CHAPTER FIVE
Getting
Technical
Simplifying the Business and the role
of technology
Ambitious undertakings
Of course, in this game you have to do more than just talk the talk…you need to walk the walk. In business speak, you have to deliver. Trouble was, the air transport industry was used to limping along from one crisis to the next. IATA needed to provide it with a crutch.
In the end we did more than that. We provided the platform that has enabled the industry to make money despite the oil price averaging a whopping $110 a barrel. That platform is known as Simplifying the Business and it was originally centred on a plan to eliminate the paper ticket, saving airlines about $9 for every single seat they sold.
At a meeting at Heathrow chaired by BA CEO, Rod Eddington, the idea of e-ticketing (ET) was first aired. It was working well on the few carriers that were using it and it would give legacy airlines a chance to close the gap with low-cost carriers. Although its use was limited there was support for the idea, particularly from Robert Milton at Air Canada and Leo van Wyck of KLM.
We began to brainstorm the concept internally at IATA. A few of the more extreme ideas got thrown out but we could see how others— common use self-service check-in (CUSS) and bar-coded boarding passes (BCBP), for example—were complementary. I also asked Tom Murphy, my Senior Vice President, to carefully analyze the role of the Internet. He was a former British Airways manager and had great knowledge of distribution. In any case, my OPODO experience had taught me that the Internet was going to be vital to a future distribution system.
I first mentioned our work to the IATA Board in late 2003. We were enduring a downbeat meeting with plenty of moaning about the low-cost carriers, which were stealing a sizable part of the legacy carriers’ market at the time. I needed to raise the energy levels, so wasted no time in playing my trump card. I told the Board there was a program in preparation that would replicate the LCC model by rebuilding the elemental processes of aviation.
Isao Kaneko, CEO of JAL, looked astonished, as did some of the other Board members. Their surprise was a good sign. It meant some fresh thinking was finally being introduced to aviation debates. Milton and van Wyck were, of course, very supportive.
E-ticketing wasn’t just about the ticket though. The StB program had identified ways to take paper out of the entire distribution chain. In addition to the move to an e-ticket, StB would also include projects in CUSS, BCBP, radio frequency identification (RFID) and e-freight. The airlines would save billions. And it was a classic win−win because it would touch the passenger too. The 2 billion-plus travellers would get a better, harmonized service making the airport process more efficient whether they were in the United States, Europe, Asia or Africa.
Although by 2004 the Internet was firmly established and airline websites were becoming a lot slicker, the airline business model was still centred on two building blocks: the 70,000-strong travel agency distribution system, through which airlines sell their tickets; and interlining, which enables passengers to fly with multiple carriers on a single ticket.
This complex system involves over $300 billion per year, moving between passengers, agents and airlines. The link between them all was the paper ticket. Over time this had evolved into a neutral document that was recognized by all airlines around the world. In practice, it was aviation’s currency. Each ticket had to be distributed securely, was stored in safes, and had a unique identifier that allowed the ticket to be tracked through its entire lifecycle.
The paper ticket made it relatively straightforward for one airline to issue tickets on another airline, known as interlining. For example, a passenger would get a ticket that enabled them to fly from London to New York on British Airways and then on to Miami on American Airlines. The passenger would hand each airline an individual coupon, or ticket, when checkingin for each flight. The airline would then use that coupon as the proof of carriage and claim its money from the airline who first issued the ticket. A very simple concept, no doubt, but in practice it was a complex and longwinded process. Although airlines just needed to sign an interline agreement and agree to the terms for transferring the monies—usually through IATA’s settlement systems—over time it became extremely costly to administer.
It took armies of people to manage these mountains of paper. Travel agents gave paper tickets to passengers. Passengers gave them to checkin staff. Those staff tore off one ticket coupon at a time, and if the coupon had been sold on the other side of the world, it was then sent thousands of miles back again to be processed. The system was also far from foolproof. Missing coupons were an everyday occurrence.
The key difficulty was that to eliminate the paper mountain the whole industry needed to move together. And we had to be quick too. Managing paper and electronic tickets at the same time would be more costly than just keeping the paper. Interline ET (IET) was another difficult proposition. Each airline needed to establish an electronic connection with every one of its interline partners, which meant a full technical interface costing up to $10,000 each time. Not only did this cost mount up as interline agreements are fairly commonplace—some airlines have as many as 200—but for some agreements, which handled just a few tickets a month, the price couldn’t be defended. Add in the fact that the time to implement a full electronic interface between two airlines could be up to four months and you had some very tough decisions on your hands. It’s fair to say that in the beginning, 100% IET seemed completely unrealistic.
