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  • INTERVIEW: Giovanni Bisignani on his 10 years transforming IATA

INTERVIEW: Giovanni Bisignani on his 10 years transforming IATA

(corrects date of AGM where he declared aim for carbon neutral growth)

When IATA needed shaking up after 9/11, it turned to Giovanni Bisignani to lead its transformation. Here, the autocratic 'agent of change' reflects on his decade in charge Giovanni Bisignani's arrival at IATA in 2002 was as dramatic as his departure 10 years on. When he touched down at the association, the world's airlines were still shaking from the horror of 9/11 and he quickly set about transforming IATA from "a dusty cove" into a lean, mean organisation fit to fight battles on all fronts. A decade later, Bisignani bade farewell at a final fractious annual general meeting where several leading airline chief executives questioned IATA's operating practices under his leadership.

In his captivating new autobiography Shaking The Skies, the outspoken Italian charts his 10-year reign at the airline association, which ended at that controversial AGM in Singapore two years ago when ex-Cathay Pacific chief executive Tony Tyler took the helm.

In Shaking The Skies, Bisignani lifts the lid on how he dismantled IATA's ageing structure and rebuilt the association to make it relevant and effective, and on the battles he fought internally and externally on the cost, safety and environmental fronts. It was some of those changes, and the autocratic approach in which he implemented them, that had created the unusual atmosphere in Singapore, but Bisignani has a stark warning for those that think IATA's leadership should be less dictatorial.

The pre-Bisignani IATA had changed little since its creation in 1945. It was viewed at the time by its leading members as being "a reliable association, but not longer relevant to the industry", he says.

That image did little to excite Bisignani when he was approached for the director general job, and he did not think it was for him.

"As a former Alitalia CEO, I knew IATA well. It was a typical international organisation: no targets, a lot of talking, and committees. A different world to the one I was accustomed to working in when I was at Alitalia or GE. That's why I told them I was not the right person for this."

So Bisignani politely declined an approach in November 2001, communicated through IATA's 2000-01 chairman, Delta Air Lines boss Leo Mullin, explaining that if he joined IATA he would "make a mess because I will start running it like GE".

But unbeknown to Bisignani, his "agent of change" reputation was exactly what had attracted him to the airlines. They had already recognised the association needed shaking up if it was to function in the 21st century. They lobbied him to rethink and needed to move fast - it was just after 9/11 and most of the US airlines were in Chapter 11.

"Leo said, 'Giovanni, the situation in the industry is really a disaster, we are dying. Come - we'll give you a blank sheet of paper. We need you to lead the revolution," recalls Bisignani of the approach.

Words of encouragement also came from Lufthansa chief executive Jurgen Weber, who told Bisignani "push, and others will follow".

At the time of the IATA approach, Bisignani was living in London and in the process of launching the airline-owned online travel agency Opodo and although encouraged by what he was hearing about the IATA role, was still unsure about the move. He then spoke to his "mentor, hero and friend", GE legend Jack Welch. "I told Jack that IATA was a dusty cove, dark and full of creatures afraid of the light of day. He shrugged and said, without hesitation, to jump on board."

And what he found when he touched down at the IATA headquarters in Geneva was an association that had translated its status as a not-for-profit organisation into one that was "not for making money, not for change and not run like a business. When I arrived I said: 'Look guys, the carnival is over'."

It took Bisignani two months to review the organisation and understand what was going on. Then, with his Welch-inspired mantra "no target, no business", Bisignani set about turning IATA into a profitable business for the greater good of all the members. He flattened the structure, taking out layers of management -- there were more than 100 committees - and brought in a properly enforced performance-target culture.

"We had to start making a profit because IATA would no longer be just the club of the big guys. It would be the club of the small guys too, and to support the small airlines I needed money to help them."

The association's penniless status had contributed to its downfall, says Bisignani, because it prevented it being able to operate as an effective tool for its members. "We had no money, so we could not take any kind of decisions. Because when we wanted to begin any kind of project we needed money and it took us two or three years to collect it from the airlines.

"I told the board that IATA would not just represent the industry, it would lead the industry. And I mean lead in business terms. We will drive the agenda and we will implement tough targets."

Bisignani believes that before his arrival, no IATA staff member had ever been sacked. But during his first year at the helm, which began in July 2002, 246 staff left and 127 joined. "Within four or five months it was a very different organisation. People started to realise that IATA was no longer the organisation for them. Some started to resign, many were fired."

During his decade as director general, Bisignani's team generated $50 billion in savings for the member airlines. "That was all connected to our variable compensation system for staff - not linked to 'how many visits to the airlines have you made', but 'how much money have you saved'."

IATA had focused on the cheapest option for a location on new hire but Bisignani changed all that. "I said we should hire the best, not the cheapest. And as the organisation changed we were able to attract people with a different type of culture who would not have been interested in working for the old IATA."

One of Bisignani's key early moves was to tap the expertise of renowned GE business school consultant Noel Tichy. "I wanted Noel to put IATA management on the ropes. When I told Jack Welch he was coming, he replied: 'Having Noel Tichy in IATA is like putting a bomb in a church'."

