ANNUAL REVIE W 2018 Alexandre de Juniac Director General & CEO International Air Transport Association Annual Review 2018 74th Annual General Meeting Sydney, June 2018

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

04 Members’ List

06 Chairman’s Message

08 Director General and CEO’s Message

10 Industry Story in 2017

16 Safety

22 Security

28 Regulation and Taxation

34 Infrastructure

40 Environment

46 Cargo

52 Passenger Experience

58 Financial Services

62 Aviation Solutions

67 IATA Offices

53 57 IATA 70th IATA Offices Anniversary MEMBERS’ LIST

Air Vanuatu Emirates A AirBridgeCargo Airlines C Ethiopian Airlines I Adria Airways Aircalin CAL Cargo Airlines Etihad Airways IBERIA Aegean Airlines Airlink Camair-Co EuroAtlantic Airways Icelandair Aer Lingus Alaska Airlines Cambodia Angkor Air European Air Transport InselAir Aero Republica Alitalia Capital Airlines Eurowings Interjet Aeroflot Allied Air Cargojet Airways EVA Air Iran Air Aerolineas Argentinas AlMasria Universal Airlines Cargolux Evelop Airlines Iran Airtour Airline Aeromexico American Airlines Caribbean Airlines Iran Aseman Airlines Africa World Airlines ANA Carpatair Israir Aigle Azur Arik Air Cathay Dragon Air Algerie Arkia Israeli Airlines Cathay Pacific F Air Arabia Asiana Airlines Cayman Airways FedEx Express Air Astana Atlantic Airways Cemair Fiji Airways J Air Austral Atlas Air China Airlines Finnair Japan Airlines Air Baltic AtlasGlobal China Cargo Airlines flybe Jazeera Airways Air Botswana Austral China Eastern flydubai Jeju Air Air Burkina Austrian China Express Airlines FlyEgypt Jet Airways Air Cairo Avianca China Postal Airlines Freebird Airlines Jet Lite India Air Caledonie Avianca Brasil China Southern Airlines JetBlue Air Canada Avianca Costa Rica CityJet Jordan Aviation Air Caraibes Avianca Ecuador COBALT Juneyao Airlines Air China Azerbaijan Airlines Comair G Air Corsica Azul Brazilian Airlines Condor Garuda Indonesia Air Europa Copa Airlines Georgian Airways Air France Corendon Airlines Germania K Air India Corsair International GOL Linhas Aereas Kenya Airways Air Italy B Croatia Airlines Gulf Air Kish Air Air Koryo Bahamasair Cubana GX Airlines KLM Air Macau Bangkok Airways Czech Airlines Korean Air Air Madagascar Batik Air Kuwait Airways Air Malta Belavia Belarusian Airlines Air Mauritius BH Air H Air Moldova Biman Bangladesh Airlines D Hahn Air Air Namibia Binter Canarias Delta Air Lines Hainan Airlines L Air New Zealand Blue Air DHL Air Hawaiian Airlines LAM Air Niugini Blue Panorama DHL Aviation Hebei Airlines Lao Airlines Air Nostrum bmi Regional Hi Fly LATAM Airlines Argentina Air Peace BoA Boliviana de Aviacion Hong Kong Airlines LATAM Airlines Brasil Air Serbia Braathens Regional Aviation Hong Kong Express Airways LATAM Airlines Colombia Air Seychelles British Airways E LATAM Airlines Ecuador Air Tahiti Brussels Airlines Eastar Jet LATAM Airlines Group Air Tahiti Nui Bulgaria Air Egyptair LATAM Airlines Paraguay Air Transat El Al LATAM Airlines Peru 4 MEMBERS’ LIST

LATAM Cargo Brasil SaudiGulf Airlines Volotea LATAM Cargo Chile O SCAT Airlines U Vueling LATAM Cargo Mexico Okay Airways SF Airlines Ukraine International Airlines LIAT Airlines Olympic Air Shandong Airlines UNI AIR Loong Air Oman Air Shanghai Airlines United Airlines LOT Polish Airlines Onur Air Shenzhen Airlines UPS Airlines W Lucky Air Overland Airways Sichuan Airlines Ural Airlines Wamos Air Lufthansa Silk Way West Airlines UTair WDL Aviation Lufthansa Cargo Silkair Uzbekistan Airways WestJet Lufthansa CityLine Singapore Airlines White Airways Luxair P Singapore Airlines Cargo Wideroe Pegas Fly SKY Airline Pegasus Airlines Somon Air V PGA Portugalia Airlines South African Airways Vietjet M Philippine Airlines South African Express Airways Vietnam Airlines X Mahan Air PIA Pakistan International Airlines SriLankan Airlines Virgin Atlantic Xiamen Airlines Malaysia Airlines Precision Air SunExpress Virgin Australia Malindo Air PrivatAir Suparna Airlines Vistara Mandarin Airlines Surinam Airways Volaris Martinair Cargo SWISS Mauritania Airlines International Syrianair MEA Q MIAT Mongolian Airlines Qantas IATA’s membership continues to In Europe, two charter airlines Mistral Air Qatar Airways grow. Between June 2017 and became IATA members. Evelop MNG Airlines T May 2018, 20 airlines joined IATA’s Airlines is based in Mallorca, Spain Montenegro Airlines TAAG Angola Airlines ranks, from all corners of the globe and WDL Aviation hails from and representing a multitude of Germany. Spanish LCC, Volotea, Myanmar Airways International TACA business models, including the also joined. R TACA Peru low-cost carrier (LCC) sector. Rossiya Airlines TACV Cabo Verde Airlines Europe also accounts for the Faroe N Royal Air Maroc Tame In Africa, Africa World Airlines and Islands-based Atlantic Airways and Royal Brunei TAP Portugal Air Peace successfully applied for COBALT from Cyprus. NCA Nippon Cargo Airlines Royal Jordanian TAROM membership, based in Ghana and Neos RwandAir Tassili Airlines Nigeria respectively. Other new members in the NESMA Airlines Thai Airways International previous 12 months include Nextjet Thai Lion Air North Asia and Asia-Pacific boasts Cayman Airways and Saudi Gulf Nile Air Tianjin Airlines nine new members. Of these, Airlines, based in the countries four—China Express Airlines, Hebei from which they have taken their Nordavia Regional Airlines S TUIfly Airlines, Suparna Airlines and UNI name, and SCAT Airlines and Nordwind Airlines S7 Airlines Tunisair AIR—are all based in China (the Somon Air, based in Kazakhstan Nouvelair Safair Turkish Airlines latter in Chinese Taipei). Two LCCs and Tajikistan respectively. Safi Airways T’way Air joined from South Korea: Eastar SAS Jet and Jeju Air. Batik Air from SATA Air Acores Indonesia, Cambodia Angkor Air SATA Internacional from Cambodia, and Vistara from Saudi Arabian Airlines India make up the remainder. 5 GOH CHOON PHONG, CHAIR, IATA BOARD OF GOVERNORS & CEO SINGAPORE AIRLINES TRANSFORMATION AND INNOVATION TO BENEFIT OUR INDUSTRY

What have been your priorities as Chairman? How is digital disrupting the industry For IATA and the aviation industry, safety is always and what role should IATA play? the number one priority. We had a very good year Digital is disrupting all industries and it is obviously in 2017 with no fatalities associated with any of the very important that we in the aviation sector pay aviation accidents on passenger jets. That’s good. But, attention to how it can be applied. Digitization can of course, we should never be complacent as far as be applied in many areas. A good example is safety is concerned. safety. Digital transformation will enhance safety management and IATA has a role to play in Beyond that, IATA has been more vocal on key issues making that happen at the industry level. that affect the industry, such as airport privatization. Also important was how we can better balance the We are also talking about using digital value chain. We are also looking into the tedious and technology to enhance the customer costly certification process that is required of airlines experience and to make our operations whenever they want to introduce innovation or more efficient. A good example is the equipment on the aircraft. All these are areas that we potential for predictive maintenance. are looking at in IATA. And we believe that they will have significant benefits for the industry as a whole. Digital disruption or transformation crosses the use of data, new Moreover, over the last year, we have looked closely technology, and artificial intelligence. at IATA’s governance structure. We are proposing These are all important areas that we to merge two of the committees of the Board of should continue to pursue to see how Governors—the Chair Committee and the Strategy the industry can benefit from them. and Policy Committee—into a single entity. It will meet more often allowing it to go into greater depth on key strategic issues that affect the industry.

6 GOH CHOON PHONG

How important is innovation in How can governments get the most out IATA BOARD OF GOVERNORS 2017–2018 distribution? of air transport? Innovation across the industry is Air transport is about bringing people CHAIR OF THE BOARD Robin Hayes Vitaly G. Saveliev President and Chief Director General and important. In the case of distribution, we and goods from countries all over the Goh Choon Phong Executive Officer Chief Executive Officer have the introduction of New Distribution world to their destinations. And in doing Chief Executive Officer JETBLUE AEROFLOT SINGAPORE AIRLINES Capability (NDC) and ONE Order. These so it has a catalytic effect on the global Pedro Heilbron Carsten Spohr are important standards for the industry. economy. It will have a lot of spin-offs for Executive President and Chairman and Chief MEMBERS Chief Executive Officer Executive Officer other economic activities, whether it is COPA AIRLINES LUFTHANSA With NDC, we can ensure we present a tourism, whether it is goods and services, (From April 2018) Yuji Akasaka Rupert Hogg Tan Wangeng consistent front-end retail experience or whether it is trade. President Chief Executive Officer President and Chief to our customers whether we are selling JAPAN AIRLINES CATHAY PACIFIC Executive Officer CHINA SOUTHERN AIRLINES directly or via travel agents. ONE Order The air transport industry should not be Akbar Al Baker Harry Hohmeister will build on advances from NDC to viewed as a source of revenue for the Chief Executive Officer Chairman Willie Walsh modernize and simplify airlines’ back government, whether it is the raising QATAR AIRWAYS AUSTRIAN Chief Executive Officer INTERNATIONAL office functions. Both are important of taxes, or other forms of revenue Saleh N. Al Jasser Alan Joyce AIRLINES GROUP for passengers because with NDC they generation. Director General Chief Executive Officer (representing BRITISH AIRWAYS) SAUDI ARABIAN AIRLINES QANTAS will be able to benefit from a more transparent offering of services and So, if you were to look at aviation and David Bronczek Liu Shaoyong ALSO SERVED President and Chief Chairman products from the airlines while ONE the air transport industry, it is important Operating Officer CHINA EASTERN (To June 2017) Order will provide a single order number to look at it in totality. With that in mind, FEDEX CORPORATION Mbuvi Ngunze (From August 2017) Group Managing Director and to replace today’s confusing system of when governments are implementing any Yang Ho Cho Sebastian Mikosz Chief Executive Officer passenger records. measures, IATA and airlines involved in that Chairman and Chief Group Managing Director KENYA AIRWAYS Executive Officer and CEO geography should be actively consulted KOREAN AIR KENYA AIRWAYS (To July 2017) How critical are global standards to and involved in the discussion. The goal Farhad Parvaresh Enrique Cueto Pham Ngoc Minh Chairman and Managing Director operational efficiency? should be to bring about an outcome that Chief Executive Officer Chairman IRAN AIR Global standards are absolutely best benefits the economy. LATAM AIRLINES VIETNAM AIRLINES (To January 2018) important. As we see in the case of Pieter Elbers (From April 2018) Fernando Pinto e-tickets and e-freight, where the Is it important to attract more President and Chief Oscar Munoz Chief Executive Officer definition of standards allowed the Executive Officer Chief Executive Officer TAP PORTUGAL low-cost carriers to IATA? KLM UNITED AIRLINES industry to move towards a paperless IATA is an aviation body for all airlines. (To March 2018) and efficient system for transactions. It is important for us to be representative. (From August 2017) Safwat Musallam Mark Dunkerley Mohamad El-Hout Chairman and Chief President and Chief That means we should have participation Chairman and Director General Executive Officer Executive Officer Similarly, NDC is a standard that from as many airlines as possible within the MIDDLE EAST AIRLINES EGYPTAIR HAWAIIAN AIRLINES allows us to be more transparent and industry. Of course, that includes the low- Tewolde GebreMariam (From April 2018) (To March 2018) offer more options in distributing our cost carriers (LCCs). Group Chief Executive Officer Christine Ourmières-Widener Masaru Onishi ETHIOPIAN AIRLINES Chief Executive Officer Chairman services and products to the FLYBE LIMITED JAPAN AIRLINES end consumers. It is important for us to attract more LCCs Naresh Goyal Chairman Douglas Parker (To May 2018) to join IATA. In fact, IATA has formed a JET AIRWAYS Chairman and Chief Andrés Conesa Going forward, an important part focus group to study how we can be more Executive Officer Chief Executive Officer Rickard Gustafson AMERICAN AIRLINES AEROMEXICO of IATA’s work will be exploring relevant and provide added value for President and Chief innovations that can deliver greater LCCs that might be looking to join. We will Executive Officer Calin Rovinescu (To May 2018) SAS President and Chief Jean-Marc Janaillac benefits at the industry level once pursue that and see what needs to be done Executive Officer Chairman and Chief everyone has adopted them. for us to enhance value. AIR CANADA Executive Officer AIR FRANCE/KLM (representing AIR FRANCE)

7 ALEXANDRE DE JUNIAC, DIRECTOR GENERAL AND CEO THE BUSINESS OF FREEDOM

For the world’s airlines, 2017 was a good industry’s 2017 profits were generated year. More people than ever traveled— there. It’s important to remember that, some 4.1 billion. The air cargo business for many airlines, day-to-day business is posted growth of 9.7%, the strongest a struggle. since 2010. What is the buffer between profit and Air travel is more accessible than ever. loss? We calculate it at $9.27 which is In 2017 airfares, in real terms, averaged the average profit that airlines made per less than half what they were in 1995. passenger in 2017. Margins are being The network has expanded to exceed squeezed, but we still expect a strong 20,000 unique city pairs. collective industry profit for 2018.

Financial performance Safety Airlines made a net profit of $38.0 billion The industry is also performing well on its in 2017. For a third year in a row, the return top priority—safety. In 2017 there were no on invested capital (9.0%) exceeded the fatalities on passenger flights operated cost of capital. With that trend continuing by jet aircraft. And the fatal accident rate into 2018, it appears that the industry was the equivalent of one for every 6.7 is finally able to deliver normal levels of million flights. profitability consistently. There is still work to be done to improve There will be some headwinds in 2018. safety. And much of that improvement There is evidence that the re-stocking will be guided by data. As the IATA cycle that breathed new life into air cargo Operational Safety Audit (IOSA) is winding down to more normal growth marks its 15th year, we are in the levels. Labor disputes are prevalent process of digitizing it. and taking their toll on some airlines. Meanwhile fuel and other input prices are That will contribute to climbing higher. our Global Aviation Data Management project The concentration of profitability in North which will house data America remains strong. About half the from multiple sources.