But if airlines decided not to implement IET with their partners, in effect cutting each other off, a large percentage of passenger journeys would either stop being offered or would need to be ticketed separately. That would be a major problem for a project proposing to improve customer service.
Time for a revolution
Despite all these challenges, I was confident of the end goal. Preparing the ET project took several months but in May 2004 it was ready to roll. I had discussed the topic with a raft of airline CEOs ahead of the Board meeting that would ratify the project. While they applauded the potential savings it was obvious that many viewed ET as a nice theory— and nothing more. It was a minor concern for me though. In essence, everyone agreed that ET was a great idea. That was all I needed. It would be difficult to backtrack from that simple assertion. So, at the Board meeting, once we were all smiles around the table, I spelled out the final component. The project needed a deadline. We had to say exactly when IATA would cease distributing neutral paper tickets.
Suddenly, the atmosphere changed. The Board meeting became extremely tense. Smaller airlines were naturally reluctant to embrace such radical change in a tight timeframe. For instance, many airlines in Africa were totally unprepared, lacking both the knowledge to implement the new system and the financial means to fund it. But IATA’s remit had changed. I assured these airlines that we were no longer a club for major airlines. I told them they could count on our support, including free of charge consultancy services and expert resources. These would be paid for by our rapidly improving commercial section.
More surprisingly, an unexpected number of large airlines did not want to move forward so quickly, notably Japan Airlines, Air India, Emirates and Virgin Atlantic. I received many letters trying to delay the process. Reasons varied, and certainly they were equally concerned about making big investments, but a crucial factor was the arrangements they had with the distribution channels. This was a project with huge consequences for the distribution chain, including fees payable to the existing distribution system. Identifying a suitable date—in fact any date—for the project deadline turned out to be a tough negotiation. More than once I had to resort to one of my preferred taglines: “No target, no business”. Things were getting heated.
Fortunately, Robert Milton, Air Canada CEO, was once again a strong supporter of my stance. With him fighting by my side I was able to seal an end-2007 target for the ET initiative. To be honest, I think we secured an agreement because more than a few members thought the target would slip, perhaps even be forgotten about. Because of this, the meeting ended pleasantly with everybody joking about being rid of the paper mountain.
About a month later, I made sure the doubters didn’t find it so funny any more. We put out an advisory to all our members that delays wouldn’t be tolerated. Airlines that weren’t 100% ET by end-2007 would no longer feature in the IATA Billing and Settlement Plan, the back-end financial network. They would effectively be cut off from the industry. And in case they doubted my word, I put in a termination date on all our contracts with the paper suppliers. There would be no way to print a ticket.
False dawn
Formal Board approval was a great start but I had to roll my sleeves up and get the right team in place to ensure our tough target would be met. It needed a certain skillset, an ability to dangle carrots as well as wield sticks. And technical understanding had to be coupled with a thorough knowledge of the regulatory and business processes involved.
I had already started head-hunting with the assistance of Michael Bell from Spencer Stuart, an executive recruitment firm. Michael was the most experienced head hunter in aviation and had recruited me to IATA. We needed to find the right man to lead the team. After an extensive search, I hired a US national whose experience included top positions in the distribution world. His biography ticked all the right boxes and he interviewed well.
But it wasn’t the right decision. It’s hard to pinpoint exactly when I started to worry, but from the start I had an instinct that he didn’t quite fit in. Too much bluster, not enough drive. While my sleeves were rolled up, he seemed to be idly pulling his cuffs straight. It just goes to show that a good résumé isn’t enough. You have to get past the technical skills to see if the person has passion. I’m a facts and figures man, not one for therapy sessions, but the passion to deliver on a good résumé is as important as the résumé itself.