Bisignani admits he did not get every new appointment right, but acted quickly to correct mistakes. "I made a couple wrong decisions. For example with the 'simplifying the business' programme I hired a CEO of Amadeus USA who had the perfect style we wanted. But within a couple of months I saw that he didn't really have enough passion and I fired him. People said I should give him time, but I can quickly identify if I've made a mistake."

Intriguingly, not everyone was convinced by Bisignani's efforts to change IATA's image from being "the club of the big guys". At Bisignani's last AGM, Emirates Airline president Tim Clark stated from the floor that there was a perception that the association was "run for the few, by the few". But Bisignani is adamant that that could not be further from the truth. "It is completely the opposite," he says.

While no direct mention is made of the events of Singapore, one paragraph in the book alludes to perceived moves by some members to stymie the effectiveness that Bisignani's autocratic leadership brought to IATA, and return it to the bad old days (see box).

"The risk is always there, because you'll always have somebody that is more interested in removing IATA from the driving seat and having the committees. But having committees, or consensus, means that you do not deliver.

"There is a risk that IATA could return to this sort of organisation, but it's up to Tony [Tyler] and I'm sure he will avoid this. The model has to be that IATA is run like a business with clear targets.

"Relevance is important. It is difficult to achieve but it's also easy to lose."

Bisignani says that he was always blessed with "incredible support" from the IATA chairmen and board during his 10 years. "The CEOs have big egos and in many countries they are the most famous businessmen, but when they are in IATA and they speak as an industry, each one takes away his hat."

One of the important early confrontations that won Bisignani respect from his peers was with Tokyo's Narita airport over its extortionate charges. At an Airports Council International event in Tokyo after just four months in the job, Bisignani blasted Narita and accused the Japanese government of giving airport authorities "a licence to print money".

Although the controversial speech in front of 1,000 delegates was greeted with a frosty silence, it had the desired effect. The airport changed the way it did business, and it set the tone for Bisignani's new-look IATA.

"I was applauded by my CEOs because we'd had the courage to say in public what everyone had been saying in private meetings. That was a turning point because these guys understood that I was not just reshaping IATA but at the same time reshaping the industry."

However, Bisignani decided to sidestep the IATA board on the controversial subject of the environment, where he took the calculated risk of declaring that the members would aim for carbon-neutral growth.

"It was the only time that I took a short cut. I knew that if I had gone to the board first I would lose. So I decided to go directly to the AGM," he says.

As he worked on the tone of his speech for the 2007 AGM, Bisignani turned to President John F Kennedy for inspiration.

"I knew I had to impress and I had to shock, but at the same time I didn't have to scare. So I went back to [the] Moon speech of Kennedy - he didn't say '10 years' - and I used that. I said it was an aspiration and if the AGM approves that, then the work after would be on the target." The targets finally agreed included efficiency improvements through to 2020 followed by carbon neutral growth until 2050 by which time a 50% reduction in emissions would be achieved.

Bisignani was frustrated by the attitude of some of his members to the threat of the low-cost carriers, who felt that they were unfair competition. "I said, 'Guys, I'm coming from a business. And low-cost carriers are business - we have to adapt and be able to compete'."

He used this challenge as a way to implement his "simplifying the business" initiative, central to which was to scrap paper tickets and adopt 100% electronic ticketing. Bisignani is convinced that without this switch, the network carriers would have found it impossible to compete with the low-cost sector.

Low-cost carriers generally steer clear of IATA as that business model does not need to make use of the settlement system. But the same is not true of the other threat to the long-established members -the Gulf network carriers.

All three are fully paid-up IATA members, but are viewed with suspicion by some of the "old guard", particularly with regard to the transparency of their financial affairs.

"IATA can't be the auditor of their balance sheets," says Bisignani. "If they're telling me that there is no money coming from the government, then I accept this.

"The Middle East has incredibly effective hubs. Why? Because they have governments who support aviation." But Bisignani accepts that the IATA airlines are in the middle of a battle that has created a lot of tension, and they must find a business solution. He clarified his message at AGMs near the end of his term, that there must be "an end to governments playing the role of lawyers or advocates", and a way forward must be found.

"We cannot be there as one against the other. We have to find a way in which we accept that the reality now [is] that the Middle East is a strong force. It's up to the airlines to make business decisions, and I'm very pleased to see the situation is evolving in the right way - Etihad has an agreement with Air France-KLM, Emirates with Qantas, and Qatar is joining Oneworld."

Bisignani is proud of how the IATA airlines have evolved during the 21st century, but he remains frustrated that their combined business performance remains so poor.

"It's the only system in the world where everybody's making money except the one who drives the business," he says. "In any other industry with a 0.6% margin over 20 years, all the CEOs would have to be sacked."

But he still keeps faith in its ability to reform: "When I came into the industry, we were able to break even with fuel at $10 a barrel. Now we can break even at $110 a barrel. It's an incredible performance."

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