or subway station, reducing ATPCO, which allows airlines to file boarding lines their own baggage allowance and charges electronically. To be successful, >>Bag recovery allows passengers to the ATPCO solution needs to be report a missing bag at a kiosk instead embedded within reservations, pricing, of waiting in line at a baggage service and ticketing systems as well as counter departure control systems. In June 2010, the IATA Board created By the end of 2010, there were the ACBR project. It is designed to 120 implementations of these projects, mobilize the industry to submit its illustrating the industry appetite for baggage rules to a single database. self-service. The focus for 2011 will The six major GDSs are expected to link be bridging the projects to establish to the database by June 2011, allowing a smooth, end-to-end passenger airlines and travel agents to automatically experience. apply correct baggage allowances for The IATA Board of Governors has interline journeys. set a target for five major airports to implement all five projects in 2011 to provide passengers a complete Fast Travel journey. An end-to-end toolkit is being prepared to help airports with implementation. The toolkit will offer guidelines and instructions to help airports to understand the processes and requirements for a seamless passenger journey. The first edition of the toolkit is expected to be released in June 2011. 36

Cost Efficiency Finding efficiencies across the value chain is a constant challenge. In 2010, IATA delivered a record $4.3 billion in cost savings by working with airports, ANSPs, and fuel suppliers.

Policy change Since 2001, airlines have improved IATA is cooperating with other aviation At the ICAO/African Civil Aviation their labor efficiency 53% and their bodies and with governments to provide Commission (AFCAC) Symposium fuel efficiency 17%. It is IATA’s aim that a stronger framework for cost efficiency. on Aviation Infrastructure Financing in a thorough and systematic approach IATA’s close work with the European Maputo, Mozambique, in November to improving efficiency be adopted Commission on a more unified European 2010, IATA emphasized the necessity throughout the industry value chain. airspace has helped to finalize the SES for transparency and early consultation Airlines and their passengers pay over performance and charging scheme with users, before investment decisions $64 billion a year in infrastructure- regulations. The result is a long-awaited are made on aviation infrastructure. In related charges. Cost reductions and end to the full cost recovery mechanism 2011, IATA is campaigning against the even freezes in infrastructure charges for ANSPs in Europe and a fairer scheme proliferation of infrastructure development are vital to the battle for the financial based on sharing risk in traffic volumes charges in Africa to ensure compliance sustainability of airlines. Infrastructure between airlines and ANSPs. with ICAO policies and prevent further providers, regulators, and governments negative precedents from being set. This is a good step forward, but the must apply ICAO principles when performance target levels for 2012– determining infrastructure charges: 2014 were disappointingly diluted Airports transparency, cost-related charges, from the original recommendations of meaningful airline consultation, equitable It is essential that investment in the Performance Review Board. IATA is charges structures for all airlines, a infrastructure is undertaken in the working to ensure the SES objectives are single till structure, and improvements most cost-efficient way possible. IATA achieved by lobbying for more challeng- in productivity. supports the need for cost-efficient ing performance targets from 2015. infrastructure development, where it is In 2010, the IATA External Cost In February 2011, IATA participated needed, and has developed principles Campaign secured cost savings of in the ICAO Airport & Air Navigation to help guide such investment. In 2010, $4.3 billion in infrastructure charges. Services Economics Panel. The savings of $2.7 billion were secured in Including the additional $2.4 billion main achievement of this event was airport charges, of which $805 million savings in passenger taxation (see page that countries were encouraged represented real cost reductions. North 24), this brings the overall External Cost to incorporate ICAO’s Policies on America and Europe contributed the Campaign savings to a record $6.7 Charges for Airports and Air Navigation majority of these savings. billion. Unfortunately, cost increases Services (Doc 9082) into national (including taxation) were still at the policy—legislation as well as bilateral average annual figure of $5 billion. And agreements. many providers and governments view the industry recovery as an opportunity to increase charges and taxes in 2011.

External cost campaign: January–December 2010

In $ millions Total Savings Real Reductions Increases Airports 2,740 805 852 ANSPs 787 187 569 Fuel 799 431 4 TOTAL 4,326 1,423 1,425 37