8 ALEXANDRE DE JUNIAC

The ultimate goal is to be able to use the looking towards an even more ambitious towards a more protectionist future. The association data to understand risk factors so well goal—cutting aviation’s net emissions to The threat of trade wars, raging debates In the face of these successes and that we can mitigate accidents before half of 2005 levels by 2050. To do so we on immigration, and efforts to replace challenges, IATA’s mission to lead, they happen. continue to urge governments to develop multilateralism with bilateral arrangements represent and serve the airline industry policy frameworks that will support do not bode well for the global economy remains relevant. Our membership has Security the commercialization of sustainable or the global air transport industry. grown to over 280 airlines from around One of the biggest challenges of 2017 was aviation fuels and to push forward major the world. Combined they provide 83% of security. In particular, unilateral bans on modernization projects for air traffic Aviation is globalization at its very best— air transport and operate across a broad large portable electronic devices (PEDs) management. linking people and economies as never spectrum of business models. And we by the US and UK on certain flights from before. We must be strong in reminding are working hard to welcome even more the Middle East and North Africa were a The infrastructure challenge governments that globalization has lifted diversity to the IATA fold. major challenge—on implementation and It is clear that the demand for air millions from poverty in the developing on maintaining public confidence in the connectivity will continue to grow. world. At the same time, developed Aviation is a tough business. Airlines security of the global air transport system. Governments understand that the nations have benefited with expanded compete intensely for each and every economic impact of aviation on their purchasing power. As the Business of customer. But they cooperate through Eventually, industry and governments economies is critical—supporting 63 Freedom, aviation must and will be IATA to strengthen the industry’s cooperated to find alternative measures. million jobs globally and underpinning a strong voice for continued global foundation. Working with our members, And airlines did an exceptional job of $2.7 trillion in economic activity. However integration. our goal continues to be to provide introducing these measures in a very they are not building critical infrastructure safe, efficient, sustainable and profitable tight time frame. The focus now is on fast enough to keep pace with demand. Efficiency global connectivity. the successful implementation of the In addition to being the airline industry’s Global Aviation Security Plan, under Given long timelines to develop global advocate, IATA is also a common the leadership of the International Civil infrastructure, it is clear that we are back office for many critical functions— Aviation Organization and with the full heading for a crisis. not least of which are our financial support of the industry. services. In 2017, IATA’s Financial A strategic review of the Worldwide Slot Settlement Systems handled $433.4 Sustainability Guidelines will help ensure that scarce billion of industry funds successfully. Airlines are preparing for the introduction capacity is measured and allocated fairly Our NewGen ISS initiative will further of the Carbon Offsetting and Reduction and transparently; and with sufficient modernize the system with the goal Scheme for International Aviation predictability that airlines are able to of providing faster, cheaper and ALEXANDRE DE JUNIAC (CORSIA). Emissions reporting make critical fleet plans. In parallel we safer payments. Director general and CEO in 2019 will form the basis are launching a major campaign to of the scheme which is work with governments to help them As we mark 10 years of the global critical for the industry’s find appropriate funding mechanisms conversion to paper tickets, New commitment to to develop airports that can affordably Distribution Capability is primed to take carbon neutral satisfy demand with quality infrastructure. airline distribution into the modern era. growth from 2020. And, our ONE Order initiative will complete Open borders the circle with a major innovation of The importance of The fortunes of the industry depend back-office processes and replacement of this achievement on borders that are open to people today’s multiple reservation records with a cannot be over-stated. and to trade. There is a global political single order number. And we are already undercurrent that is pushing the world

9 01 INDUSTRY STORY IN 2017 01 DEMAND GROWS STRO N G LY: BUSINESS MODELS EVOLVE

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11 01 INDUSTRY STORY IN 2017

Air transport delivers more Direct connections are …was led again by Air freight carried momentum choice, at a lower cost boosting demand growth in China through the year In 2017, airlines connected a record Connecting cities directly cuts the cost of In 2017, the domestic China passenger After picking up in the second half number of cities worldwide, providing air transport by saving time for shippers market again provided the largest of 2016, industry-wide freight tonne regular services to more than 20,000 city and travelers. Combined with cheaper incremental increase globally in the kilometers (FTKs) rose 9.7% in 2017, up pairs. This is an increase of 1,351 over the fares and stronger economies, the boost number of passenger trips, adding a from 3.6% in 2016. Air freight grew more number of city-pair connections in 2016 from time savings resulted in worldwide massive 59 million journeys compared than twice as fast as global trade volumes and a doubling of service since 1995, air passenger numbers exceeding four with 2016. The composition of the world’s overall during 2017—the widest margin of when there were less than 10,000 city- billion in 2017 for the first time. In 2000, top three increasing origin-destination outperformance since the rebound from pair connections globally. Over this same the average citizen flew just once every (O-D) markets was unchanged from 2016, the global financial crisis in 2010. period, the cost of air travel for consumers 43 months. The time between trips in with the domestic markets of the United has decreased by more than half in real 2017 was lower by nearly half, at only 22 States and India once more ranking The strong growth in air freight volumes (inflation-adjusted) terms. Chart 1 months. Chart 3 second and third, respectively. Many of was driven by the global inventory these O-D markets delivered double-digit restocking cycle and by buoyant demand growth in 2017, with the strongest being for manufactured exports. In annual terms, Air transport supports Strong passenger Japan–Korea, where the number international FTK growth accelerated in all economic growth and prosperity demand in 2017… of passenger journeys increased more regions in 2017 compared with 2016, most through tourism and trade The demand for air passenger services than 26%. Chart 5 notably in Africa. Chart 6 International tourists traveling by air grew strongly in 2017, with industry-wide are estimated to have spent $711 billion revenue passenger kilometers (RPKs) in 2017, an increase of almost 6% over increasing 8.1%. This is the fastest growth 2016. More and cheaper city connections in more than a decade, since 2005, and is also boost trade in goods and services well above the long-run average of 5.5%. and heighten foreign direct investment and other important economic flows. Passenger growth in 2017 was supported Although more than 99% of world trade by a broad-based improvement in global by weight is by surface transport, more economic conditions and by lower than one-third by value is transported airfares, mainly earlier in the year. Lower by air. IATA estimates the value of goods fares have been a tailwind for passenger carried by air in 2017 to have been $5.9 demand since late 2014 and have helped trillion, representing almost 7.5% of world to drive the RPK/GDP multiplier above its GDP. Chart 2 long-term median level for three years in a row. Chart 4

Air freight grew more than twice as fast as global trade volumes overall during 2017.

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1 2 3 UNIQUE CITY PAIRS AND AIR TOURIST SPENDING AND ACCESSIBILITY OF REAL TRANSPORT COSTS VALUE OF TRADE CARRIED BY AIR AIR TRAVEL

1.6 4.5 22,000 Unique city pairs 750 Air tourist spending 8,000 Scheduled air pax (billion) 50 Real cost of air transport Value of traded goods carried by air Months before next trip 1.5 700 4.0 45 20,000 7,000 1.4 650 3.5 40 18,000 1.3 6,000 600 3.0 35 1.2 550 30 16,000 5,000 2.5 1.1 500 25 2.0 14,000 4,000 1.0 450 20 1.5 0.9 prices) (2014 $/RTK 400 15 flights Months between 12,000 3,000 goods ($ billion) Traded 1.0 Number of unique city pairs Number of Billion air passengers per year Billion air passengers 0.8 spending ($ billion) Air tourist 350 10 10,000 2,000 0.5 0.7 300 5 0 8,000 0.6 250 1,000 0

2011 2017 2011 2017 2011 2017 20002001200220032004200520062007200820092010 2012 20132014 2015 2016 20002001200220032004200520062007200820092010 2012 20132014 2015 2016 20002001200220032004200520062007200820092010 2012 20132014 2015 2016

4 5 6 RPK VERSUS WORLD TOP 10 INCREASING AIR FREIGHT VERSUS GLOBAL GDP GROWTH O-D MARKETS IN 2016 GOODS TRADE GROWTH

16 Industry RPKs 9 25 25 Domestic China 14.6% Industry FTKs World GDP World goods trade 14 Domestic US 4.7% 20 20 7 12 17.6% Domestic India 15 15 10 5 Domestic Japan 6.9% 8 10 10 Domestic Mexico 15.2% 6 3 5 5 Domestic Indonesia 5.5% 4 % year on year % year % year on year % year 0

% year-on-year growth rates on year % year 0 1 United Kingdom–Spain 10.6% on year % year 2 Domestic Spain 15.6% -5 -5 0 -1 Domestic Russia 9.9% -2 -10 -10 Japan–Korea 26.4% -4 -3 -15 -15 0 5 10 15 20 25 30 35 40 45 50 55 60 2011 2017 2011 2017 20002001200220032004200520062007200820092010 2012 20132014 2015 2016 Absolute increase in O-D journeys (2017, million, year on year) 20002001200220032004200520062007200820092010 2012 20132014 2015 2016

13 01 INDUSTRY STORY IN 2017

Demand for air transport Airlines raised their achieved load looking to expand their networks, for robust financial outcomes in the broader services was not matched factor, maintaining a gap above example through antitrust-immune historical context of the industry, albeit by capacity increases the breakeven level joint ventures, which make it possible one that would simply be considered a Industry-wide increases in capacity in With oil prices, interest rates, and such other to achieve economies of density and to normal performance in most industries. 2017 failed to keep pace with strong key costs as labor rising in 2017, the estimate serve “thinner” city-pair routes than would This outcome was boosted by tax demand growth. On the passenger side, for the industry-wide breakeven load factor otherwise be possible; equity investments; credits, and a number of one-off financial global available seat kilometers (ASKs) increased sharply to 64.0%. However, the or other types of partnerships. transactions, even as trading conditions increased 6.7% in 2017 compared with increases in passenger and freight load became more challenging. The operating 2016. For freight, available freight tonne factors meant that the combined achieved In 2017, the industry also saw the demise profit margin eased moderately in 2017 as kilometers (AFTKs) grew 4.8% year load factor also rose, 1.5 percentage points, of some airlines, notably in Europe. This unit costs outpaced unit revenues. At an on year in 2017—the slowest full-year to 69.2%, enabling airlines to maintain highlights the evolving industry structure, estimated 7.5% of revenues, the operating growth rate since 2013. a solid gap above the level required for which includes consolidation in some markets. profit margin also remains around financial breakeven. The gap between the historical highs. Prior to 2015, industry- As a result, passenger and freight load breakeven and achieved load factors is wide operating profit margins of this order factors increased in 2017. The industry- driving profitability and returns and was Airline investors received an were last seen in the 1960s. Chart 11 wide passenger load factor rose 1.0 again critical to the industry’s financial above-cost-of-capital return for percentage point compared with 2016, to a performance in 2017. Chart 9 the third consecutive year record high 81.5% for a calendar year. With Another important way of considering Regional financial performance freight demand growing at double the rate profitability is the perspective of the remains mixed of capacity, the increase in the freight load Airline business models and industry’s capital providers. Equity Regionally, the industry’s financial factor was even larger than the increase industry structure evolves further investors in the airline industry have performance is mixed. There has been in the passenger load factor, up a sizeable There was further evolution of air transport typically not been rewarded adequately some convergence in profitability, but 2.2 percentage points relative to 2016 for a markets and airline business models in for risking their capital until the past few wide differences remain. North America return to its 2011/12 level. Chart 7 2017. The long-haul, low-cost (LHLC) years. Despite a moderation in industry- continues to outperform, with an model continued to gather momentum, wide returns, to 9.0%, and a rise in the operating margin of around 11%, solidly particularly in the North Atlantic market, cost of capital, to 7.1%, 2017 is the third above the industry average of 7.5%. World oil prices rose significantly with a number of legacy carriers having consecutive year when the industry’s but affected regions unevenly established LHLC subsidiaries. More return on capital exceeded its average The robust growth of the air freight Broadly speaking, 2017 was a year of two broadly, low-cost carriers (LCCs) are cost of capital and generated a normal segment in 2017 was an important halves for crude oil and jet fuel prices. pursuing practices previously thought to return for investors. Creating value for contributor to the improved financial The first half of the year saw prices drift be part of the full-service carrier (FSC) investors will be an increasingly crucial result for Asia-Pacific carriers, which lower, but that trend was reversed in the model: the use of global distribution element in attracting the capital necessary generally rely more on freight to be year’s second half. Oil and jet fuel prices systems; of frequent-flier programs; and to fund fleet renewal and replacement in an important contributor to their ended the year around 20% higher than of connecting or feeder traffic, including the years ahead. Chart 10 business. The impact of various policy at the beginning of the year. The impact the LHLC services of other airlines. The decisions—including travel restrictions of the increase, though, was not equal FSCs are also adopting many of the cost- and the ban on electronic devices—and across countries. For most, a weak US efficiency practices pioneered by LCCs. The level of profits remains high intense competition in some leading dollar helped to a varying degree to Supported by strong demand and a markets negatively impacted the financial offset rising prices. Mexico and South These developments are blurring the healthy economic backdrop, the airline performance of Middle Eastern carriers in Africa were most insulated by exchange distinction between the FSC and LCC industry generated an estimated net 2017. Despite signs of gradual improvement, rate fluctuations, whereas Brazil was a models, resulting in a hybrid business post-tax profit of $38.0 billion in 2017. the challenging operating environment for notable exception. Chart 8 model. Airlines, meanwhile, are also This was the third consecutive year of airlines in Africa remains clear. Chart 12

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7 8 9 INDUSTRY PASSENGER AND EXCHANGE RATE–ADJUSTED BREAKEVEN AND FREIGHT LOAD FACTORS JET FUEL PRICES (2017) ACHIEVED LOAD FACTORS

85 Passenger load factor 56 130 70 Breakeven load factor 70 Freight load factor Brazil Achieved load factor 83 54 US dollar 120 terms 68 68 81 Euro 52 China 79 Russia 110 South Africa 66 66 50 Mexico 77

75 48 100 64 64

73 46 90 62 62 71 % of available capacity available % of 44 capacity available % of 69 % of available tonne kilometers tonne available % of 80 60 60 kilometers tonne available % of 42 67 = 100) Jan 2016 (Index, Jet fuel prices

