IATA: Outgoing chairman hails progress on climate change

Washington DC
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Climate change was at the centre of Richard Anderson’s year as chairman of IATA’s board of governors.

“By far and away, the climate-change steps that we took together as an industry are nothing short of remarkable,” says the chief executive of Atlanta-based Delta Air LInes. “No other industry in the world has come forward with an industry global solution that includes market-based measures.”

Anderson’s stint in the IATA role is drawing to a close in the run-up to the association’s annual general meeting, which kicks off in Doha on 1 June. He is to be replaced by Air Canada chief executive Calin Rovinescu.

In September 2013, IATA successfully reached an agreement with ICAO to create a set of market-based measures to combat climate change, achieving what Anderson had described as one of the most important issues he faced as chairman at the beginning of his tenure.

“While there’s still a lot of details to be worked out, it’s been quite a successful programme,” he says on the endorsement.

The agreement requires ICAO to develop a market-based measure that will allow the industry to achieve carbon-neutral growth from 2020. This includes developing standards to monitor, report and verify emissions by 2016.

The vast majority of IATA member airlines approved a resolution in support of the development of a global mandatory carbon offset scheme at the IATA annual general meeting in 2013.

Meanwhile, the financial health of airlines around the world continues to improve. Despite a downward revision in its most recent guidance, IATA expects annual industry profits to top $18.7 billion this year, in a rise of nearly $6 billion on 2013.

Citing regional differences, Anderson declines to make any broad statement on the health of airline finances but does call fuel costs the “most important driving principle” in the industry.

“Management of the price of jet fuel and making sure that the business properly accommodates that – wherever your business in the world is – is key to being successful in the business,” says Anderson.

One of his bolder moves at Delta was the acquisition of the Trainer oil refinery in June 2012. Spreads between the cost of oil and jet fuel – the crack spread – in the New York market have tightened since operations fully commenced in early 2013, which has benefited all carriers.

IATA expects oil prices to average about $108 per barrel in 2014, a number that it revised up by $3.50 per barrel in March.

Along with management of fuel costs, government taxes on the airline industry are one of its “biggest challenges”, says Anderson.

“Many local governments see this global industry as something that can be taxed and taxed and taxed,” he says, adding that this has negative implications for local economic growth.

IATA director general Tony Tyler has had significant success countering some of the various tax initiatives around the world, says Anderson.

Improving inclusivity and transparency at IATA are two internal initiatives that Anderson has guided as chairman. “We need to make sure [that] the board of the organisation reflects the diversity of the airlines around the world that are members,” he says, citing the election of Vietnam Airlines chief executive Pham Ngoc Minh to the organisation’s board as an example.

Air Caledonie, Avianca Brasil, Hi Fly, Nordwind Airlines and Syphax Airlines are recent additions to IATA’s membership rolls.

Anderson has had some success pushing for IATA to gain the level of transparency that is standard at private businesses. The creation of an internal compensation committee to review salaries and benefits on an annual basis is one example he cites.

“An organisation this size needs to operate much the way a private enterprise does that is publicly traded,” says Anderson. “It needs to have [the] same level of transparency. Its agenda and its objectives need to be dictated by its members.”

Looking forward, Anderson says IATA needs to continue with its climate change and taxation agenda while also working on a number of internal efficiency projects, including its billing and settlement plan.

The BSP is a system designed to facilitate and simplify selling and remitting payments between travel agents and airlines around the world. It handled $269 billion in sales in 179 countries at the end of 2013.

“When Calin takes over as chairman, the most important thing is to continue to drive the effectiveness and efficiency of the internal programmes that IATA provides to the industry around the world,” says Anderson.