Asia Europe A number of airports in Asia continued Following a damaging review IATA has engaged with Amsterdam, to provide charges relief to airlines of Sydney Airport by Australia’s Brussels, and Copenhagen airports to to help stimulate traffic recovery. In Competition Commission, the Australian try to avoid damaging changes to their particular, Airports of Thailand instituted Ministry of Transport has brought forward charges structures and to ensure instead deep reductions and incentive schemes a Productivity Commission review of that charges better reflect cost efficiency at Bangkok’s Suvarnabhumi Airport. pricing and regulatory regimes originally and are nondiscriminatory. At Amsterdam Singapore’s Changi Airport provided planned for 2012. IATA is participating Schiphol Airport (AMS), IATA and airline landing fee reductions of 10% to 15% in close cooperation with airlines. opposition to a proposal for large in 2010 but also announced increases structural changes forced the airport to IATA is likewise engaged with the in charges from 2012. put plans on hold and to conduct a study Japanese Ministry of Land, Infrastructure, on the potential impact of such changes. In India, following significant input from Transport and Tourism on aviation policy, The risks identified by the study led AMS IATA, the Airports Economic Regulatory charges, and tax issues. The country’s to limit the structural changes. IATA’s Authority (AERA) ordered that major government is planning to reduce efforts are now focused on fighting the airports be regulated using a single domestic fuel taxes and is expected to 2% overall increase AMS is proposing. till approach. This order has yet to be exclude aviation from environment and At Brussels, IATA is campaigning to applied at New Delhi’s Indira Gandhi poverty-reduction taxation. Charges avoid large structural changes and to International Airport and Mumbai’s consultations are focused on reduce a proposed price cap. IATA and Chhatrapati Shivaji International Airport Haneda and Narita airports. member airline efforts, meanwhile, won the amid an ongoing review of national In the Philippines, IATA and airlines are Danish Competition Authority’s consent concession agreements, but it is a lobbying for the removal of discriminatory to investigate potential discriminatory positive development. It is, moreover, taxes on foreign airlines. concerns regarding the low-cost pier at the latest piece in a thorough regulatory Copenhagen airport. IATA will continue framework being established by AERA. to follow through on such issues while looking to build stronger relations with airport partners. In France, IATA and airlines have been involved in Aéroports de Paris’s consultations with the French authorities on major aspects of economic regulation. This involvement has ensured fairer prices for the next five years at Charles de Gaulle and Orly airports. 38

Air navigation services IATA is similarly involved in the reform An attempt by several Caribbean nations Savings of $787 million in air navigation of UK airport economic regulations to to introduce a Caribbean Tourism Tax service charges were secured in 2010, introduce a more targeted and flexible was successfully avoided in 2010, saving including $187 million in real cost license-based system, including a right air carriers an estimated $287 million. reductions. As with airport savings, of appeal by airlines. This system will North America and Europe were the The tremendous growth and associated be proposed to Parliament in the new regions with the most significant savings. infrastructure requirements in the Middle airports economic regulation bill in 2011. The success in those two regions East, particularly in the Gulf area, are stemmed from IATA actions with the The Spanish government, meanwhile, driving many airports and air traffic control FAA and Eurocontrol, respectively. has opted to privatize 49% of Spanish (ATC) providers in the region to increase airport operator AENA. In response, IATA charges and modify charges structures. In the United States, increases to the is insisting that airline requirements for IATA has engaged in several countries overflight and oceanic charges proposed airport privatization and robust economic to ensure that ICAO charging principles by the FAA have again been delayed, regulation be taken into consideration to are considered. In some cases, such as until 2015, saving the industry $153 ensure the required cost-effectiveness in Dubai, IATA has obtained a commit- million. Until then, the 1999 rates are and service levels. ment from providers that airlines will be expected to continue. consulted prior to any further changes In Europe, the average en route unit Other regions in charges. rate for 2011 across Eurocontrol The long saga in the United States In Africa, IATA continues to push for countries was increased 0.9% in 2010. regarding FAA reauthorization is ongoing, meaningful dialogue and for transparency. This is a marked improvement on earlier and discussions continue regarding IATA has been active in helping to proposals for a 3.3% increase but is possible user fee funding. The focus is on resolve the dispute between South short of the freeze urged by IATA and the Mica bill, from which the proposal to Africa’s airport authority and aviation by European Union Vice-President Siim increase the Passenger Facility Charge regulator over allowed fee increases Kallas. Overall, 18 European nations from $4.50 to $7.00 has been removed, for 2011. IATA remains vigilant but reduced or froze their unit rates, while saving the airline industry $1.4 billion. expects the regulator’s lower increases 13 poor performers increased both Argentina’s aviation regulator has to be upheld. IATA is in negotiations their costs and unit rates. with the Democratic Republic of the announced the continuation of the 30% The biggest concern, and disappointment, Congo (DRC) regarding a $50 airport discount on charges in Buenos Aires in is with four of Europe’s biggest countries: development fee and a 60% increase 2011. In Brazil, the aviation regulator has France, Germany, Italy, and the United in the en route charge. The airport launched a significant review of the rates Kingdom. The combined unit rate authority has agreed to either provide and charges model and will introduce increases for these four nations are the necessary justification or to suspend efficiency targets and price caps. three and a half times higher than the the en route increase. European average. IATA will address this discrepancy through the new SES Performance Scheme.