65 40 70 58 58

2001 2010 2011 2012 20132014 2015 2016 2017 2001 2010 2011 2012 20132014 2015 2016 2017 2000 20022003200420052006200720082009 Jul 17 2000 20022003200420052006200720082009 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17

10 11 12 RETURN ON CAPITAL GLOBAL COMMERCIAL NET POST-TAX PROFIT INVESTED IN AIRLINES AIRLINE PROFITABILITY ($ PER PASSENGER)

40 12 Weighted average cost of capital (WACC) 12 10 EBIT margin 25 Return on capital (ROIC) Net post-tax profit 11 11 8 30 10 10 20 $19.56 6 9 9 20 4 8 8 15 10 7 7 2 6 6 0 0 10 $9.27

$ billion $7.53 5 5 -2 $6.82 % of revenues % of -10 $4.81 4 4 5 % of invested capital invested % of % of invested capital invested % of -4 3 3 -20 $1.57 -6 2 2 0 -30 -8 1 1 -$1.66 0 0 -10 -40 -5

2011 2017 2011 2017 20002001200220032004200520062007200820092010 2012 20132014 2015 2016 20002001200220032004200520062007200820092010 2012 20132014 2015 2016 Africa Industry Europe Asia-PacificMiddle East North America Latin America 15 02 SAFETY 02 FLY I N G SAFELY: THE NUMBER ONE PRIORITY

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17 02 SAFETY

Safety continues to improve There were 6 fatal accidents in 2017, Sub-Saharan Africa continued to make Asia-Pacific operators have had the The last decade saw continued resulting in 19 fatalities among passengers strong progress on safety. Airlines in highest number of accidents in the last improvements in overall safety and crew. This compares with an average the region had zero jet hull losses and five years, compared with other IATA performance. Industry measures have of 10.8 fatal accidents and 315 fatalities zero fatal accidents involving jets or regions, with an average of 24% of the resulted in a 70% reduction in the accident per year for the 2012–2016 period and turboprops for a second consecutive world’s accidents. However, there are signs rate, from 3.60 per million flights in 2008 with 9 fatal accidents and 202 fatalities year. The region’s turboprop hull loss and of improvement in the region’s accident to 1.08 per million flights in 2017. in 2016. None of 2017’s 6 fatal accidents all-accident rates declined against the rate, which was down from 2.33 per involved a passenger jet. Of that total, 5 averages of the previous five years. The million flights in 2016 to 1.54 per million The equivalent of more than half the involved turboprop aircraft and 1 involved 2017 turboprop hull loss rate, however, flights in 2017. world’s population—4.1 billion travelers— a cargo jet. The crash of the cargo jet also increased from 1.52 to 5.70 compared flew safely on 41.8 million flights in 2017. resulted in 35 fatalities on the ground. with 2016. And that, in turn, was largely Turboprop aircraft operated 16.5% of the IATA member airlines experienced zero responsible for an increase in the all- world’s commercial flights in 2017 but fatal accidents and zero hull losses with jet accident rate compared with 2016, from accounted for 44% of all accidents and or turboprop equipment. IOSA-registered 2.43 to 6.87 in 2017. 5 out of the 6 fatal accidents. A positive airlines experienced one accident for every improvement in turboprop safety can be 1.8 million flights in 2017 whereas the rate seen when the 2017 accident rate of 2.90 for carriers not on the register was one per million flights is compared with the accident for every 460,000 flights. five-year (2012–2016) rate of 4.89 per JET AIRCRAFT HULL LOSS RATES PER MILLION FLIGHTS million flights.

Detailed information on the industry’s safety performance can be found in the IATA 2017 Safety Report.

Commonwealth of Independent States Europe 0.13 0.92 N o r t h A m e r i c a 0.27 0.00 0.00 1.17 North Asia 0.14 Middle East and 0.00 0.32 North Africa 0.22 0.00 0.00 0.00 1.67 2017 0.74 2016 Latin America Africa Asia-Pacific 2012–2016 World IATA and the Caribbean 0.00 0.18 member 0.41 0.00 0.58 0.11 0.00 0.80 2.21 0.48 0.39 0.30 0.53 0.33 0.17

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Six-Point Safety Strategy fatigue and mental health; cabin safety; the Ground Damage Database (GDDB) ICAO continues to study issues IATA’s Six-Point Safety Strategy is a smoke, fire, and fumes, including unusual designed to facilitate data-driven surrounding the carriage of passengers’ comprehensive, data-driven approach to odors; maintenance contributors to flight decisions to measurably reduce aircraft PEDs in checked baggage. IATA continues identifying organizational, operational, risk, from errors to noncompliance; and ground damage to represent the industry in the discussion and emerging safety issues. Its six points security threats. the IATA Operational Safety Audit on the carriage of lithium batteries and are as follows: (IOSA) PEDs by participating in the work of the IATA is developing safety performance the IATA Safety Audit for Ground applicable ICAO panels. reducing operational risk indicators (SPIs) to monitor events in Operations (ISAGO) enhancing quality and compliance these areas and to identify precursors through audit programs to more-serious incidents and accidents. The GADM program includes information In-flight turbulence advocating for improved This approach to measuring safety from over 470 organizations. More than IATA is also developing a global database aviation infrastructure, such as the performance is essential for safety 90% of IATA’s members contribute to at of turbulence reports to provide airlines implementation of performance-based management and decision making. least one GADM database. with an enhanced situational awareness navigation (PBN) approaches tool that will facilitate a significant supporting the consistent implementation IATA and the Civil Aviation Authority decrease in passenger and cabin crew of safety management systems Global aviation of Singapore (CAAS) recently signed a injuries from in-flight turbulence. Airlines, supporting effective recruitment and data management memorandum of collaboration to establish manufacturers, data service providers, training to enhance quality and compliance Historically, aviation has relied on the a Safety Predictive Analytics Research software developers, and various weather identifying and addressing accident investigation process to guide Center (SPARC) in Singapore. SPARC will information providers are involved in the emerging safety issues safety improvements. As the number of leverage operational safety information project, which aims to go live in 2019. accidents declines, future advances will available under the GADM initiative to The aim is to share real-time, in situ depend on analyses of flight information assess potential hazards and identify turbulence reports between aircraft in Current and emerging and other data resources to achieve a safety risks, many of which are otherwise flight and their respective dispatch and safety risks thorough understanding of what happens difficult or impossible to foresee. flight operations departments. IATA works to implement safety programs in the more than 100,000 flights that that identify and reduce operational operate safely every day. The Global and fatality risks. IATA’s data-driven Aviation Data Management (GADM) Lithium batteries Aircraft tracking assessments and data analyses and Safety program integrates many sources of The industry continues to work to ensure Many airlines track their aircraft in Group of experts from member airlines operational data received from various that lithium batteries can be carried remote airspace through a variety of have identified the following areas of channels and includes the following: safely. IATA, through the IATA Dangerous means. On 10 November 2015, the ICAO focus for improving safety in aviation: Goods Board, issued an addendum to Council adopted a common aircraft controlled flight into terrain (CFIT); the STEADES database of de-identified the 2018 edition of the Dangerous Goods tracking standard and made all operators loss of control in flight (LOC-I); midair airline incident reports, the world’s largest Regulations to restrict the carriage of responsible for tracking their aircraft collision; runway safety, including runway such resource what is known as smart luggage; that is, throughout their areas of operations at excursion, runway incursion, incorrect the Flight Data eXchange (FDX) luggage with lithium batteries installed intervals of 15 minutes, as required in landing, and takeoff surface; third-party aggregated, de-identified database for use as a power bank to charge a oceanic airspace and recommended for oversight; human performance and crew of flight data monitoring and flight portable electronic device (PED) or to all airspace. Aircraft tracking by airlines is resource management (CRM), including operations quality assurance (FDA/ power motorized wheels on the bag. not required in airspace where air traffic crew experience; ground operations, FOQA)–type events, which helps airlines IATA has issued a guidance document on service (ATS) surveillance is performed in including loading errors and integrity and to proactively identify safety hazards managing smart baggage with built-in intervals of 15 minutes or less. load sheet; dangerous goods, such as lithium batteries and electronics. lithium batteries; fitness for duty, involving

19 02 SAFETY

ADDRESSING THE PRIMARY CAUSES OF ACCIDENTS The aircraft tracking standard became To help countries define and implement effective in July 2017 and will become UAS regulations, in 2017 IATA, other key mandatory on 8 November 2018. The air transport industry stakeholders, and human performance Loss of Control Midair Collisions standard is performance based and national civil aviation authorities (CAAs) In Flight deficiencies, The Eurocontrol Safety allows for the use of new systems and worked with ICAO to develop a toolkit to From 2013 to 2017, LOC-I the common hazards Improvement Sub Group accounted for only 9% of all that may lead to CFIT (SISG) identified non- technologies as they become available. guide UAS safe operation and governance. reported accidents. LOC-I, accidents, and compliance with TCAS RA In addition, ICAO issued a letter on however, generally has a the factors contributing to a (traffic collision avoidance 20 March 2017 emphasizing national loss of situational awareness. high severity, with 93% of system resolution advisory) Unmanned aircraft systems responsibilities to protect civil aircraft LOC-I accidents resulting in among its top five air fatalities from 2013 to 2017. IATA encourages mitigations traffic management (ATM) Unmanned aircraft systems (UAS) from pilotless aircraft. IATA works with airlines to to CFIT that include but are operational safety priorities represent a potential hazard to civil reduce LOC-I risks through not limited to in 2017 and launched a aviation, particularly through their The transition from prescriptive- to activities that should result in study into the issue. It was irresponsible use in the vicinity of performance-based regulations for UAS an understanding of adherence to crew concluded in the planning airports and manned aircraft. Many UAS and the establishment of target levels procedures; stage of the study that the the common hazards and the use of enhanced ground best source of information are being flown by people unfamiliar with for safety will set the foundation for contributing factors that proximity warning systems is pilots. A voluntary online the safety risks and with civil aviation and the implementation of further safety may lead to LOC-I, such as (EGPWS) and updated survey was proposed and its regulations. initiatives. IATA participates in developing databases; meteorological conditions supported by IATA and a policies and operational technology and aircraft malfunctions enhanced CRM and number of European aircraft affecting flight control, and pilot monitoring; operators, and the resulting In 2016, IATA launched an awareness concepts to enhance safety. Priorities manual handling errors and the use of a continuous survey prompted some 3,800 campaign to educate and alert UAS users include the following: faulty decision-making. descent final approach responses from pilots in 90 about the importance of their responsible (CDFA) technique, where countries. use. IATA has also been working with dynamic geofencing that provides IATA, supported by IATA’s a continuous descent is the following stakeholders to promote adaptable virtual barriers using a Pilot Training Task Force maintained along a The IATA Safety Group (PTTF), has developed vertical path; and believes that operators the safe use and integration in airspace combination of global positioning system the Guidance Material the implementation of PBN. should develop a risk-based of UAS: Airlines for Europe (A4E); (GPS) and radio frequency connections, and Best Practices for the TCAS minimum equipment Airports Council International Europe such as Wi-Fi or Bluetooth, to keep UAS Implementation of Upset Runway Safety list (MEL) policy so that, for (ACI Europe); the Civil Air Navigation from entering dangerous, restricted, or Prevention and Recovery example, an aircraft with an IATA worked closely with the Training (UPRT) manual unserviceable TCAS cannot Services Organisation (CANSO); the sensitive airspace International Civil Aviation to help address factors be dispatched into airspace European Cockpit Association (ECA); the detect and avoid (DAA) technology Organization (ICAO) in 2017 contributing to LOC-I. that uses in-flight broadcast to analyze runway safety European Helicopter Association (EHA); analyses of UAS incidents and accidents procedures (IFBP). IATA data from global aviation the International Federation of Air Line to identify trends and support safety also believes that operators data management (GADM) Pilots’ Associations (IFALPA); and the management systems (SMS) and state Controlled Flight should use their flight data programs and to develop the into Terrain management (FDM) programs International Federation of Air Traffic safety programs (SSP) ICAO Global Runway Safety CFIT accidents from 2013 to monitor pilot response to Controllers’ Associations (IFATCA). Action Plan (GRSAP). The through 2017 represent 4% TCAS RA to ensure that a GRSAP was published in It is becoming increasingly important of the total accidents in that TCAS RA maneuver is carried November 2017 coincident for UAS to be safely integrated into five-year period. The CFIT out correctly and in a timely with the Second ICAO accident rate has declined, manner. Operators should overall airspace. Developing UAS traffic Runway Safety Symposium but CFIT remains a concern also address any identified management (UTM) architecture will in Lima, Peru, in which IATA because of the high number shortcomings through training participated. require new technologies and safety of fatalities associated and awareness campaigns. with this type of event. To and security standards and safeguards. understand and mitigate IATA will continue to participate in UTM CFIT, IATA is committed to concept development. understanding

20 SAFETY 02

Safety audits This project will facilitate effective and Also under consideration is expanding the International Airline Training Fund efficient audits and benchmarking and scope of ISAGO audits. If implemented, The International Airline Training Fund IOSA lead to a further reduction of redundant this could lead to a further reduction in (IATF) is funded by IATA and its members Since its launch 15 years ago, the IATA audits. The increased reliability of audits duplicate audits for GSPs. and sponsors capacity-building initiatives Operational Safety Audit (IOSA) has will, in turn, engender heightened trust in for airlines and other aviation industry become the global benchmark for airline IOSA worldwide. The new ISAGO model was developed in stakeholders where they are most needed operational safety management. In 2017, consultation with stakeholders, and the globally. In 2017, the IATF trained 3,408 the accident rate for IOSA members was ISAGO transition to it has been completed. aviation industry professionals from almost four times lower than for non-IOSA The IATA Safety Audit for Ground developing nations, particularly from airlines and more than 2.5 times lower Operations (ISAGO) is an aviation Africa (86%). than over the previous five years. industry ground service provider (GSP) Quality assurance program registration scheme. It is aimed primarily Data management and analysis are the Enhancing aviation safety remained the IOSA is a worldwide standard that enables at establishing safe ground operations and main pillars of the quality assurance IATF’s priority through the continuation and maximizes the joint use of audit raising cost benefits by reducing the risk of programs underpinning the integrity of the IOSA Implementation Training reports. To date, IOSA has saved the aircraft damage and personnel injuries and of IOSA and ISAGO. In line with a new Initiative for African Airlines (IOSA-ITI) air transport industry more than 7,900 eliminating redundant audits by airlines. request from the IATA Board, IATA and the delivery of on-demand training redundant audits and led to extensive cost monitored the number of IOSA audits, courses on operational safety. Six airlines savings for IOSA-participating airlines. A 2017 analysis of ground damage observing that 31 were conducted in 2017. achieved IOSA certification thanks to the database (GDDB) data showed that IATA also identified observing audits IATF’s training support in 2017. Since 2008, all IATA members must ISAGO-registered providers exhibited a for IOSA and ISAGO and the monitoring maintain IOSA registration. Of the 430 better reporting culture than non-ISAGO of individual auditor performance as a The IATF also sponsored four rounds of airlines on the IOSA Registry, however, 141 providers. They reported 78% of all the performance measure for 2018. the IATA Diploma in Airline Management in are non-IATA members, a testament to damage they caused, compared with only 2017. This sponsorship helped to develop IOSA’s widespread appeal. 34% for non-ISAGO GSPs. the aviation business skills of young airline professionals in Africa and from small An IATA focus in 2018 will be to progress Improvements to enhance the scope island countries in the South Pacific. with the IOSA digital transformation and value of ISAGO results were rolled project by further prioritizing potential out in 2017: solutions. Another focus within that project will be the review and improvement of Moving to a corps of dedicated auditors THE ISAGO REGISTRY audit methods and practices. and away from a pool of voluntary auditors. Because ISAGO audits will As of February There are more than The IOSA digital transformation project be conducted, with IATA oversight, 2018, the number MORE THAN has three strategic pillars: by professionally trained and certified of GSPs in the . auditors, they will be of consistently ISAGO Registry the optimization and digitalization of the the highest quality. This should lead had surpassed 440 internal audit program processes to regulators’ and airlines’ growing registered ISAGO 1,600 the use of advanced analytics acceptance of ISAGO audits. stations at over the deployment of a collaborative Restructuring the cost model to ensure platform for industry stakeholders a more even distribution of program 228, audits have been expenses between GSPs and airlines. an increase from 10% 300 performed since 2016 of more than airports worldwide. ISAGO’s inception.