After a few months in the job, our new recruit had spearheaded a strategy focusing on an arbitrary selection of a few major airlines. It smacked of the big boys club I had worked so hard to disband. We learned very little from this initiative and achieved no tangible results. During IATA’s annual top management meeting in Montreux, Switzerland, I fired him. Several members of the team felt he should be given more time but I just knew I had made a mistake in recruiting him. He hadn’t shown the sense of urgency or the leadership necessary to build the consensus that this job required. Moreover, he seemed to be more supportive of those airlines that did not want to change fast enough. In any case, the fairest thing for all concerned was to end the relationship as quickly as possible.
And it had to be done for the industry’s sake too. Airlines were bleeding money and this was no time to bed in somebody who may have never made the grade anyway. It was essential not to compound the initial mistake of hiring him by failing to recognize the error and then failing to act. Mistakes, wrong decisions—they are a part of life and the business experience. The only thing to be afraid of is not having the courage to admit to them and putting them right with all possible speed.
But although I acted swiftly it was still a few months wasted. The end-2007 deadline didn’t allow room for such a slow start and the project was seriously off track. And of course, we were now missing a project leader. I knew we couldn’t afford another mistake so decided to abandon the classic head-hunting process. Instead, as with corporate communications, I turned inward and made a careful assessment of our in-house resources, focusing on the recently recruited managers.
I identified the Director of IATA’s Industry and Financial Services, Philippe Bruyère, freshly arrived at IATA from Crédit Suisse. While he had no specific experience in distribution, he came from a strong financial background. The complexities of how the money moved around the distribution chain wouldn’t be lost on him. Importantly, he understood process and he understood the need for speed and leadership. The appointment of Philippe as the head of the StB project created quite a stir within the organization. He was young and taking over from a man who had been a CEO in his role prior to IATA. Many thought it was another crazy Giovanni idea. But it worked. It was further positive reinforcement that there were great opportunities for personal development. I asked Philippe to build on this impetus. He had to develop a strategy and put a team together within ten days. I gave him free rein—he could choose from the best managers available at IATA to help him.
Inspired by authors such as John Kotter and his eight steps of change, Philippe devised a 100-day strategy. His approach was precise and covered all the essential points. The premise was simple: the only way to achieve a revolution was to mobilize the entire industry. This meant that every single airline (500-plus), every single travel agency (70,000-plus), every single airport (1,600-plus), not to mention every single one of the 2.4 billion people who travel by air, would need to embrace proactively the transition from paper ticket to ET.
Creating the networks
Easier said than done, of course. Airlines were cutting staff to keep costs down so there was little in the way of human resources to make the internal changes. They were also squeezing travel agent commissions due to the tight economic conditions, so bringing these two parties together for a common cause required some delicate negotiations.
Setting up internal and external networks provided the framework to take the process forward. The external network was based on a concept of accountability. If someone is made personally accountable for an objective, they will take actions to achieve it, including mobilizing their staff as well as their suppliers and customers. This creates a virtuous circle involving more and more people. By March 2005, letters were flying out of the IATA head-office tasking some 500 airline CEOs to appoint an StB Champion from their senior management ranks and an e-ticketing contact.
One member of the IATA ET core team was assigned to each world region to support this external network. They would research their region’s specific ET challenges and train an IATA StB representative in each country on how to help their local airlines implement solutions. This empowerment model gave the local IATA people the tools, information and support necessary to push their airlines to make progress. In turn, it provided IATA with some tough young motivated managers without whom StB wouldn’t haven’t been so successful. The IATA country and regional project support teams were required to contact all 400 BSPusing airlines each time we conducted a survey on capability and plans— which we did six times during the project. So there were about 2,400 meetings on ET alone. In addition, the StB Steering Group was carrying on with its work, with ET usually taking up about half of its meetings. My scheduled appointments with airline CEOs were ET-centric too. I had about 30 ET briefings prepared for me so I could push CEOs harder.
At any point, the StB Champion at an airline could call the ET regional expert in the IATA core team and get an immediate answer to a question. They could even request a mission where the ET expert would fly in for a few days and provide local support.
The external network needed feeding with knowledge, expertise and coordination. That’s where the internal network came in. At its centre was Philippe who would have to translate strategy into action. He had chosen some good people. Bryan Wilson, an expert in IT systems and processes and a former top manager at SITA, joined the IATA StB team as ET Project Director. In this capacity, Bryan led the project team of experts and was responsible for identifying and overcoming technical, legal and political obstacles that posed a risk to 100% ET. In each country there was an IATA StB representative and in each regional office there was an StB Regional Program Manager. Each person took on this role in addition to their daily jobs and was given accountabilities and targets along with the necessary incentives. Eventually, the IATA StB team reached 80 people covering over 90 countries.