Economic regulation is not rocket science. You need a tough service level agreement and dramatic penalties if promises are not kept or the investment schedule is not met. Giovanni Bisignani (London, United Kingdom, February 2011) 39

Fuel In the Middle East, IATA has engaged In 2010, IATA campaigns on fuel As a result, a gradual shift away from in consultation with several ANSPs to fees and taxes resulted in savings for the monopolistic fuel supply situation at ensure that ICAO charging principles airlines of $799 million. Savings of Russian airports is under way, particularly are adhered to, particularly in Egypt, $360 million were secured in India at the more important, larger airports. Libya, and Afghanistan. This has through competitive fuel pricing and IATA is continuing with campaigns in resulted in some cost savings, but IATA the development of common-use 2011 to ensure the transparency of continues to dialogue with providers for infrastructure. IATA’s influence on the costs and formula prices based on more meaningful consultation and for European Union’s compulsory stock international standards in Angola, Brazil, transparency. In Egypt, IATA addressed obligation regime resulted in a fuel China, Congo, the Dominican Republic, the very unusual issue of charges for cost avoidance of $271 million for Kazakhstan, Mexico, Russia, and Ukraine. flight safety messages, which were the air industry. In St. Maarten, IATA IATA continued to work, meanwhile, successfully canceled but offset by was similarly successful in delaying an on improving fuel supply reliability in surprise increases in air navigation increase in the airport fuel concession 2010. This included airport-specific service charges of up to 25%. fee. In Ecuador, following a three-year improvements, such as jet fuel tankage IATA lobbying campaign, the government In Asia-Pacific, IATA is working with and supply capacity, at London Heathrow, in early 2011 approved an exemption Airservices Australia on a new, long- Nice, and Sydney. The IATA Fuel Fees from its 12% VAT for jet fuel used by term ATC pricing agreement for 2011– and Charges Database launched in 2010 cargo airlines. Initial estimates suggest 2016. IATA also helped to develop is fully operational, and the commercial savings of around $15 million per year. and implement a service charter in viability of the IATA Standard Into- IATA/airline campaigns in Japan resulted consultation with airlines that sets targets Plane Fueling Procedures has been in the retraction of one proposed increase for Airservices Australia and measures demonstrated. These procedures should to the fuel facility charge and also led to the organization’s performance. The result in improved safety and efficiency the postponement of another increase. long-term agreement and service charter for airlines and into plane service would present a positive example for IATA’s efforts in seeking the regulatory providers. other providers to follow. oversight of activities related to the jet fuel supply chain and refueling services bore positive results in 2010. Legislation introduced in the Russian Federation in 2009 to favor open markets was strengthened in 2010 with new regulations. 40

Industry and Financial Services IATA handled $323 billion in its financial systems during 2010. In its mission to handle the industry’s money even more safely and efficiently, IATA is constantly improving financial controls and streamlining processes.

Cargo Accounts Settlement System The $323 billion of industry funds During 2010, CASS operations grew In October 2010, all remittance and handled by IATA in 2010 represents to 105, crossing the 100 mark for the settlement operations were aligned to a an impressive 15.5% increase over the first time. There are now 87 CASS export revised global remittance and settlement previous year’s $280 billion. Billing and operations, 14 CASS import operations, standard operating procedure. That Settlement Plans (BSPs) accounted for and four CASS domestic operations. procedure specifies in detail the controls the majority of the total, at $221 billion. New operations were launched in Brazil, required to ensure the highest-quality The IATA Clearing House (ICH) settled Germany, Tunisia, Vietnam, and Yemen. oversight and care of our members’ $43.7 billion; the Cargo Accounts money. CASS’s collection success was Settlement System (CASS) settled 99.994%. Participation in CASS was In November 2010, IATA put in place $29.2 billion; and the IATA Currency at its highest level ever, with a 10% common management structures in Clearance Service (ICCS) settled increase in carrier representation. In each of its five regional hubs: Amman, $29.1 billion. 2011, the expansion of CASS import Beijing, Madrid, Miami, and Singapore. operations will continue, with a particular Standardized roles and job descriptions Billing and Settlement Plans focus on Africa. ensure the stronger segregation of duties in a consistent fashion worldwide. By IATA’s BSPs are the interface between June 2011, all remittance and settlement airlines and travel agents. They provide Strengthening activity will be migrated from country an efficient, reliable, and cost-effective financial controls offices to the regional hubs. By the end system that simplifies the selling, reporting, of 2013, all industry settlement system and remitting procedures of airline tickets In June 2010, the IATA Board of functions will have been shifted from for IATA-accredited agents on a Governors agreed on a number country offices to the regional hubs. worldwide basis. of internal and external moves to strengthen industry settlement systems BSPs processed nearly 500 million (ISS). These moves are part of IATA’s transactions in 2010, with an accuracy Strengthening ISS program and focus of 99.963%. New BSP operations on the standardization, simplification, were implemented in Mongolia, Kosovo and centralization of critical financial (as an extension of the BSP Western settlement processes. Balkans), and Mayotte (as an extension of BSP France). There are now 87 BSPs The vision is to put in place one covering 167 countries and territories. operating methodology for managing the industry’s money. That means one global ISS standard operating procedure, one structure consisting of professional teams regionalized in hubs, and one tool in the form of an integrated IT system supporting the standard operating procedure and the structure. 41