21 03 SECURITY 03 SECURITY PROCESSES: PLANNING AND COOPERATION FOR IMPROVED OUTCOMES

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23 03 SECURITY

A challenging year ICAO Global Aviation Resolution 2309 also urged nations to Portable electronic devices Security and facilitation issues presented Security Plan implement ICAO Annex 17 standards at In March 2017, the US Department of several challenges to civil aviation in 2017. The 2016 United Nations Security Council every airport within their jurisdictions Homeland Security (DHS) issued a Among the developments were the US Resolution 2309 on Aviation Security and to urgently address any gaps or security directive to ban large PEDs from travel ban imposed without warning on reaffirmed the obligation of countries vulnerabilities. the cabins of US-bound flights originating travelers from seven nations; the months- to ensure the security of their citizens from 10 airports in the Middle East and long ban on portable electronic devices and of other nationals against terrorist ICAO also shared with the IATA Security North Africa. The UK Department for (PEDs) in cabin baggage on direct flights attacks on air services operating within Group (SEG) a detailed roadmap with 94 Transport (DfT) followed suit a short to the United States and the United their territories. It likewise reaffirmed the tasks for ICAO members, other countries, time later with similar restrictions but Kingdom from several African and Middle responsibility of nations to safeguard and the industry. IATA is directly involved a different list of airports. Airlines Eastern countries; the implementation of their citizens and other nationals against in the delivery of more than 25% of the immediately complied with the directives enhanced security measures when flying terrorist attacks on international civil 94 tasks. Global GASeP tasks are being but noted the potential fire hazard of into the United States from 285 locations aviation wherever these may occur. integrated into SEG programs, and the PEDs in the cargo hold and the on-the- following the removal of the PEDs ban; SEG will provide progress reports to ICAO ground difficulties arising from aircraft and the release of the ICAO Global on a regular basis. with different security requirements Aviation Security Plan (GASeP). departing the same airport. ICAO, meanwhile, is developing regional GASeP roadmaps that combine regional Following robust, IATA-led calls for security and facilitation programs and alternative measures, in June 2017 the GASEP’S FIVE PRIORITIES plans under one framework. IATA is again US DHS and Transportation Security involved, by building on regional security Administration (TSA) released new and facilitation initiatives. requirements that allowed carriers to unlock the ban, although details were not publicly disclosed. IATA’s SEG led 1 consultation efforts with the TSA to Enhance risk awareness and understand the flexibility in implementing response the new requirements. This resulted in updated directives, with the latest

5 2 released in December 2017. Clear, alternative means of compliance on Increase Develop a security In November cooperation culture and certain aspects of the measures were 2017, ICAO and support human capability provided to affected airlines. released GASeP, in security which has five priorities: 3 4 Improve Elevate oversight technological and quality resources and assurance foster innovation

24 SECURITY 03

This sequence of events shows yet again Smart Security Smart Security guidance documentation In 2018, IATA will dedicate efforts to that unilateral security measures are Smart Security is a joint initiative of IATA and global outreach have contributed realizing the long-term vision for Smart not as effective as globally coordinated and Airports council international (ACI) to Smart Security’s success. A focus Security for a more sustainable, efficient, schemes that benefit from aviation that improves security outcomes in light in 2017 was support for the industry’s and effective passenger and cabin industry input. The security of civil of ever-evolving threats while delivering implementation of improved explosive baggage screening process. Accelerating aviation and its passengers is indeed a increased operational efficiency and an detection capabilities. Guidance was the development and proliferation fundamental responsibility of individual enhanced experience in the passenger produced on technology, hardware, of advanced screening technologies governments. And airlines stand ready to and cabin baggage screening process. It operational concepts, and standards will be considered as will overcoming assist and comply with all such security does this through innovative technologies for consideration by airports, screening the impediments to establishing a measures. Airlines, though, cannot, be and processes combined with risk-based authorities, airlines, and authorities. IATA risk-based regulatory framework that held responsible for the implementation of security concepts. also leveraged expertise from Smart advances differentiated screening for security measures. Security to support its members in passengers and their belongings. IATA Many of the technologies and process responding to the March 2017 PED ban will also continue to focus on the primary Some nations preclude airlines from improvements spearheaded by Smart on certain flights. checkpoint and other strategies that will implementing secondary or carrier-own Security are becoming mainstream. For help remove or reduce the imposition of requirements. In addition, jurisdictional instance, lane automation, centralized Another focus in 2017 was the extraterritorial measures. regulations at an airline’s point of image processing, and checkpoint development of key performance metrics departure may conflict with regulatory management systems, which were in their (KPM) to allow airports, screening compliance at the point of arrival, placing infancy when Smart Security commenced, authorities, and other stakeholders to airlines in a difficult position. Countries have become standard, and their adoption measure the efficiency of a specific need to recognize these challenges is spreading quickly. passenger checkpoint using standardized within the standards and recommended definitions and data collection practices framework that is the bedrock of methodologies. The KPM are not bilateral air service agreements. exhaustive but, rather, are a common base and a common language with regard to checkpoint efficiency.

Many of the SMART SECURITY technologies and process These airports report that, alongside other improvements process innovations, their automated lanes raise spearheaded by To date, operational efficiency as much as Smart Security 42airports have are becoming installed automated mainstream. screening lanes. 30%

25 03 SECURITY

Cybersecurity and personal Airlines will need to ensure that Conflict zones data protection they handle the personal data of EU July 2017 marked three years since the The increasing digitization of aviation passengers correctly and that third parties shooting down of MH17 over Ukraine. necessitates a robust cybersecurity processing personal data on their behalf In the time since, militarized hostilities strategy. IATA proposed and launched also comply. The EU GDPR is stringent have continued and arguably increased Airlines are engaged a task force to address cybersecurity in about permissions for using personal data in areas where civil aviation aircraft are in risk assessments 2017. The Aviation Cyber Security Task and about where that data is held, how it known to operate. prior to the dispatch Force (ACSTF) of industry experts in this is protected, how long it is kept, and what emerging area of risk to air transport will to do if a personal data breach occurs. IATA member airlines are engaged in of aircraft based on report to the SEG. The aim is to gather risk assessments prior to the dispatch IOSA standards. But information, determine the scope of the Consent for using data needs to address of aircraft based on IOSA standards. better intelligence and threat, and identify best practice for a single, specific purpose of processing. If But better intelligence and information- airlines regarding the increasing probability an organization’s services involve multiple sharing by nations is required. In May information-sharing by of a cyber breach of aircraft systems. processing operations for more than one 2017, ICAO adopted a standard on nations is required. purpose—as is likely in an end-to-end information sharing for Annex 17 that In Europe, meanwhile, the European air journey—separate consent for each deals with security. And in 2018, ICAO Union General Data Protection Regulation purpose must be obtained. is expected to publish a risk assessment (EU GDPR) comes into effect in May manual for civil aircraft operations over 2018. It introduces obligations for any Understanding legal obligations on data or near conflict zones. organization that offers services to “data protection on a global basis is complicated. subjects who are in the Union,” whatever The United States, for example, has a their nationality or place of residence and patchwork of federal and state laws regardless of their actual place of business governing data protection. The best way operations. This extraterritorial reach forward for airlines is to use the set of laws means that all major airlines are likely to that are the most stringent and applicable be covered by the EU GDPR and should to their operations as baseline standards. plan for compliance. Noncompliance For many, that will be the EU GDPR. is punishable by fines equal to 4% of global turnover—akin to fines imposed on multinational corporations under EU competition laws.

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Working together we can focus on innovating security for the 21st century, on creating an innovative system that acknowledges its interconnected nature. In the future, I envision a system where security measures are seamless, capable of detecting and addressing threats instantaneously, and where passengers can be screened at walking pace.

DAVID P. PEKOSKE, ADMINISTRATOR, U.S. TRANSPORTATION SECURITY ADMINISTRATION

27 04 REGULATION AND TAXATION 04 SMARTER REGUL ATION: BEST PRACTICES DEFINED

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Smarter regulations Brazil’s removal of Horario de Transporte Consumer protection In 2017, several large markets took action Smarter regulations deliver clearly (HOTRAN), an additional layer of slot The aviation industry operates in an to strike a better balance between defined, measurable policy objectives allocation procedures (reflecting the ultracompetitive marketplace and prizes protecting consumers and ensuring a in the least burdensome way. A smarter “reducing burdens and regular reviews” customer loyalty. Social media and citizen vibrant, competitive aviation marketplace. fiscal policy, for instance, will encourage principle); and journalism can magnify any incidents Brazil put in place its Resolution 400, air connectivity, not restrict it through Nigeria’s establishment of clear where standards of customer care are which liberalized the baggage allowance overtaxation. A policy framework based procedures for the release of blocked perceived to fall short. Airlines, therefore, on domestic and international flights; on smarter regulation principles positions airline funds (reflecting the “clarity and are highly incentivized to offer good Turkey suspended EU-like compensation a country for sustainable aviation growth. certainty” principle), resulting in the customer service and, if problems occur, for long delays; and Korea moved away release of backlogged funds. to try to put them right. Problems in 2017 from a proposal that would require tickets Examples of smarter regulation included overbooking and pet carriage to be refundable if purchased 91 days or approaches witnessed in 2017 include An important step forward in 2017 was incidents and the poor application of more in advance. the publication of smarter regulation best practices in serving passengers with Colombia’s introduction of a slots methodology (referred to as “good reduced mobility. regulation that is consistent with the regulatory practices”) in ICAO’s Manual Worldwide Slot Guidelines (WSG) on the Regulation of International Air Airlines have agreed to core principles reflecting the “consistency and Transport (Doc 9626). for passenger rights that governments coherence” principle); have endorsed through ICAO. When the circumstances of a flight delay or cancellation are within an airline’s control, the industry agrees that passengers have FUTURE TRENDS SMARTER REGULATION PRINCIPLES the right to care and assistance in the case of delays and rerouting and to refunds or In June 2017, IATA published a report other monetary compensation in the case on the future of the airline industry Smarter regulation policy Smarter regulation process of cancellations. with three goals in mind: design principles principles Consistency and coherence. Regulations Defining a clear need. The objective of a If governments put in place consumer 1 should not overlap and lead to contradictions regulation should be identified based on sound protection regulations that go beyond Anticipate the 2035 public policy agenda nationally or internationally and should be evidence, and available alternatives must be international conventions and airline and allow the industry to identify actions applied with oversight responsibility clearly considered. practice, it is important that these be that it can take now to better prepare for delineated. risks and opportunities ahead Assessing impact. There should be an developed in accordance with smarter Proportionality. The cost of regulations should assessment of the impact of any regulation. regulation principles. It is particularly be proportionate to the benefits they promise. Consulting. The drafting of regulations should vital that governments, regulators, and 2 Targeted at risk. Regulations should have involve those who are potentially affected. Provide thought-provoking substance to specific and well-defined objectives that respond the flying public understand the balance Reducing burdens and regular reviews. The advance similar discussions at an airline or directly to the risk identified. between protecting consumer rights and development and review of regulations should alliance level as the case may be Fair and non-distortive. Regulations should be focus on reducing the compliance burden. providing sustainable air services. applied fairly and should not place discriminatory Granting opportunity to respond and revise. burdens on any particular group. There should be clear procedures for responses 3 Clarity and certainty. Regulations should to adjudications and appeals and for any needed Engage with a wide range of government clearly define the groups they apply to, should revisions to regulations. departments and use the report as a furnish those groups with clear information platform to partner with regulators on about what is expected of them, and should give preparing for the future groups sufficient time for compliance.