We had established a methodology that formed the foundation not just for ET but for all StB projects. Essentially this involved measuring progress through data. The airline CEOs were an important part of the relationship and they were constantly informed of ET progress. So while there was a global agenda, there was very much a focus on local implementation. You have to understand the reality on the ground.
That’s really what the StB Champion and local IATA contact was all about. We began a campaign to raise awareness and build the relationship between these “on-the-ground” contacts. It was the IATA representative’s job to present on the ET project and its objectives, raise the airline’s awareness on what action needed to take place and by when, and then ask the airline champion for their formal commitment to the action plan. Within four weeks of the project’s announcement, they had been trained to do this and answer any possible questions. Within six weeks, over 300 meetings had been held across the world on e-ticketing. Reports were flying in to Geneva. Each report stated the date of the meeting, the people in attendance, the current status of ET implementation at the airline, and the plan to achieve the 100% vision. For the first time, there was information on the state of the industry in terms of ET.
That was the good news. The bad news was the information showed all too clearly how ill-equipped the industry was to adopt ET. Every week I met with the team for an update, I often had to take responsibility for calling up an airline CEO to push them harder.
Progress initially was painfully slow and out of IATA’s hands. Internally, ET cut across airline departments and the airline StB Champion had to break down silos. Commercial people weren’t used to talking to operational people and they didn’t have much to do with the technical guys either. I could only sympathize. It reminded me of my first months at IATA.
But eventually things started to happen. I had followed up personally with many airline CEOs to support the ET process. I also went directly to governments to tell them to prepare to change the law. Many countries required a paper document for fiscal or visa purposes, so they had to switch to accepting an e-format. And to counteract the economic constraints, IATA was providing all the necessary financial resources to support its member airlines. In my speeches I started to emphasize that “no one gets left behind”.
ET started to spread like a virus, starting with IATA and stretching through its representatives to the airline StB Champions and on to the various airline departments. ET fever was hitting the industry. Despite all the challenges, the first target of 40% ET was achieved ahead of schedule in November 2005.
Colour by numbers
We had to shock people to get there though. Prior to the June Tokyo AGM, the StB team produced a series of ET reports for airline CEOs. Each report was customized by airline and handed out individually to the CEOs at the AGM. They showed the results of that first campaign—in effect providing feedback to the airline CEO on their own management of the ET campaign.
The individual report explicitly presented the airline’s status on e-ticketing based on the available data. A simple colour scheme was adopted. Red airlines were those with no plan to meet the target; orange were those with a plan but still no ET capability; yellow were ET-capable; green were interline ET-capable; and platinum were 100% ET-capable in all aspects.
At the 2005 AGM there were no platinum airlines at all, while the green or yellow carriers were the better resourced ones. Many airlines were still orange or red. In total, 245 airlines had still never issued an electronic ticket. The reports were short, structured to be easy to read and they proved very effective. They shocked the CEOs. It was just as I had planned because we had reached a stage where the project needed an injection of speed and a greater sense of inclusion. Far too many CEOs were still just talking the talk and they had to be embarrassed into taking action. The CEOs had not just heard speeches on how ET would become a reality; they had all given speeches on how ET would become a reality. And here in front of them were reports stating that on current trends they had no hope of making the target. In addition, the reports included a shopping list of challenges to overcome. This information, backed up by industry data on the potential revenue loss if the airline did not meet the target, added to the pressure.
Perhaps it was a bit harsh but these unsubtle hints did the trick. The CEOs started to realize that to meet the 100% target required action—urgent action—from them. Armed with the reports, they went back to their management teams demanding results. In fact, many didn’t wait until they arrived back in their home country. I was delighted to see quite a few making frantic calls on their mobile phones immediately after receiving the report. Showing them the red card improved their game no end.
Phone a friend
To reach our goal, airlines needed technical expertise and regular help. Hundreds of ET projects were going on around the world and the main suppliers of technical help were stretched to the limit. ET expertise was in short supply.