IATA Currency Clearance Service Travel Agent Service Fee The ICCS helps airlines to centrally The 2010 survey cited 15 countries IATA developed the Travel Agent and efficiently manage the repatriation for blocking funds, up from 13 in 2009. Service Fee (TASF) to assist travel of their worldwide sales funds at optimal The top five priority markets for action agents in collecting their service fees market exchange rates. In 2010, the ICCS in 2011 by the IATA Currency Working for credit card sales through the BSP. processed $29.1 billion on behalf of its Group are Eritrea, Ethiopia, Nigeria, Today, 96% of BSP-registered travel 268 user airlines. Sudan, and Venezuela. Fully 60% agents use TASF to collect their service ($310.6 million) of the blocked funds fees. In addition to collection, TASF The ICCS is a key airline treasury tool identified by the survey were attributed offers reporting tools to facilitate the in that it offers the option to repatriate to Venezuela. tracking and monitoring of travel sales settlements in over 111 countries. agent activities. It also offers an accelerated repatriation option for airlines that do not require fund IATA’s air traffic control TASF is available in 20 countries on conversions or the flexibility of actively and airport Enhancement four continents. It was launched in South managing the repatriation process. In and Financing Service Korea in January 2010, and 750,000 2010, 16 new BSP and CASS markets TASF transactions were processed in were added to the ICCS coverage. IATA’s Enhancement and Financing that country during the year under review. (E&F) Service helps ANSPs and airports to lower their costs and improve their IATA’s currency efficiency in invoicing and collecting coordination activities user charges by using IATA’s financial systems. The service also helps airports IATA helps airlines to repatriate funds and ANSPs to secure cost-effective from highly or restrictively regulated financing for investment in civil aviation markets and countries. In 2010, $516 infrastructure. Airlines benefit from the million of members’ funds was reported service through improved data quality blocked or delayed in IATA’s annual and better payment processes. By the Remittance of Foreign Balances (RFB) end of 2010, IATA’s E&F Service had survey. This marked a decrease of $94 processed more than $2 billion million, or 15%, from the 2009 year-end in approximately 50 countries. figure of $610 million. 42

Weblink IATA Clearing House Simplified Interline Settlement Weblink is an IATA service that extends The ICH facilitates the offsetting of Simplified Interline Settlement (SIS) the cost-efficient settlement process billings between over 350 airlines and will enable all interline billing to be done through the BSP from airlines to travel associated companies before those in the form of electronic invoices, with agents. billings are settled on a weekly basis. transmission linked directly to the ICH This efficiency enables a cash flow for settlements. As of 2010, more than 30 airlines saving of 69% in each weekly settlement. had implemented Weblink. Those The new electronic formats that SIS In addition, it reduces industry financial airlines generated nearly three million makes possible contain sufficient data risk by minimizing the time and the transactions and collected $430 million for interline invoices to be automatically amount of outstanding intercompany in tickets from travel agencies. This posted in the accounts and routed to the debts. equated to savings in distribution appropriate department. This reduces costs of more than $15 million. In 2010, intercompany settlements manual intervention in the accounts and increased 9%, to $43.7 billion. removes the costs of paper handling and The number of suspensions due to processing. It also eliminates international nonpayment fell substantially, to just shipping and postage costs for invoices seven compared with 23 in the previous and supporting documents. year. This represents the smallest number The development of SIS continued of suspensions recorded in recent years. during 2010. Its scope has been Losses to participants during the extended to provide coverage for new year totaled less than $50,000, due industry priorities, such as the electronic to the continued active management miscellaneous document (EMD). and maintenance of security deposits Workshops and briefings were held at wherever justified under the regulations. industry meetings to assist participants in the interline environment.

IATA is the financial backbone of global air transport, with settlement systems handling a billion dollars a day. Airlines have outsourced to IATA the global distribution of their product. This means that a ticket purchased anywhere in the world through an IATA-accredited travel agent can be paid for in a single currency and will be globally recognized. Giovanni Bisignani (Montreal, Canada, January 2011) 43

First & Final Interline Billing Passenger Agency Program

A comprehensive suite of Internet First & Final Interline Billing enables airline IATA’s Passenger Agency Program forums has also been developed passenger billings to be settled on a first- allows the secure distribution of airline to enable everyone to benefit from time basis quickly and simply, avoiding the tickets and related services through a sharing process updates, questions, and need for lengthy billing dispute resolution. network of accredited sales locations. answers. Pilot testing of SIS will start This reduces workload in revenue The Passenger Agency Conference in summer 2011, and the industry will accounting and increases the speed (PAConf) establishes the rules for begin migrating to the new service in and accuracy of management reporting accreditation. September 2011. and route revenue analysis. In 2010, PAConf, through local SIS is expected to save the industry In 2010, the number of airlines participating market consultation, finalized the over $500 million a year in operating in First & Final Interline Billing grew from adoption of the single global passenger efficiencies and reduced costs. It also is 42 to 43 even though some participants sales agency rules for BSPs through anticipated to abolish the more than 150 merged. Processing volumes declined to Resolution 818g. The rules take effect metric tons of interline-associated paper just over three million interline journeys per 1 June 2011 everywhere except Israel. that is shipped around the world annually. month on average during the year, due in PAConf continued to take steps part to interline traffic between the merged to strengthen the security of monies airlines no longer passing through the collected through BSPs, making in process. particular changes to local financial The volume of First & Final Billing is criteria, of which there are 111 versions. expected to grow after the implementation In the current financial climate, PAConf of SIS. New services resulting from the has formalized a quarterly timetable for completion of the SIS project are likely to mail votes to facilitate the ability of the increase demand as airlines seek further Agency Program Joint Councils (APJCs) reductions in costs. Those new options to recommend changes to local criteria. include the ability to invoice and settle interline tickets on a fully automatic basis utilizing the facilities offered by the service to create or store the necessary billing values. 44

Cargo Cargo tariff coordination Cargo standards IATA Cargo’s mission is to work with IATA is scaling back its cargo tariff With the endorsement of the Cargo industry partners to establish a reliable, coordination in conjunction with antitrust Committee, IATA’s Cargo Services efficient, and secure supply chain. The immunity phaseout and expiry. During Conference (CSC) agreed in 2010 to focus for 2010 was on the following: 2011, for example, the program of apply the liability limit under the Montreal industry-agreed rates to and from Japan Convention to its air waybill conditions >>Protecting industry money through the will be subject to an amended immunity of contract across all routes worldwide. Cargo Agency Program and CASS filing mechanism. The Japanese Civil The CSC also defined the necessary >>Advancing the e-freight, Secure Aviation Bureau (JCAB) will thus accept standard resolutions and recommended Freight, and Cargo 2000 programs to carrier-flagged rates for application to practices, including standard electronic increase supply chain competitiveness and from Japanese gateways. In addition, messages, as the foundation for the JCAB will accommodate carrier- implementing e-freight and e-AWB >>Devising and managing industry specific rules applications. (e-air waybilling). In addition, the CSC standards to support supply chain approved recommended practice on the The replacement of industry rates with needs framework of a mail service agreement specific carrier rates continues to drive between postal operators and airlines. increased content in the various IATA Cargo Agency Program tools, such as TACT (the Air Cargo Tariff) To further secure the supply chain, IATA’s Cargo Agency Program addresses and online databases. Further regions following the cargo security incident of the relationship between airlines and its will be subject to phaseout activity October 2010, a standard consignment global accredited network of more than throughout 2011 and 2012. security declaration in electronic and 12,000 freight forwarders. During 2010, paper format has been adopted by the the Cargo Agency Conference continued industry. This provides regulators with an to enhance the resolutions that govern audit trail of who has secured what, how, the Cargo Agency Program to simplify and when. The consignment security and modernize the program. The year declaration is one of the building blocks ahead will see such areas as training of the Secure Freight initiative, which requirements, financial criteria, and aims to implement a standard supply program mechanics addressed. chain security program in countries where none exists. 45

Cargo 2000 To improve flight safety and efficiency, Making the DGR available in Russian Cargo 2000 (C2K) is the self-funded air IATA and the industry developed Unit will not only improve safety throughout cargo industry quality group established Load Device (ULD) operational standards the supply chain but also will enable local through IATA. Membership is drawn from and introduced the ULD Operational training for mandatory dangerous goods all supply chain participants and numbers Damage Limits Notice to help operational expertise. 79 companies that together account for staff in the field to identify unserviceable over 65% of international air cargo. To ensure that customs administrations ULDs. A new label for the transportation consider airline requirements when C2K was formed with the objective of of time and temperature-sensitive developing new regulations, and to improving quality and efficiency in the healthcare products was also introduced facilitate industry compliance with supply chain. To date, it has implemented to ensure that the integrity of the cold regulations, the Customs Advisory Group an industry standard transportation supply chain is maintained. (CUSAG) and the IATA/FIATA Customs process, the master operating plan, A Russian edition has been added to Working Group (IFCWG) are working against which participants measure the languages in which the Dangerous closely with regulators around the world. and report their quality performance. Goods Regulations (DGR) are published. Overall, the network witnessed The Russian edition of the DGR was growth in shipments of 6%, to 14.5 developed in response to requests from million shipments, in 2010. Unfortunately, member airlines in Russian-speaking the airspace closures in the early part states. It was also produced in support of of 2010 because of volcanic ash had the memorandum of understanding that a significant impact on the delivery IATA signed with the Russian Federation of the customer promise. So despite in November 2009 to help develop its the recovery since, annual average aviation sector in such vital areas as shipment figures remain below 2009’s safety, security, e-freight, and training. performance. 46