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aircraft noise and emissions. It also 2018. IATA advocated to ensure proposes to introduce an air transport best practices were applied for tax by 2021 if the other measures international air transport leading are deemed insufficient. IATA up to VAT implementation in those 3 4 coordinated a joint industry letter nations. The other four member 1 to the Dutch government and will nations of the GCC will introduce VAT continue to consider further actions most likely in early 2019. to prevent the implementation of this taxation proposal, which runs counter to ICAO policies. ASIA-PACIFIC 4 AUSTRALIA SWEDEN The Australian government introduced A new aviation tax for passengers a bill increasing Australia’s Passenger departing Swedish airports came into Movement Charge from AUD55 effect on 1 April 2018. The tax ranges EUROPE to AUD60 effective 1 July 2017, from SEK80 to SEK400 depending on 2 AUSTRIA despite industry opposition. The bill, the distance flown and is supposedly The decision by the Austrian however, does include a government for environmental purposes. Yet, the government in 2017 to reduce its commitment to not increase the Swedish government’s own study TAXATION ticket tax 50% on 1 January 2018 AUD60 rate for five years. states that a tax is not an appropriate was a welcome development. measure to reduce emissions. NEW ZEALAND Excessive taxes on aviation impede economic growth, and affect the ability of GERMANY IATA is fighting a proposed tourism UNITED KINGDOM air transport to meet demand. Aviation taxes, moreover, should not be used to Germany’s Air Transportation Tax tax in New Zealand. IATA argues The UK government’s devolution subsidize other modes of transportation or to make up budget deficits. continues to penalize German that the charge would contravene of responsibility for the UK Air consumers, to disadvantage German accepted ICAO guidelines and could Passenger Duty (APD) led in late 2016 carriers, and to hamper the German result in a reduction of 78,000 to a draft bill to replace the APD with THE AMERICAS ST. LUCIA economy. It is hoped that the international passengers per year to an air departure tax (ADT) at airports 1COLOMBIA St. Lucia increased taxes and fees, country’s new coalition government New Zealand and lower the country’s in Scotland. The Scottish government Colombia introduced its Connectivity including its Airport Development will make reviewing the tax a priority. GDP $70 million. proposes the ADT set at 50% of the Tax in June 2017 as a passenger Fee, in 2017 to fund its repair of APD rate, a move it believes will ticket tax on domestic and roads and to construct a cruise ship ITALY INDIA boost the Scottish economy. The bill international departures to fund terminal. IATA opposes the increase The IRESA tax, the Italian noise India introduced a goods and services remains on hold. an access tunnel and routes linking and the use of the funds. emissions tax for civil aircraft, is tax (GST) regime on 1 July 2017. Jose María Córdova International applied in some Italian regions, Despite industry engagement with Airport with the city of Medellin UNITED STATES while others have rejected it as the authorities prior to and since the and its suburbs. Following industry IATA and Airlines 4 America (A4A) unconstitutional. The industry is MIDDLE EAST GST’s introduction, rates applicable to advocacy challenging the tax from a combined to persuade US lawmakers seeking clarity on this inconsistency 3AND AFRICA air transport include 5% for economy- policy and standards perspective and to reject a proposal that would have and believes that the tax should not MOROCCO class and 12% for premium-class travel. from the perspective of its negative nearly doubled the Passenger Facility be applied anywhere in Italy. Morocco withdrew its ticket stamp International best practice is zero economic impact, a Colombian court Charge (PFC) that US airports impose tax with immediate effect at the end taxation. The GST’s implementation suspended the tax with effect from 1 on travelers and that airlines are NETHERLANDS of February 2018. involves many outstanding issues, and December 2017. obliged to collect as part of their ticket The newly formed Dutch coalition industry advocacy continues. price. The proposal would have allowed government announced in 2017 its GULF COOPERATION MEXICO airports to raise the PFC from $4.50 to intention to introduce a minimum COUNCIL COUNTRIES JAPAN The Mexican state of Baja California has $8.00, or up to $13 per customer one price for carbon. It explicitly refers Among Gulf Cooperation Council A bill including a departure tourism established a tax on all foreign tourists. way, adding an estimated $2.6 billion to seeking a Europe-wide agreement (GCC) members, Saudi Arabia and tax is expected to be tabled in the There are, however, indications that this to the PFC charge levied on US air on the taxation of air transport and the United Arab Emirates introduced Japanese Diet soon and is likely to tax is being reevaluated. travelers annually. the possible introduction of a tax on a value-added tax (VAT) on 1 January pass despite strong industry concerns.

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Montreal Convention 1999 Unruly passengers The industry has set out a strategy Slots Montreal Convention 1999 (MC99) is an The unruly behavior of a minority for dealing with unruly passengers. It More than 190 airports worldwide are example of smarter regulation. MC99 of passengers cannot be allowed to involves improving the prevention and slot constrained, meaning that they have sets out rules on airline liability during compromise flight safety or to disturb management of incidents, including insufficient capacity to meet demand international carriage that deliver the journeys of other customers. The enhancing the legal deterrent. A at all hours of the day. This number is significant benefits for all stakeholders. industry takes a zero-tolerance approach legal deterrent to unruly behavior is set to rise substantially over the coming It ensures protection for passengers and to disruptive incidents. prosecution and enforcement powers decades, as airport construction fails to is a prerequisite to cargo transformation for countries to deal with misbehavior. keep pace with the increase in demand initiatives, such as the electronic air From 2007 to 2016—the latest year of Montreal Protocol 2014 (MP14) provides for aircraft movements. waybill (e-AWB) and e-freight, that deliver available statistics—there were 58,000 those legal powers, but 22 nations must shipments faster and more efficiently reported cases of unruly passengers. ratify MP14 before it can come into force. IATA’s Worldwide Slots Guidelines is than ever. MC99 also ensures that But in 2016 alone, there were 9,837 such the global standard for the policies, airlines benefit from streamlined claims incidents, amounting to 1 incident per By year-end 2017, 12 nations had ratified principles, and procedures of airport slot management and heightened processing 1,424 flights. MP14, Egypt and Portugal being among allocation and management. Consistent regarding their liability for passengers, the most recent countries to do so. Turkey application of the WSG provides for baggage, and cargo. The type of incident varied significantly, and a number of other countries are in the certainty, sustainability, flexibility, from low-level disobedience of crew the final stage of ratification, and IATA and transparency that the industry There was significant progress in 2017 in instructions to major disruptions expects MP14 to enter into force in 2019. requires and that passengers benefit IATA’s campaign to obtain the universal involving aircraft diversions and from, including dependable services ratification of MC99. Chad, Indonesia, passenger deplanement. In 2016, 12% of and an expanding route network. The Mauritius, Russia, Sudan, Thailand, and reported cases were physical, including Human trafficking success of the WSG is the independence Uganda ratified the convention, bringing damage to the aircraft and safety The trade in people is an illegal industry of the coordinator and the harmonized the total number of signatories to 130, equipment. There was also a significant worth $32 billion a year that the United application of the principles. fully 70% of ICAO member nations. rise in cases where all forms of conflict Nations Office of Drugs and Crime de-escalation were exhausted and the estimates involves the trafficking of almost IATA undertook a comprehensive cabin crew had to physically restrain a 25 million people annually. A significant strategic review of the WSG in 2017 passenger to preserve aircraft safety. number of traffickers are suspected in conjunction with ACI and the of taking advantage of the global air Worldwide Airport Coordinators transport network. The aviation industry is Association (WWACG) to ensure that BENEFITS OF MC99 determined to play its part in preventing the WSG remains relevant in meeting this and in helping law enforcement the industry’s needs. The review focused identify traffickers and their victims. on access to congested airports using In addition, Since fair, transparent, and neutral processes In 2017, IATA focused on raising the that enable competition; the process . 2013, awareness of human trafficking through for handling airports with peak, not $493 presentations at its 72nd AGM and constant, congestion; the enhancement the number of global passengers through its #EyesOpen social media and clarification of slot performance and covered by MC99 billion, campaign. IATA is looking at a range management through best practices; and has risen from of further activities in 2018, including the timelines and activities that make up TO or 7% of global air cargo by guidance and training material and the WSG historic determination process. value, in bilateral trade has been opened to the benefits partnering with other industry groups. 86% 95% of e-AWB and e-freight.

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THE AMERICAS NORTH ASIA 1 Colombia and Peru, following 3 The Civil Aviation Authority training and education, adopted of China (CAAC) released a slot REGIONAL SLOT WSG-aligned regulations to manage regulation in 2017 that incorporates their congestion issues. some WSG elements. IATA participated in a workshop and Mexico recognized the need to align shared best practice with the with global standards, and IATA is CAAC. China continues to focus on supporting its quick implementation performance and punctuality and, in DEVELOPMENTS of the WSG. 2018, is putting into force new rules by the CAAC that require regular Brazil made efforts towards reporting and remedial action as eliminating links between punctuality necessary. and historic slots in Brazilian Slot Regulation Resolution 338. IATA worked with Hong Kong International Airport and Hong Kong’s Civil Aviation Department EUROPE in 2017 as they implemented their 2 Europe remains the most quota count scheme to manage significant region for congestion, night flights. The goal is a balanced accounting for just over 50% of the approach that meets the needs of the 2 world’s most congested airports. local community and that optimizes 3 the benefits of aviation. IATA continues to work closely with the European Commission to see that EU Slot Regulation 95/93 is ASIA-PACIFIC effectively applied by all EU members 4 At Melbourne Airport, IATA and that the benefits of independent, helped avert a proposal that could transparent, and neutral coordinators have affected the neutrality of the 1 4 are fully realized. airport slot allocation process.

In Thailand, IATA helped prevent a planning disruption caused by a sudden transfer of airport slot coordination services from Thai Airways to the Civil Aviation Authority of Thailand.

33 05 INFRASTRUCTURE 05 INFRASTRUCTURE IMPROVEMENTS: CREATING THE RIGHT BALANCE

34 05

35 05 INFRASTRUCTURE

Operational and financial For several years, IATA highlighted Sustainable airport governance the pressure to maximize shareholder improvements shortcomings in the European Privatization or corporatization in returns too often outweighs the core The number of passengers using air Commission (EC)’s Airport Charges various industry sectors, if structured objective of delivering user and consumer transport is set to nearly double by 2036. Directive. And in 2017 the EC formally appropriately and carefully monitored, benefits. Ironclad regulation must prevent Infrastructure, though, is not keeping acknowledged that airports could misuse can deliver benefits, including improved a privatized or corporatized airport from pace, and a crisis is looming. Airlines their market power and is therefore customer service and increased becoming an out-of-control monopoly. require access to sufficient, high-quality evaluating changes to its legislation. efficiency, investment, and innovation. infrastructure at competitive costs to No airport privatizations to date have The issues are becoming particularly meet the rising demand for air freight IATA has been successful in promoting the met long-term expectations, however, disturbing with new investors entering the and passenger travel and to continue to industry’s agenda. Results in 2017 included primarily for lack of regulatory controls private or corporate airport market and deliver social and economic benefits. The charges reductions in South Africa and and balances. Too often, the driver for pushing back on regulation designed to industry’s collaboration with infrastructure India, in Delhi, and changes in the Danish privatization or corporatization is raising protect consumers. Short-term returns are partners is critical to maximize customer regulation that will have important quick cash for governments. being maximized at the expense of long- service and to boost air connectivity. favorable consequences on the level of term economic benefits. airport charges at Copenhagen airport. Airport privatization or corporatization is not new. But its success must be IATA is campaigning to change the way Cost-efficiency and It also became apparent that the 2015 measured in service levels and cost- governments approach the privatization lower charges fee reduction at the airport in Cartagena, effectiveness and not in financial gain for and corporatization of airports. IATA’s Infrastructure charges must be set at Colombia—from $92 to $38—was a governments or investors. objectives include levels that are fair, justified, and reflective positive move. Tourism arrivals rose 38%, of a value service proposition for airlines with the additional tourist spending doing The provision of aviation infrastructure ensuring airlines, as a major stakeholder, and passengers. Economic regulation that much more for the local economy than the should be considered a fundamental are consulted on privatization or promotes transparency, consultation, and airport fee ever could. public service and an essential economic corporatization plans; productivity in establishing an equitable generator for any country. It must be confirming that the rationale for any charges structure is key to improving seen as part of a long-term vision serving privatization or corporatization is in the airport cost-efficiency. Yet, despite consumer demand for air transport and interests of the industry and users and ongoing work to ensure that transparent for economic development. Airports do customers; consultation processes are in place for not naturally or usually have competition. exploring alternative business models the productive establishment of fair When they are privatized or corporatized, that do not necessarily involve the transfer infrastructure charges, challenges remain. of assets to private owners; following best practice public- private partnership models focused on INFRASTRUCTURE DEVELOPMENT efficiency and service levels should there be no alternative to privatization or The airline industry is prioritizing infrastructure development that will corporatization; and ensuring governments put regulatory safeguards in place that protect the interests of airlines, passengers, and other airport users. accommodate drive cost- promote align airport secure a reliable shape a build modernized, growth in efficiency and sustainable investment with supply of jet fuel common vision efficient air traffic demand; lower charges airport airline capacity at competitive and of the airport of management at airports; governance; needs; transparent prices; the future; and (ATM) systems.

36 05

THE AMERICAS EUROPE 1 BRAZIL 2 AUSTRIA IATA worked with Brazil’s air IATA was part of a campaign that navigation service provider (ANSP) saved $62 million through reductions to reduce an increase in overflight in Austria’s air travel levy for 2018. fees, resulting in a cost avoidance of $216 million. GREECE 2 IATA saved airlines $69 million CANADA through reductions in charges at IATA worked with NavCan, the Greek airports for 2017–18. Canadian ANSP, to save $131 million 4 through reductions in air traffic control (ATC) charges in Canada AFRICA for 2017–18. 3 SOUTH AFRICA IATA had input into a new charges 1 COLOMBIA agreement that resulted in $232 5 IATA convinced the Colombian million in reductions for 2017–18. government not to introduce a carbon tax for international fuel uplift. TANZANIA 3 IATA efforts helped avoid a rail development levy application on jet fuel.

NORTH ASIA 4CHINESE TAIPEI IATA and the industry lobbied to postpone the implementation of fees at Taipei airport, resulting in a cost avoidance of $44 million instead of a proposed increase of $66 million.

ASIA-PACIFIC 5 INDIA CHARGES CAMPAIGN IATA influenced a reduction in airport charges at Delhi airport, saving airlines $197 million for 2017.

JAPAN IATA achieved a reduction in airport HIGHLIGHTS charges for Narita and Kansai airports, saving airlines $26 million for 2017–18.