IATA had to help but it wasn’t straightforward. We had to walk the tightrope between staying out of commercial disputes and making sure the entire industry made the transition. Aside from all the other initiatives, two new self-engagement tools were launched. The aim was to bring transaction costs down and to speed up the ET implementation process. The ET Matchmaker was an airline tool that allowed one airline to contact a counterpart in the network and ask them if they wanted to interline, how they wanted to proceed and when they wanted to begin the work. Requests were either accepted or rejected/ignored. If accepted, implementation and follow-up meetings were held. If rejected or ignored, the airline knew it had to make other plans. The second tool, the General Business Requirement (GBR) Generator, enabled airlines that had agreed to interline to establish their electronic terms quickly.
These two initiatives brought the average interline implementation time down from the previous best of four months to just two weeks. By the end of 2006, IATA was projecting that over 80% of current interline journeys would be ticketed by the deadline, with the remainder being easily tackled with minimum inconvenience to the customer. And that was a conservative estimate.
All we had done really was identify the problems quickly. Then we brought in experts to solve the problems, translate the solutions into something non-experts could apply and finally drive the implementation.
It didn’t mean we were home and dry though. The sheer amount of work was putting airlines under incredible pressure. By early 2007, the strains of the tight deadline were becoming more visible as airlines struggled to complete 100% ET. Many were genuinely doing their best but for some, it was a convenient excuse. It was becoming clear that a few airlines would have to be dragged into the modern, paperless world kicking and screaming.
We quickly identified another opportunity for assistance. Those airlines nearing 100% ET now had under-utilized experts. So why not ask an advanced airline to send one of their experts to an airline that needed the expertise? An ET buddy system. Initially, this was done between airlines that were part of the same alliance, but that soon became a pleasantry we neither needed nor could afford. Soon enough, experts were flying around the world to offer help wherever it was required—a real example of industry cooperation. Titus Naikuni, CEO of Kenya Airways, in particular deserves some praise. He was instrumental in helping several African carriers.
Not all problems could be solved on an individual buddy basis. So IATA also sponsored regional workshops where airlines, vendors and experts would come together to share their progress and problems, learn about solutions and agree on how they would work together in an electronic world.
Airports without any kind of electronic infrastructure were an especially tricky conundrum and the source of both amusement and bemusement at the regional workshops. No electricity at all seemed a reasonable excuse for failing to implement ET. Not for the StB team though. Kenya Airways implemented ET at Lamu Island, a small Kenyan dirt airstrip off the coast that had no power. The loadsheet was brought out to the airport by a check-in agent who took the boat from the mainland town before each flight. A video of the story was shown at the 2007 Vancouver AGM and put to shame airlines who still claimed that global ET was impossible.
Eliminating paper tickets
That final year, we had to overcome various problems from the small to the large. I hit the road to highlight the importance of meeting the target and to offer any assistance necessary to airlines in difficulty.
Egyptair was facing serious issues because its old, legacy systems couldn’t cope with ET and major financial investments were required. It was only due to the leadership of the CEO, Atef Abdel Hamid, that Egyptair got on board before the final furlong. Air India was stuck in a similar situation, something of a surprise in a country that is the home to many of the world’s biggest IT companies. Malaysian Airlines was another example and, again, thanks to the commitment and vision of its CEO, Idris Jala, it was able to meet the deadline.
These airlines really just needed a massive dose of motivation to take them over the line. Others had more deep-seated problems. MIAT, the airline of Mongolia, is a case in point. Its CEO, Orkhon Tseyen-Oidov, asked for my personal help. Of course, I responded positively and a month later, in March 2007, I arrived in a very cold Ulan Bator. The Mongolian capital is a strange but wonderful place. It is surrounded by stunning natural scenery but has a coal power station planted right in the middle of a humble, rudimentary city. It’s not exactly environmentally-friendly, but it gives the city more grandeur than you would expect.
At MIAT headquarters, a modern building in the airport area, the CEO introduced me to his team. The managers were all very young. As ever, I had prepared for the meeting. I took out my notes expecting that their first request would be an extension of the deadline. This was the usual demand of an airline facing difficulties. Instead, they had very precise questions as to how to reach the targets from a business and technical viewpoint. I was given a very accurate presentation on the ET program that they were currently working on. I was surprised but very impressed and promised I would help them. In truth, I only had to make one call—to the CEO of SITA, