IATA: Bisignani ready for a new start

Singapore
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The trademark of Giovanni Bisignani's decade at the helm of IATA has been "maximum attack," and while he will shout out at any issue that needs addressing, a more conciliatory tone is emerging.

But Bisignani is not going soft. "We have to go on shouting at the bad guys but we are trying to build a certain relation with the good guys in order to act in a more united way in the value chain," he told Airline Business ahead of his 10th and final annual general meeting as director general. "That is important, for airline success is critical to all, because if we don't survive you have a problem.

"This industry is very fragile and my biggest concern is that if we have another big problem like SARS or a volcano then we will be in a survival mode," he says.

Bisignani warns that, despite "a great decade", industry leaders must get their minds in sync with the real world of commerce.

"2010 was a record year, $16 billion profits and 2.9% margin, and everybody was saying 'let's celebrate!'. For the industry this was the biggest margin ever, but we have to compare ourselves with a normal business. We have to understand that if we are not able to pay the cost of capital - 7-8% - then we can't be considered a business by the financial institutions."

This sparked Bisignani's Vision 2050 initiative, the IATA think-tank which brings together highly regarded "strategic thinkers" from across the industry and beyond to help determine the route to sustained profitability.

"The other reason was that because this was my last year as director general, and I was always shouting "Basta", I thought: let's look ahead."

He points out that the association's efforts have already delivered a healthy $59 billion in savings since 2004 and that the industry's capability to deal with the spiralling price of fuel has been transformed over the last decade. "In 2002 we were break-even with fuel at $25, now we are able to make money or break even with fuel at $110."

But Bisignani admits he has "unfinished business" to hand to his successor, former Cathay Pacific chief executive Tony Tyler. "Our customers are not happy when they come on board - why not? Because we have not solved the hassle that they have at airport security."

But IATA has made progress here. The "check-point of the future", which Bisignani says was "a crazy Giovanni idea" just two years ago, is now a reality and on display at the AGM.

The ground element of the business is clearly in Bisignani's sights when he calls for the industry to present a more united front. "We have to reward the value chain of our stakeholders in a more equal way. I cannot have it that the shareholder of the airport has an EBIT of 50% and we have one or two percent."

The AGM's return to an Asian venue - albeit after a late switch from Cairo in the wake of this year's Middle East political turmoil - is extremely appropriate, and not only as the region has been home to the director general in waiting.

"The future is here," says Bisignani. And with China the coming force, Bisignani sees its airlines taking a leading role in the future. "But now is not the moment. The Chinese companies need a bit of restructuring in areas such as the allocation of assets and the role that government plays in buying and allocating the aircraft."

Blessed with massive traffic growth and extremely competitive labour costs, Bisignani warns that the Chinese carriers must not rest on their laurels. "Now they can compete effectively because their labour costs are 10-15% of their total operating costs, but they cannot rely on this advantage."

The Chinese airlines are taking an active role in the global alliances, but the language barrier continues to delay their progress, says Bisignani. "They are still isolated from the rest of the world."

Another coming force is the low-cost sector. "They said it would not come to Asia as there are bilaterals [restrictions] and no secondary airports. But I warned that the strength of the passenger would open up the market."

The latest iteration is long-haul low-cost, which is being challenged by the network carriers with spin-off divisions, like Qantas's Jetstar or the newly announced arm of Singapore Airlines. "The problem there is handling the situation within the company and the tension that those two kinds of models may create," says Bisignani.

So as he prepares to front his last AGM as director general, Bisignani's message remains clear: IATA can never drop its guard.