37 05 INFRASTRUCTURE

Airport investment aligned Infrastructure providers often enjoy Jet fuel supplied reliably at A common vision of the with airline needs monopoly or quasi-monopoly status, competitive and transparent prices airport of the future There are more than 190 capacity- so governments and regulators must Jet fuel costs accounted for about 20% The New Experience Travel Technologies constrained airports worldwide, including maintain vigorous oversight of charges of airlines’ operating costs in 2017, down (NEXTT) initiative is a partnership such important hubs as Amsterdam, and development activities. Building from over 30% when the oil price spiked between IATA, Airports Council Guangzhou, Jakarta, Mumbai, and São more infrastructure is essential, but any in 2012–13. Not all carriers have been able International (ACI), and other airport Paulo. The lack of runway and terminal investment in airport facilities must be to maximize the benefits of reduced oil service providers. It defines how capacity worldwide is a major concern underpinned by a robust business case that prices, because of a lack of competition in technology and advanced processes can that urgently needs to be addressed. clearly demonstrates a return on investment fuel supply and unjustified duties, fees, and deliver more capacity and enhance the Airlines need functional facilities that for the airlines that fund developments. taxes on jet fuel in some parts of the world. ground journey for every person and balance capacity with demand to facilitate thing—passenger, baggage, cargo, and growth and that deliver adequate levels It is critical to ensure that infrastructure It is important that airlines have access aircraft—that moves through an airport. of service while improving operational development matches airline growth to a reliable supply of jet fuel priced efficiency, now and in the future. Capacity projections and operational requirements. transparently and competitively. In 2017, NEXTT involves developing a common expansion must occur faster than at Unnecessary infrastructure development jet fuel prices in some countries in Africa, vision to guide industry investments present and follow an airport master plan results in additional costs and the Americas, and Central Asia were and help governments establish a smart that guides infrastructure design and inefficiencies, which can reduce demand still significantly higher than the global regulatory framework. It is provisionally construction and triggers appropriately for air travel and weaken the case for average, and this had a negative impact planned as a three-year program. Success timed investments based on demand. investment. Consultation with airlines on airline profitability. will be defined by the provision of a from an early stage of infrastructure forward-looking and aligned approach to development is essential and should be The aviation industry continues to remind investment in ground infrastructure that mandated by regulators to ensure that governments that bilateral air service promotes operational improvements and JET FUEL COSTS capital investments are cost-effective and agreements and ICAO tax policies capacity growth. that airport facilities are aligned stipulate that jet fuel for international with airlines’ needs. flights must not be taxed. Where such taxes exist, the industry campaigns to remove them. In 2017, IATA managed to down mitigate taxes in Colombia, Tanzania, and from over the Brazilian state of Bahia. IATA also helped to reduce fuel costs in Botswana by a cumulative $23.6 million. 30% Jet fuel costs Joint IATA and industry efforts to open accounted for about up the jet fuel market for competition continue in many countries, including Australia, China, Cuba, Kazakhstan, and when the Mexico. Efforts also continue to ensure oil price the reliability of supply in a number of 20% spiked in 2012–13. jurisdictions, including Australia, New of airlines’ operating Zealand, Nigeria, and the United Kingdom. costs in 2017,

38 05

MAJOR AIRPORT adjust scope, delay unwarranted MANCHESTER investments, and ensure the 3AIRPORT timely delivery of a $2.3 billion IATA-led airline community capital program. engagement has ensured that Manchester Airport’s £1 billion DEVELOPMENTS investment in terminals, piers, and NEW MUSCAT aprons is optimized and aligned to airlines’ needs. This will improve 6INTERNATIONAL passenger experience, operational AIRPORT MEXICO CITY of its size, Mexico underperforms BRASÍLIA resilience, cost avoidance, and Following IATA advocacy and training in its integration with the global air performance measurement. with Oman airports, Oman’s Ministry 1AIRPORT transport network. If the new airport 2INTERNATIONAL of Transport has adopted IATA’s new IATA supports the building of a new is not built, it could mean 20 million AIRPORT level of service concept as published airport in Mexico City to enable the fewer passengers per year for Mexico IATA convinced Brasília International LONDON in the 10th edition of IATA’s Airport Mexican capital to benefit more fully by 2035. This translates into a loss of Airport to revise the design of its 4HEATHROW Development Reference Manual from its geographic position linking up to $20 billion in GDP contributions terminal expansion. The new plan AIRPORT (ADRM). The design capacity of the North America and Latin America. An and as many as 200,000 jobs. will improve capacity utilization New Muscat International Airport, IATA is advocating for the decision IATA study shows that for a country and connection times and simplify therefore, now follows IATA’s to build a third runway at Heathrow passenger flows through the optimum level of service guidelines. to be realized in a cost-effective flexible and efficient introduction This change enables the airport to manner. The current proposal has of swing gates for international and increase its annual capacity from 12 an unacceptable price tag for the domestic operations. million to 20 million passengers with capacity gained. Costs are projected no additional investment or capacity at between £14 and £17 billion, double expansion needed. the price of the London Olympics. Heathrow Airport charges are already the highest in the world, and any HONG KONG expansion of the airport must be accompanied by a commitment that 7INTERNATIONAL charges will not rise further. The AIRPORT 3 4 construction of the third runway must IATA supports the construction of enhance Heathrow’s competitiveness, a third runway in Hong Kong, with not destroy it. completion scheduled for 2023. The new runway will be 3,800 meters long and parallel to and north of the 6 7 O. R. TAMBO existing two runways. It is expected 1 5 INTERNATIONAL to be dedicated for arrivals and will increase aircraft movement by 33 per AIRPORT hour. The new runway and a planned As a result of IATA’s support of new concourse and expansion of the airline community, Airports the terminal will enable Hong Kong 2 Corporation South Africa (ACSA)’s International Airport to serve an investment plan has been aligned and additional 30 million passengers prioritized with airline requirements. annually. 5 This will speed up much-needed capacity, ensure phased deployment,

39 06 ENVIRONMENT 06 ENVIRONMENTAL MITIGATION: CARBON-NEUTRAL GROWTH DRAWS NEARER

40 06

41 06 ENVIRONMENT

Pushing for progress In addition, the industry continues to push Carbon Offset and Reduction In September 2017, ICAO’s Committee As with all industrial sectors, air travel for progress on operational, technical, Scheme for International Aviation on Aviation Environmental Protection must mitigate its environmental impact. and infrastructure improvements that As of 1 March 2018, 73 ICAO member (CAEP) formalized for the ICAO Council its The successful delivery of a robust complete the industry’s long-standing, nations, including 36 developing countries, recommendations on the technical rules sustainability strategy will provide the four-pillar strategy. The aim is to deliver have volunteered to apply CORSIA. Only and guidance for the implementation of industry with a license to grow and enable on its commitments for carbon-neutral flights between volunteering countries CORSIA. IATA, in turn, has been holding increasing numbers of people to enjoy growth from 2020 and a 50% cut in will be subject to offsetting requirements workshops worldwide in 2018 to help the social and economic benefits of air 2005 carbon emissions by 2050. The in the initial stages of the scheme. All airlines prepare for the monitoring, connectivity. widespread deployment of sustainable airlines, however, will need to be ready reporting, and verification work they will aviation fuels (SAF) will be crucial. starting 1 January 2019 to monitor the need to undertake and will develop tools to The Carbon Offset and Reduction Scheme emissions from their international flights facilitate airlines’ compliance with CORSIA. for International Aviation (CORSIA) The industry also seeks to manage and report them on an annual basis to was IATA’s primary focus in 2017. IATA and reduce its environmental impact their regulatory authorities. sought to ensure increased voluntary in such other areas as noise and waste. participation by countries and that And airlines are committed to raising preparations for CORSIA implementation awareness of the illegal trafficking of by airlines continued. animals and plants.

THE AVIATION INDUSTRY'S THREE EMISSIONS GOALS 1 22 33 Improving fuel Capping net Cutting efficiency emissions net carbon an average of through emissions in 1.5% annually carbon- half by 2050, to 2020 neutral growth compared from 2020 with 2005 (CNG2020)

42 ENVIRONMENT 06

Support for CORSIA is unfortunately Sustainable aviation fuels Significant milestones in the production In February 2018, the industry marked undermined by the decisions of some The aviation industry is increasing its and uptake of SAF in 2017 included the the 10th anniversary of the first airline governments to use carbon pricing to efforts to encourage the development following: flight using a SAF blend. IATA used justify levies on air transport. Recent of SAF. These are sourced from a variety the opportunity to suggest that with examples include proposals to introduce of renewable or recycled feedstocks the 100,000th flight using a SAF blend appropriate policies in place to encourage environmental taxes in the Netherlands, and can deliver up to an 80% reduction since 2008 production, up to one billion passengers Sweden, and the possible extension of in carbon emissions over the complete the global production of approximately may have the opportunity to fly on a SAF- the Swiss Emissions Trading Scheme to lifecycle of the fuel. 12 million liters of SAF blend flight by 2025. European flights. the use of a SAF blend on more than 55,000 flights in the course of the year The main challenge for SAF deployment Such decisions undercut the global the commencement of continuous is to ensure sufficient production and a stance and could be perceived as a SAF supply at Oslo and Bergin airports competitive end-user price. Governments disavowal of CORSIA as the agreed, in Norway and the continued supply, must develop appropriate policy multilateral approach. This is particularly supported by United Airlines, of SAF at frameworks, including guaranteeing that disconcerting given that the governments Los Angeles International Airport SAF can, at a minimum, compete at the behind such decisions were instrumental same level as automotive biofuel. Effective in reaching an agreement on CORSIA at policies can reduce SAF production risk the 39th ICAO Assembly—an agreement and enable access to more competitive that recognizes CORSIA as the market- debt and equity capital. based measure for emissions from international aviation. User-friendly SAF accounting methods; a global, mutual recognition of sustainability standards; and effective recognition within PREPARING FOR CORSIA IMPLEMENTATION the ICAO CORSIA scheme are equally important policy enablers. A B

MONITORING, OFFSETTING THE

REPORTING, AND GROWTH OF CO2 VERIFYING CO2 EMISSIONS EMISSIONS Applies to all airplane operators flying Applies to all airplane operators on included routes between ICAO (with some minor exemptions) with states from 2021. international routes and to all ICAO states globally from 2019.

43 06 ENVIRONMENT

Illegal wildlife trade IATA, 46 airlines, and other aviation IATA environment assessment IATA will increase the IEnvA’s value to The trade in endangered wildlife and stakeholders have also signed the IATA leads the application of the the industry by adding to it optional plants is the fourth-largest illegal trade Buckingham Palace Declaration, an ISO 14001 international standard for modules. Those modules will allow IEnvA after drugs, weapons, and human initiative from the United for Wildlife environmental management systems operators to include standards, guidance, trafficking. Although the responsibility (UfW) foundation set up by the Royal to the airline sector through the IATA and assessment for energy management for prosecuting traffickers lies with Foundation that includes a transport Environmental Assessment (IEnvA) based on ISO 50001—the international governments and their customs, border, taskforce. IATA is in addition a core program. The IEnvA provides a simplified standard for energy management and wildlife protection agencies, the member of the USAID’s Reducing solution for airlines to improve their systems—and specific obligations arising aviation industry is committed to playing Opportunities for the Unlawful Transport environmental performance, adopt under the Buckingham Palace Declaration. its part in preventing the appalling trade of Endangered Species (ROUTES) industry recommended practices, and in animals. Partnership, which aims to disrupt the comply with domestic and international As of 1 February 2018, 15 airlines have illegal wildlife trade by preventing its use standards and obligations. achieved IEnvA Stage 1 certification and IATA member airlines unanimously of legal transportation supply chains. 6 more have achieved IEnvA Stage 2 condemned illegal trafficking at IATA’s certification. 72nd AGM. The relevant IATA governance bodies have since worked on providing guidance to members to help them combat the trade. That guidance includes an addendum to the Live Animals Regulations (LAR), the recommended practices adopted by the Joint Passenger Services Conference (JPSC), and the recommended procedures in IATA’s Cabin Operations Safety Best Practices Guide.

WILDLIFE TRAFFICKING The trade in of seizures endangered wildlife relate to More than passengers. and plants is the fourth-largest illegal Over 48% trade after drugs, of passenger-related 74% seizures occur over weapons, and human multi-leg journeys. trafficking.

44 06

The agreement on CORSIA represents a very important milestone for air transport, and indeed for the entire world given that it is the very first commitment of its kind for any global industrial sector.

DR. OLUMUYIWA BENARD ALIU, PRESIDENT OF THE ICAO COUNCIL

45 07 CARGO 07 DIGITAL CARGO: HARNESSING THE POWER OF DATA

46 07

47 07 CARGO

A year of growth 2017 focus In parallel, IATA continued to press Digitization of the supply chain Air cargo connects the world. It provides Throughout 2017, IATA worked with governments to improve trade efficiency The industry has been pursuing a a vital bridge to global markets. Without shippers, freight forwarders, and the entire by reducing tariffs and ratifying transformation to a digital process known air shipments, global supply chains could air cargo value chain to further a common international agreements that make global as e-freight for over a decade. A key not function, and the availability of many agenda toward trade easier. The focus of this activity element of e-freight is the market adoption time- and temperature-sensitive products, is Montreal Convention 1999 (MC99), of the electronic air waybill (e-AWB). In such as flowers, fruit, and life-saving concluding the digitization of the the revised Kyoto Convention, and the 2017, global penetration of the e-AWB pharmaceuticals, would be restricted. The supply chain to allow all information to be World Trade Organization (WTO) Trade surpassed the 50% barrier but fell short of industry brings significant economic and shared instantly, improving efficiency, and Facilitation Agreement (TFA). the industry-endorsed target of 62%. social benefits to the global economy. simplifying the transport process; adopting modern and harmonized The industry agreed in 2017, therefore, Air cargo’s growth in 2017 buoys a standards that facilitate safe, secure, and to amend a number of resolutions and renewed commitment by the air transport efficient operations, particularly in relation recommended practices to make the industry to transform and strengthen to the carriage of dangerous goods; e-AWB the default standard on enabled its position as the preferred mode of using enhanced technology to provide trade lanes. The benefits of these transport for the global economy’s high customers with responsive services amendments should spur e-AWB value to weight manufactured products. based on intelligent systems able to efforts in 2018. Among these items are microelectronic self-monitor, send real-time alerts, and devices, pharmaceuticals, aerospace respond to deviation; and components, and medical devices. harnessing the power of data to drive efficient and effective industry quality improvements.

GLOBAL TRADE IN 2017 BY VALUE

That is equivalent to Air cargo generates annual representing revenues for airlines in excess of about In 2017, airlines transported $5.6 trillion 35% WORTH OF GOODS ANNUALLY, OR of global trade 50 53.9 by value. BILLION, MILLION $15.3 billion and in some cases the cargo carried on a route is the difference between whether metric tons of goods, WORTH OF GOODS DAILY. the route is profitable or not.

48 CARGO 07

Challenges, however, remain in digitizing Harmonized regulatory standards Dangerous goods In March 2018, the industry took a the supply chain. Trade lanes and airports and industry cooperation Safety is the industry’s priority. Global significant step forward in the digitization in countries not signed up to MC99 face Harmonized regulatory standards are standards and regulations are in place to of the dangerous goods supply chain regulatory limitations in the transfer of essential to secure the air cargo supply ensure the safe transport of dangerous following the adoption of the e-Dangerous digital data and are unable to adopt the chain while ensuring the flow of commerce. goods, including lithium batteries. However, Goods Declaration (e-DGD). The e-DGD e-AWB. Perceived complexity and a lack mis-declared or noncompliant dangerous is an electronic approach to managing of harmonization in e-AWB procedures In 2017, there was an increase in the good shipments, especially involving the IATA Dangerous Goods Declaration among stakeholders also need to be number of countries issuing or maintaining lithium battery consignments, continue. (DGD) and leverages industry initiatives to overcome. The industry will continue bans or restrictions on air cargo from digitize data and to embrace data-sharing to address these challenges to further certain origin countries. IATA continues IATA intensified its efforts to improve platform principles. e-AWB penetration in 2018. to work with regulators to mitigate the regulatory compliance and called security risks and to provide feasible on governments to step up their The benefits of implementing the e-DGD IATA is facilitating and supporting operational solutions for air cargo. enforcement of dangerous goods with clearly defined data governance air cargo’s modernization through its regulations. In particular, IATA asked that include improved transparency, transformative Simplifying the Business governments take a tougher stance on traceability, and data quality. This, in turn, (StB) Cargo program. rogue shippers and impose significant will improve process efficiency and reduce fines and custodial sentences on those errors and delays. violating the regulations.

THE SIX GOALS OF CARGO TRANSFORMATION

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

Making air cargo easier, smarter, and faster

49 07 CARGO

Special cargo One digital language Powerful data Standardized air cargo processes are A common language across platforms IATA’s Cargo iQ is a quality management critical to manage the handling and facilitates trade growth, improves security, group with close to 80 members that helps transport of special cargo, such as and accelerates market access for air airlines and freight forwarders monitor and Some 209 cold pharmaceuticals, live animals, and cargo. IATA’s Cargo-XML has emerged as benchmark delivery performance against chain logistics perishable commodities. IATA standards the preferred standard for the electronic their service promise, define common are continually enhanced to comply with communication of air cargo data among processes and procedures, and promote businesses and the latest regulatory requirements and airlines, other air cargo stakeholders, and best practices. In 2017, Cargo iQ launched facilities are CEIV with shippers’ demands. customs authorities. its Smart Data Project and an audit and Pharma certified, certification scheme. IATA’s Center of Excellence for In 2017, IATA’s Cargo-XML messaging with 75 more Independent Validators in Pharmaceutical standard was integrated into two The Smart Data Project portal will undergoing the Logistics (CEIV Pharma) addresses issues important customs systems: the World monitor over 150 million lines of industry certification related to pharmaceutical transport. Customs Organization’s Cargo Targeting performance data annually with the CEIV Pharma, operated in partnership System (WCO CTS) and the Automated intent of assisting Cargo iQ members to process. with industry stakeholders worldwide, System for Customs Data World improve their processes and add value offers a standardized, global certification (ASYCUDA World), a system used by 90 to the air cargo industry. The portal program that trains people to handle countries. The integration of Cargo-XML provides valuable analytics of shipment pharmaceuticals and to conduct consistent, with the WCO CTS makes communication performance and indicators on where on-site assessments of the handling of simpler and more effective and facilitates optimization could occur. It also allows pharmaceuticals for transport. Some 209 more accurate risk assessment by members to compare their performance cold chain logistics businesses and facilities customs authorities using the WCO CTS against the performance of others in are CEIV Pharma certified, with 75 more application to capture advance electronic the air cargo community on a lane and undergoing the certification process. cargo manifest information. process level and from an airline and a forwarder perspective. Building on the success of CEIV Pharma, The integration of Cargo-XML with in 2017 IATA launched a standardized ASYCUDA World standardizes electronic global certification program to improve communications between airlines and the safety and welfare of animals traveling customs authorities. The new data by air. The Center of Excellence for standard reduces message duplication Independent Validators for Live Animals and simplifies communication across the Logistics (CEIV Live Animals) provides supply chain, facilitating trade growth, stakeholders across the air cargo supply improving cargo security, modernizing chain with the assurance that CEIV customs operations, and fostering Live Animals–certified companies are participation in global commerce through operating to the highest standards. advance electronic data submission for air cargo shipments.

50 07

Nearly 90% of business-to-consumer e-commerce today is delivered by air. Remarkably, this percentage grew from 16% to 83% in just the six-year period between 2010 and 2016. This tremendous growth, over such a short period of time, provides a concrete testament to the direct relationship which exists between air transport capability, and e-commerce profitability.

DR. FANG LIU, SECRETARY GENERAL OF ICAO

51 08 PASSENGER EXPERIENCE 08 PERSONALIZED TRAVEL: A CUSTOMER-CENTRIC APPROACH

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53 08 PASSENGER EXPERIENCE

Customers first One ID IATA’s One ID project seeks to overcome Fast Travel Aviation is a customer-focused industry. Passengers want to use a single this fragmented approach. One ID Passengers want increased control over Passengers want their journeys to be biometric identity token for all their introduces a collaborative identity airport processes. They desire to take tailored, seamless, hassle free, and travel transactions, from booking flights management solution that spans all advantage of the latest digital, self- efficient, from booking and check-in, to passing through security and border processes and stakeholders in the end-to- service options. through security, to collecting their control to collecting their bags. end journey from booking to destination luggage at their destination airport. With and puts the passenger front and center. Fast Travel transforms the passenger’s passenger numbers set to double over Individual stakeholders, however, such as airport experience. It ensures that the next 20 years, delivering this degree airlines and border control, customs, and A dedicated task force comprising passengers can walk from the door of of personalized experience will benefit screening authorities, have designed their representatives of airlines, airports, the terminal to their seats on the plane travelers and facilitate the most efficient own processes to meet their individual governments, and solutions providers with minimal inconvenience. The program use of constrained airport infrastructure to obligations and requirements. And there’s further developed the One ID concept in provides self-service options at six cope with demand. little or no coordination between them. 2017. One ID relies on the early validation airport touch points: self- or automated of a passenger’s identity and controlled check-in, self-tagging of baggage, IATA is working with the industry to access to this information by the various self-checking of documentation, self- develop and implement innovative public and private stakeholders on an rebooking of flights, self-boarding, and solutions to meet the needs of passengers authorized-to-know basis. It ensures that self-recovery of baggage. and to accommodate growing demand. passengers are recognized and attended to in the most efficient way in each In 2017, 45% of travelers had access to successive step of their journeys with the complete Fast Travel experience. Fast the use of trusted digital identity and Travel implementation, however, varies biometric recognition technology. regionally. Africa and North Asia have focused on mobile boarding pass and self- In 2018, the task force will continue to tagging options, while the more mature research One ID’s enabling technologies. markets of North America and Europe DELIVERING ON PASSENGER EXPECTATIONS It will examine how those technologies have focused on end-to-end, biometric can be deployed in airports and how self-service implementations. The keys to delivering on passenger expectations are listening and innovating. best to establish the trust to facilitate The 2017 IATA Global Passenger Survey identified passengers’ desire for technology stakeholder collaboration. The task IATA’s focus in 2017 was on removing that gives them heightened control over their travel experience through force will also determine the level of obstacles that prevent airlines from harmonization, standardization, and implementing Fast Travel solutions. The interoperability required to make One ID approval to use mobile boarding passes viable internationally. And it will examine in China is an instance of IATA’s success the legal aspects of privacy and data in this regard. Airlines and airports are protection, drawing from lessons learned responding to trends and technologies by through various proof-of-concept and emphasizing off-airport concepts, such test implementations of One ID around as remote drop-off points for baggage; the automation a single identity real-time flight increasingly efficient seamless the globe. digital self-service options; and on-airport of a growing token for all information airport security that border biometric implementations. number of airport travel processes, sent directly does not require control. processes; using biometric to personal having to remove identification; devices; or unpack personal items; and

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2017 GLOBAL PASSENGER SURVEY KEY RESULTS Baggage New Distribution Capability More than four billion bags are carried by The New Distribution Capability (NDC)

IATA’s 2017 Global Passenger Survey revealed that passengers are looking for airlines annually. Fully 99.57% of those program continued its progress in 2017. technology to improve their travel experience. bags arrive with their owners. But the A rise in the number of NDC deployments industry is determined to do even confirmed the industry’s embrace of better and has agreed to IATA the NDC’s modern, XML-based data Resolution 753 (R753). transmission standard for communications between airlines and travel agents. By mid-2018, airlines have committed to being able to track a bag through key NDC is also transforming airline industry 64% touchpoints: when it is accepted at the retailing. It is bringing to such third-party of passengers favor biometric identifiers as their airport, loaded onto the aircraft, and shopping channels as traditional travel preferred travel token. unloaded from the aircraft and placed into agencies and travel websites access to the arrival system or put into the transfer airlines’ optional products and services, system for carriage by another airline. rich content, and personalization, which Airlines must also be able to share are already available to consumers when this tracking information with interline they shop on airline websites. carriers as needed. By the end of 2017, 50 airlines had 68% deployed NDC, and more carriers will 72% Baggage tracking technology follow suit in 2018 and beyond. Fully 113 of The global deployment of radio frequency the 196 airlines IATA surveyed in 2017 plan of passengers prefer self-boarding. identification (RFID) technology, which to deploy or already have deployed NDC, of passengers can accurately track passengers’ baggage up from 86 in a similar survey in 2016. All want to self-tag in real time across key points in a journey, three global distribution systems (GDS), 82% their bags with holds the potential to save the air moreover, committed in 2017 to achieving the preferred of passengers want to option of transport industry more than $3 billion Level 3 NDC certification, the highest use a digital passport on electronic over the next seven years. RFID tracking is level, by the end of 2018. Travelport their smartphones for bag tags. therefore an IATA priority for 2018. became the first to achieve this level in as many flight-related December 2017. Additionally, China’s processes as possible. IATA has drafted a recommended practice TravelSky is committed to achieving at for RFID that it will present for approval least Level 2 in 2018. to airlines in 2018. IATA is also developing implementation guidance for RFID, including reusable RFID.

55 08 PASSENGER EXPERIENCE

NDC offer and order management In tandem with the LB, IATA is continuing ONE Order Costs will be lowered by coverage, meanwhile, continues to to expand its NDC outreach to all parts ONE Order will leverage NDC data increase, and according to the latest of the travel value chain. Activities communication advances to simplify eliminating the inefficiencies inherent NDC Deployment Report 80% of NDC- include a continuing series of hackathons airlines’ core reservation, ticketing, and in handling multiple passenger name certified airlines have implemented both. around the globe to stimulate innovative fulfilment systems. For passengers, ONE records (PNR), e-tickets for flights, and Additionally, 70% of NDC-certified airlines travel solutions and apps using the NDC Order means the gradual disappearance electronic miscellaneous documents are using the schemas to sell flights and standard. IATA also has introduced NDC of multiple reservation records associated (EMD) for ancillary services and moving ancillaries, bundled and unbundled. propathons (proposition marathons) in with a customer purchase, such as the GDS to simpler systems, and by Adding further momentum to NDC which travel buyers are asked to develop reservation number, the ticket number, and closing the integration gap between growth was the release of the 17.2 ideas for airline products and services the airline reservation number. The only passenger service systems (PSS) and standard in the fourth quarter of 2017. This for the business travel community and to thing passengers will need to locate their airlines’ e-commerce retailing platforms. standard builds on feedback from early visualize what the main components of an itinerary and be recognized throughout NDC adopters and includes significant airline-travel manager relationship might their journey is a single order number. Revenues will be enhanced by restructuring. As such, it is a notable look like. improvement over previous standards and ONE Order will greatly simplify the enabling interoperability between has been well received by the industry. Early in 2018, IATA held the first meeting passenger experience and remove one of different airline business models, including of the Global Travel Management the major hassles of air travel—trying to connectivity between full-service carriers The next phase of NDC implementation Executive Council, which comprises 14 find the correct document or number when and ticketless low-cost and hybrid model is about driving a critical mass of NDC C-level representatives from global travel dealing with an itinerary change or a travel carriers, and by transactions. The focuses for 2018 will management companies (TMCs). They disruption. ONE Order also has the potential ensuring new products enabled by the be on NDC adoption across the travel addressed initiatives in distribution and to facilitate greater interoperability between NDC are easily delivered. value chain and on NDC implementation payment. IATA will convene twice-yearly traditional and ticketless carriers, bringing support. In keeping with these objectives, meetings of the council to determine TMC further benefits to air travelers through Innovation will be achieved by IATA has launched the NDC Leaderboard challenges and priorities and to explore heightened network opportunities. (LB) of airlines wishing to grow their NDC possible cooperation. refreshing airline PSS and revenue volumes rapidly. Travel agents will benefit from ONE Order accounting system technologies and by gaining an identical process to book opening the market to other vendors, and by Each participant in the LB aspires to airline flights and products regardless of liberating the PSS from constraining pre- contribute to an industry goal of having an airline’s business model or technology. Internet capabilities and aligning airline 20% of sales powered by NDC advance This will expedite their service and order management processes with the passenger information (API) by 2020. The increase their productivity. modern retailing world. LB consists of airlines whose combined passenger boardings represent around For airlines, meanwhile, ONE Order will The release of the first ONE Order 30% of total passengers carried by IATA continue the business transformation messaging standard is planned for 2018. member airlines. that began with the e-ticket. It will With that, ONE Order will finish its initial modernize back-office processes phase and enter its second phase: industry by replacing multiple rigid, paper- capability and adoption. Test programs based booking, ticketing, delivery, and are under way to evaluate the candidate accounting methods with a standard order schemas and their impact on standards management process. Industry benefits and processes. ONE Order is a long-term will accrue in three main areas: costs, transformation project and will require revenues, and innovation. strong engagement across the value chain.

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If you look at projections, by 2036 there will be 7.8 billion people traveling, almost half of them to, from and within Asia-Pacific. Clearly, the key constraint is infrastructure. We have to encourage governments to work with the industry to build more infrastructure to accommodate growth.

GOH CHOON PHONG, CHAIR OF THE IATA BOARD OF GOVERNORS & CEO SINGAPORE AIRLINES

57 09 FINANCIAL SYSTEMS 09 FINANCIAL EFFICIENCY: FASTER SETTLEMENT, SAFER FUNDS

58 09

59 09 PASSENGERFINANCIAL SYSTEMS EXPERIENCE

Integrated globally Global standards and systems that ensure the swift, secure, reliable, and $236.4 $32.2 $56.8 $35.2 $69 $3.8 cost-effective movement of funds among the BILLION BILLION BILLION BILLION BILLION BILLION participants in the air travel value chain are essential components of IATA’s Billing and IATA’s Cargo Account The IATA Clearing IATA Currency IATA’s Simplified IATA’s Enhancement & the global aviation system. Settlement Plan (BSP) Settlement System House (ICH) provides Clearance Services Invoicing and Financing (E&F) helps IATA Financial Settlement processed $236.4 (CASS) is designed to fast, secure, and cost- (ICCS) offer global Settlement (SIS) is the air navigation service billion of that total. simplify the billing and effective settlement cash management highly cost-effective providers (ANSPs) and Systems (IFSS) have been The BSP facilitates settling of accounts services to more than that enables airline electronic invoicing airports improve the the back office of the and simplifies the between airlines and 435 airlines, airline- treasurers to centrally platform developed efficiency and quality global air transport system selling, reporting, and freight forwarders. It associated companies, control and repatriate by IATA to remove all of their invoicing and for six decades. They are remittance procedures operates through CASS and airline travel partner their worldwide sales paper from the invoicing collection processes. so reliable that they often of IATA-accredited link, an advanced, participants. In 2017, funds. The ICCS are and settlement of The E&F processed travel agents and global, web-enabled the ICH processed used by more than 330 industry services. SIS is $3.8 billion in 2017. go unnoticed, despite the improves financial e-billing solution. At $56.8 billion and had airlines and are available streamlining processes very significant sums of control and cash flow the end of 2017, CASS a financial settlement in over 200 IATA BSP by enabling the money that they handle. In for approximately 400 was processing 94 success rate of 100%. and CASS operations exchange of electronic 2017, the IFSS processed participating airlines. At operations serving 201 worldwide. The ICCS data among airlines and the close of 2017, there airlines, general sales were responsible in between airlines and $433.4 billion. were BSP operations and service agents 2017 for repatriating direct operating cost in 180 countries and (GSSAs), and ground over $1.7 billion from suppliers. The use of a territories. Their overall handling companies. countries with severe single standard, the IS- on-time settlement rate The on-time settlement currency liquidity XML, simplifies business was 99.999%. In March rate for CASS was 100%, issues and restrictions, activity for the industry 2018, IATA began the and $32.2 billion was including Nigeria and and allows suppliers implementation of the processed. Egypt. Overall, the ICCS to use one invoicing New Generation IATA processed $35.2 billion. standard for all their Settlement Systems airline customers. (NewGen ISS, see page 61). In 2017, SIS had more than 2,507 participants, including 424 airlines, 304 suppliers, and 1,779 others enabled as receivers of SIS e-invoices to maximize efficiency on the invoice sender side. SIS processed over 1.5 THE IFSS PROCESSED million interline and supplier invoices during the year and settled $433.4 BILLION $69.0 billion in volume.

60

FINANCIAL SYSTEMS 09

IATA Settlement Systems New Generation IATA NewGen ISS is delivering In the interest of furthering performance Settlement Systems of the BSP and CASS, IATA has initiated On 8 March 2018, Norway became the IATA EasyPay, a secure and cost- a review of ISS targets intended for first market to implement NewGen effective pay-as-you-go solution based on application from 2017 through 2023. The ISS, the most extensive and ambitious the e-wallet concept; aim for 2018 is to keep the net default rate modernization of the BSP since it was three levels of travel agent accreditation, on gross sales at or below 0.014% and created in 1971. The rollout of NewGen ISS with agents given the choice of which the on-time settlement rate at 99.98% or across all BSPs will take place in a series level best fits their business model; higher. of waves and is expected to be completed a remittance holding capacity that will in the first quarter of 2020. ensure a safer selling process; and The ISO 9001 certification obtained global default insurance (GDI), an by IATA during 2017 for its quality For airlines, NewGen ISS means faster optional financial security alternative management system and the ISS provide settlement, safer funds, and a lower cost for travel agents that presents a cost- the foundation for better customer of distribution. For travel agents, NewGen effective and flexible alternative to bank satisfaction and continuous improvement. ISS will offer more products and services, guarantees and other types of security. IATA will strive in 2018 to maintain its greater flexibility, and new and more cost- global ISO 9001 certification. effective solutions. IATA is also introducing an initiative called Transparency in Payments (TIP) in conjunction with NewGen ISS. TIP is focused on providing airlines with increased transparency and control in the collection of their sales revenues through the travel agency channel. As it stands, airlines only see the settlement costs after the fact, if at all. No form of IATA SETTLEMENT SYSTEMS payment is barred by TIP, but agents can only use forms to which an airline has

An improved ISS achieved the following in 2017: previously given consent. TIP, moreover, allows agents to use their own credit cards if an airline specifically authorizes Safer funds, with Higher average rate it. Norway became the first market to unrecovered debt of of on-time funds, at implement TIP on 9 April 2018, followed a week later by Finland and Sweden. TIP 0.015% 99.999% rollout will continue in a series of waves through to early 2020. Lower operating unit fees

BSP: CASS: 30% 42% below the 2015 actuals below the 2015 actuals

61 10 AVIATION SOLUTIONS 10 INDUSTRY INSIGHTS: SOLUTIONS THAT SUPPORT SUCCESS

62 PASSENGER EXPERIENCE 10

63 10 AVIATION SOLUTIONS

Timatic IATA Consulting SOLUTIONS FOR AIRLINES Timatic is the industry’s definitive source IATA Consulting has comprehensive for ensuring airlines’ compliance with experience of the full array of aviation- passenger travel document requirements. sector business challenges.

Direct Data Solutions Airs@t Its flexibility allows it to be integrated into It draws on IATA’s more than 70 years airlines’ departure control systems and into of service to the airline industry and thus Direct Data Solutions (DDS) is a game-changing, industry- Airs@t is the only passenger satisfaction kiosk and mobile check-in procedures. is unrivaled in offering its clients the best sponsored program that provides the travel industry with timely, benchmarking survey specifically designed solutions. accurate, cost-effective access to global airline market data. for the airline industry. Timatic is updated at least three times daily throughout the year to ensure its IATA Consulting’s depth and breadth of Participating carriers gain easy access to the most It tracks and compares airline customer application of the latest regulations. aviation industry knowledge enables it to comprehensive global data set, aggregated from such multiple satisfaction ratings in-depth, with help its clients maximize the value of their sources as ARC Air Logistics, Inc.’s area settlement plan (ASP) research into all travel service aspects operating models, realize their growth transactions, IATA’s available Billing and Settlement Plan (BSP) of the preflight, in-flight, and postflight ambitions, and gain insights that translate transactions, and carriers’ contributions. passenger travel experience. Timatic’s highlights in 2017 were as follows: into sustainable competitive advantages. No matter what business intelligence you require—network Airs@t has been collecting data since 2010 planning to fleet planning, revenue management, sales and and as such provides clear trends to airlines, IATA Consulting’s numbers marketing, or business and product development—DDS delivers. allowing them to understand the impact of for 2017 were as follows: past actions to shape their strategies. 480

Airs@t at year-end 2017 included MILLION 120+ projects As of December 2017 DDS passengers had their encompass the following: Passengers of documents checked 45+ countries 50+ airports Traffic studies 300 Ground handling 93% 30 airlines used Timatic Passenger terminal optimization AIRLINES Security enhancement of worldwide agency sales Yearly surveys of more than 63 15+ airlines airlines employed automated Strategic planning document verification powered Safety enhancement by Timatic AutoCheck Route analysis 62,000 NDC consulting services 60% PASSENGERS 1,530 5+ CAAs and of IATA member government and airline governments airlines’ tickets sources gave information Civil aviation restructuring Tourism and benefits of aviation studies F i v e Capacity enhancement GLOBAL ROUTES carriers, 52 of which (Transpacific, Transatlantic, Europe–Middle 40+ aviation provide direct sales data, East–Asia, Intra-Europe, and Transamerica) with the data of 8 more stakeholders carriers to be added by The entire preflight, in-flight, and (financial institutions and ANSPs) year-end 2018. postflight travel experience detailed by 81 passengers who share their exposure Pharmaceutical handling to more than 80 travel attributes. Business planning

64 AVIATION SOLUTIONS 10

Dangerous Goods Regulations Center of Excellence for SOLUTIONS FOR CARGO Independent Validators in The Dangerous Goods Regulations (DGR) Pharmaceutical Logistics are the global reference for shipping CargoIS dangerous goods by air. In 2017, CargoIS IATA’s Center of Excellence for Independent CargoIS is the leading The DGR has been the only standard recognized Validators in Pharmaceutical Logistics (CEIV Pharma) aims to improve the handling of source for air cargo offered market dynamics by the global airline industry for almost 60 years. pharmaceutical products by introducing business intelligence. across more than 140,000 140k It is the most complete, up-to-date, and a standardized pharmaceutical-handling airport-to-airport trade lanes; Its information spans user-friendly reference for dangerous goods process at airports globally that complies with the entire supply handling in the industry. pharmaceutical manufacturers’ requirements. chain: airlines, general sales agents, freight forwarders, ground OVER handlers, airports, and many others. reflected the business of CargoIS gets its data more than 30,000 freight from two sources: 30 k forwarders and more than 100,000 - CASS, the Cargo 200 airlines and GSAs; units of the DGR are shipped worldwide Accounts Settlement every year, demonstrating its widespread Systems operated adoption and industry compliance. CEIV Pharma’s by IATA and used by numbers for 2017 airlines to settle with were as follows: freight forwarders and once the sole Dangerous Goods provided data sourced from data source for (DG) AutoCheck CASS, meaning the more than 1,500+ CargoIS, and 19 million records of airway bill people trained Dangerous Goods AutoCheck is an information per annum that - contributing airlines, 19 m acceptance validation tool. through a new data are fed into Cargo IS; and source, CargoIS It will automate the checking of dangerous 250+ Direct Data (CDD), goods against the DGR without slowing the entities assessed that complements check-in process. CASS data. It will provide the acceptance checker with an CargoIS is the only image of the shipment for physical inspection. 209 air cargo intelligence DG AutoCheck will make significant entities certified solution combining the offered data representing process, cost, and safety improvements to the advantages of actual $26 billion worth of acceptance process for dangerous goods. transactional data with $26b At year-end 2017, there were 13 CEIV air freight charges. voluntarily contributed Pharma Communities: data, resulting in the Before DG AutoCheck’s launch best data quality North America 8. Liege in 2018, it involved on the market. And 1. Miami 9. Madrid now, as a result of 10. Paris the CDD project, and an industry working group of Europe airlines subscribing 2. Amsterdam Asia to CargoIS can 3. Athens 11. Hong Kong Since January 2018, 70 11 OVER 25 access commodities companies from across 4. Barcelona 12. Singapore origin countries have transported and the supply chain. 5. Basel 13. Osaka subscribed to CargoIS. benefit from unrivaled signed test 6. Brussels market coverage. 70 customers 7. Frankfurt

65 10 AVIATION SOLUTIONS

SOLUTIONS FOR TRAINING SOLUTIONS FOR VR IATA Training RampVR SOLUTIONS FOR CARGO continued IATA Training puts participants from around the world through RampVR is the aviation industry’s first virtual realistic business scenarios and gaming situations to promote training platform for ground operations. industry standards; to help aviation-related businesses operate IATA Net Rates safely, efficiently, and sustainably; and to foster career paths in It allows participants to experience a variety of scenarios in different operating conditions IATA Net Rates will introduce the dynamic and support of the more than 62 million jobs related to aviation. using high-spec virtual reality (VR) technology automated delivery of private airfreight rates and It carries ISO 9001:2015 certification in recognition of its high that helps it raise the safety, security, and charges from airlines to forwarders and eliminate quality and its solid quality management system. sustainability of the air transport industry. the cumbersome manual creation and e-mailing of thousands of rate sheets. RampVR provides users with built-in metrics to track performance and real-time access to key It was test marketed in 2017 and launched in reference material. 2018 and has signed its first customers. In 2017, IATA Training

trained more than IATA Net Rates testing in 2017 involved Ramp VR launched in May 2017 and is valued because PARTIES £££££ 100k VR in the learning context increases representing airlines and people from 1,000-plus knowledge retention by a factor of four cargo agents and 14 organizations in 150-plus countries; while also improving motivation and the exchange of more than engagement and offered over in November 2017 it won the International Airport Review Award in the technological 10,000 350 solution category. RATES. courses and more than 40 diploma programs; and worked with SOLUTIONS FOR STRATEGIC PARTNERSHIPS SOLUTIONS FOR AIRPORTS 450 IATA Strategic Partnerships resellers and partnering AirportIS The latest version institutions, including IATA Strategic Partnerships is a community of more than of AirportIS 400 partners worldwide who share ideas and collaborate to AirportIS offers the was launched in improve aviation practices and technologies. most comprehensive June 2017 and is passenger, schedule, 20+ The numbers for IATA Strategic Partners in 2017 included powered by the regional training partners, and cargo traffic DDS to give users data available in the more robust data marketplace. and unparalleled data quality. 400 partners, It is a market leader in airport business 270+ intelligence and is authorized training centers, and used by over 90 At the 2017 year-end, 40 areas of involvement, airports and airport AirportIS was in use at consulting companies globally for air OVER 90 170+ 100 work groups and task forces, and service development airports and airport accredited training schools. activities. consulting companies. 17strategic partners at the AGM.

66 IATA MAIN OFFICES IATA MAIN OFFICES

Montreal Asia-Pacific Middle East Head Office & North Africa 80 Pasir Panjang Road 800 Place Victoria #20-81 Mapletree Business City Business Park P.O. Box 113 Singapore 117372 Building No. 8 Montréal, Québec H4Z 1M1 King Abdullah Street Canada Al Shaab Roundabout China & Amman 1194 Tel: +1 514 874 0202 North Asia Fax: +1 514 874 9632 Jordan 3rd Floor, China Digital Harbor The Americas Geneva No. 1 Wangjing North Road Executive Chaoyang District 703 Waterford Way Office People’s Republic of China Suite 600 33, Route de l’Aéroport Miami, Florida 33126 United States of America P.O. Box 416 Europe CH - 1215 Geneva 15 Airport Switzerland Torre Europa Tel: +41 22 770 2525 95 Paseo de Castellana Fax: +41 22 798 3553 Madrid 28046 Spain

67 www.iata.org/2018-review