Aviation Solutions IATA’s products and services are built on an understanding of the needs of the industry. They are focused on improving aviation’s financial and environmental sustainability and deliver relevant, value-added results. IATA Training Consulting and Development Institute IATA Consulting delivers solutions In addition, IATA Consulting was The IATA Training and Development for airlines, airports, and civil aviation retained by Airports of Thailand (AoT) Institute (ITDI) aims to develop human clients around the world. In 2010, to determine how to rationalize air traffic capital for tomorrow’s air transport IATA Consulting undertook 50 projects distribution and airport development industry. The ITDI offers internationally spanning these three focus areas. between the country’s Suvarnabhumi recognized training programs in the and Don Muang Airports in the rapidly principal industry areas of airline and Projects included the continued growing Bangkok area. IATA Consulting airport management, safety, security, development of PBN procedures for guided AoT to a single airport solution and cargo as well as in organization airports in Malawi. PBN improves the for the mid- and long term. and human performance. The institute safety of aircraft arrivals and departures is based in 50 locations and works with while also reducing CO emissions Benefits range from more efficient 2 more than 300 authorized training centers and airlines’ expenses, by leveraging and safer airspace to reduced airline to administer its self-study courses. the latest techniques in air navigation operating costs through the elimination of technology. IATA Consulting also potential dual airport operations. All in all, In 2010, the ITDI enrolled over 30,000 assisted the civil aviation authority of implementing the recommendation will professional and vocational students a major South East Asian nation with translate into a better level of service and from nearly 150 countries in some 500 framing preliminary policies on open a more convenient journey for the more disciplines across all market segments. skies and climate change. The projects than 60 million passengers who will The ITDI works closely with world-class blend local requirements with best pass through Thailand by 2015. academic institutions and with major international practices that IATA has industry players to develop partnerships The consulting group also implemented helped to define. and cutting-edge training solutions for several new product initiatives for 2010– the changing needs of the industry. Its The Consulting group continued its 2011: ties to academia include the Stanford fuel-efficiency focus with a preeminent >>IATA Flight Plan, flight planning Center for Professional Development, South Asian airline in 2010. Team software (in partnership with Navtech) Harvard Business School Publishing, members provided on-site implementation Nanyang Technological University, assistance that helped this major carrier >>Telecommunications Consulting, and the University of Geneva. reduce its annual fuel expense 6%, or reduces airline telecom/data spend almost $100 million. 30% or more (in partnership with SCA) In addition, the ITDI works with the International Airline Training Fund (IATF), >>Airline Profitability Improvement which provides training to member Program (APIP) airlines in developing countries. The IATF >>Baggage Improvement Progam (BIP) is an independent, nonprofit foundation that supports airlines in meeting industry priorities. In 2011, the IATF and the ITDI will cooperate on an SMS Implementation Program to teach practical skills to personnel at 15 airlines in developing nations. The unique ITDI methodology will ensure tangible results that help member airlines to implement SMS in their operations. In 2011–2012, the ITDI is poised to provide the industry with blended learning solutions that serve all industry segments from entry through executive levels. The Institute will use the latest educational technology and a variety of delivery methods to do so, including traditional classroom and in-company, self-study, and distance-learning methods. The ITDI is pleased to announce that it will hold the first International Aviation Human Resources Summit, to be held in Singapore in November 2011. 47

IATA’s commercial services are focused on helping airlines and aviation-related businesses improve their performance. These include business intelligence products that support critical decisions with broad, up-to-date, and accurate strategic information. Giovanni Bisignani (Geneva, Switzerland, April 2011) 48 49

Corporate publishing Strategic Partnerships

IATA is the air transport industry’s IATA’s Strategic Partnership Program Carriers now also benefit from authoritative source for publications includes well over 300 of the world’s Data AirHouse, a cost-efficient data and data covering safety, security, regional and premier global aviation integration and reporting solution that operations, finance, and the environment. suppliers. Those suppliers are active streamlines access and eliminates The association produces over 250 in helping to set and address industry expensive IT support. In 2011, PaxIS publications, most notably the DGR priorities in e-cargo, passenger facilitation, will be substantially increased in scope portfolio, which is the industry’s the environment, fuel, safety, and security. and coverage by integrating airline direct benchmark for safe cargo transport. New areas added in 2010 and to be sales into the overall ticketed database added in 2011 include alternative fuel, through our direct data industry initiative. In 2010, IATA extended the DGR e-services, and a revamped e-cargo area. This major upgrade will combine airline portfolio online with the introduction of internally booked tickets with travel EasyDGR. This innovation, for shippers, The program provides real-time working agency booked tickets to provide the freight forwarders, and airlines, virtually group collaboration between member most comprehensive marketplace view eliminates shipment rejections by carriers and leading aviation suppliers. available in the industry. The program is creating an electronically validated Program partners also have the oppor- projected to start implementation in the dangerous goods declaration and proper tunity to attend the IATA annual general third quarter of 2011. packing instructions. EasyDGR is the first meeting which provides face-to-face phase of the IATA electronic publishing access to member carrier CEOs as Another of IATA’s business tools, platform, which will eventually include well as major industry suppliers. IATA’s CargoIS, provides unparalleled access such other critical IATA publications as Strategic Partnership Program celebrated to more than 20 million shipment records the Airline Coding Directory, Airport its 20th anniversary in 2010 and looks settled by CASS. It furnishes statistics by Handling Manual, and World Air forward to continuing to play a significant agent location, average yield, and origin Transport Statistics. role in shaping the industry’s future. and destination. In 2010, CargoIS was used by more than 200 airlines, repre- Other industry-leading information senting 75% of the world’s cargo volume. products from IATA’s corporate Events publishing arm include the following: AirportIS, meanwhile, is used by more Throughout 2010, IATA enhanced than 50 airports globally for marketing >>The IATA Tax Suite, which contains its leadership role in the industry by and air service development activities. consolidated data from governments, hosting preeminent meetings, events, It also gives organizations outside the tax authorities, and over 1,600 airports and symposiums on airline schedules, aviation industry, such as tourism boards in 190 countries. The suite is the air cargo, aviation law, aviation security, and hospitals, a strategic window into global reference used to monitor, commercial strategy, ground handling, global passenger streams and travel process, and settle taxes, fees, and and revenue accounting. Nearly 6,000 patterns. charges with speed and efficiency. industry professionals attended or It is a substantial contributor to the were part of IATA events in 2010. A In 2010, IATA launched Airs@t, an industry’s bottom line. new event, the first World Passenger online airline customer satisfaction Symposium, will take place in Singapore benchmarking service. Airs@t was used >>The Timatic Suite which, used in October 2011. to survey more than 40,000 international by 253 airlines worldwide, is the passengers for their opinions as they industry’s answer to passenger moved through the world’s busiest document compliance. The suite’s Business intelligence services airports during the year. 19 carriers in flagship product, Timatic AutoCheck, IATA provides an unrivaled portfolio the Americas, Europe, Middle East and was deployed by carriers in 2010 of business intelligence tools designed Asia are covered by this service. Airs@t to ensure that all international for airlines, airports, agents, aircraft enables airlines operating long-haul passengers comply with government manufacturers, and other market routes to compare themselves with their travel document requirements. The segments inside and outside the industry. peers using 50 different parameters and product can save a dollar in reduced The flagship product, PaxIS, is the most to judge themselves on the full travel fines, transportation costs, and passenger comprehensive airline passenger market experience, from reservation and check- processing procedures, for every two intelligence database available. In 2010, in to inflight services, entertainment international passengers flown. the product offered comprehensive systems, and baggage delivery. New market data based on airline tickets routes included in the service in 2010 settled in more than 160 countries included North Atlantic and Europe to through IATA’s BSPs. Asia. In 2011, new routes will include trans-Pacific and intra-Europe. 50

IATA Membership as of 1 May 2011

Active members

Adria Airways Air Nostrum British Airways Dragonair Aegean Airlines Air One Brussels Airlines Dubrovnik Airline Aer Lingus Air Pacific Bulgaria air Egyptair Aero República Air Seychelles C.A.L. Cargo Airlines EL AL Aeroflot Air Tahiti Cargojet Airways Emirates Aerolineas Argentinas Air Tahiti Nui Cargolux Estonian Air Aeromexico Air Transat Caribbean Airlines Ethiopian Airlines Aerosvit Airlines Air Vanuatu Carpatair Etihad Airways Afriqiyah Airways Air Zimbabwe Cathay Pacific Euroatlantic Airways Aigle Azur Aircalin CCM Airlines European Air Transport Air Algérie Airlink China Airlines Eurowings Air Astana Alaska Airlines China Cargo Airlines EVA Air Air Austral Alitalia China Eastern FedEx Express Air Baltic All Nippon Airways China Southern Airlines Finnair Air Berlin American Airlines Cimber Sterling flybe Air Canada Arkia Israeli Airlines Cirrus Airlines Freebird Airlines Air China Armavia CityJet Garuda Air Europa Asiana Airlines Comair Georgian Airways Air France Atlas Air Condor Gulf Air Air India Atlasjet Airlines Condor Berlin Hahn Air Air Jamaica Austrian Continental Airlines Hainan Airlines Air Koryo Avianca Continental Micronesia Hawaiian Airlines Air Macau Azerbaijan Airlines Copa Airlines Hong Kong Airlines Air Madagascar B&H Airlines Corsair Hong Kong Express Airways Air Malawi Bangkok Airways Croatia Airlines Iberia Air Malta Belavia—Belarusian Airlines Cubana Icelandair Air Mauritius Belle Air Cyprus Airways Interair Air Moldova Biman Czech Airlines Iran Air Air Namibia Binter Canarias Delta Air Lines Iran Aseman Airlines Air New Zealand Blue Panorama DHL Air Israir Air Nigeria Blue1 DHL International E.C. Japan Airlines Air Niugini bmi Donavia Jat Airways 51

Jet Airways MIAT—Mongolian Airlines Skyways Vietnam Airlines Jet Lite Montenegro Airlines South African Express Virgin Atlantic JetBlue Nippon Cargo Airlines Spanair Vladivostok Air Jordan Aviation Nouvelair SriLankan Airlines Volaris Kenya Airways Olympic Air Sudan Airways Volga-Dnepr Airlines Kingfisher Airlines Oman Air SunExpress VRG Linhas Aéreas Kish Air Onur Air Surinam Airways Wataniya Airways KLM PAL—Philippine Airlines SWISS White Airways Korean Air Pegasus Airlines Syrianair Wideroe Kuwait Airways PGA—Portugália Airlines TAAG—Angola Airlines Xiamen Airlines LACSA PIA—Pakistan International TACA Yemenia LAM— Linhas Aéreas de Airlines TACA Peru Moçambique PLUNA TACV Cabo Verde Airlines LAN Airlines Precision Air TAM—Transportes Aéreos Associate members LAN Argentina Qantas del Mercosur LAN Cargo Qatar Airways TAM Linhas Aéreas Austral LAN Perú Rossiya Airlines TAME—Línea Aérea del Ecuador Lufthansa CityLine LAN Ecuador Royal Air Maroc TAP—Air Portugal Safair Lauda Air Royal Brunei TAROM SATA Air Açores Libyan Airlines Royal Jordanian Thai Airways International Virgin Blue LOT Polish Airlines SAA—South African Airways THY—Turkish Airlines LTU SAS TNT Airways Lufthansa Saudi Arabian Airlines Transaero Lufthansa Cargo Shandong Airlines TransAsia Airways Luxair Shanghai Airlines TUIfly Mahan Air Shenzhen Airlines Tunis Air Malaysia Airlines SIA—Singapore Airlines Ukraine International Airlines Malév SIA Cargo United Airlines Malmö Aviation Siberia Airlines UPS Airlines Mas Air Sichuan Airlines US Airways MEA—Middle East Airlines Silkair UTair Meridiana fly SKY Airlines V Australia 52

IATA Offices

IATA’s 1,332 staff, comprised of more than 100 nationalities, serve its 237 members from 66 offices in 61 countries. A growing number of IATA offices operate under accord de siège agreements, which recognize the important nature of IATA’s work and grant it semi-diplomatic status. Such agreements are in place in Canada, Cote d’Ivoire, Jordan, Kenya, Libya, Morocco, Senegal, Singapore, Spain, Sudan, Switzerland, and Syria.

Main Offices Regional Offices Montreal – Head Office Geneva – Executive Office Africa Sandown Mews East Block 800 Place Victoria 33 Route de l’Aéroport 88 Stella Street PO Box 113 PO Box 416 Sandton Montréal, Québec H4Z 1M1 CH - 1215 Geneva 15 Airport Johannesburg 2146 Canada Switzerland South Africa Tel.: +1 514 874 0202 Tel.: +41 22 770 2525 Asia-Pacific Fax: +1 514 874 9632 Fax: +41 22 798 3553 TripleOne Somerset 111 Somerset Road #14-05 Somerset Wing Singapore 238164

Main Office Regional Office Country Office China & North Asia Middle East & North Africa North America 3F East Tower 52 Al-Hashemiyeen Street 601 Pennsylvania Avenue NW World Financial Center Abdoun North Building, Suite 300 No. 1, Dongsanhuang Zhong Road PO Box 940587 Washington, DC 20004 Chaoyang District Amman 11194 United States of America Beijing 100020 Jordan People’s Republic of China Russia & the CIS The Americas 19-1 Lyalin Lane Europe 703 Waterford Way Moscow 105062 Torre Europa Suite 600 Russian Federation Paseo de Castellana 95 Miami, Florida 33126 28046 Madrid United States of America Spain 350 Avenue Louise Louizalaan Brussels 1050 Belgium www.iata.org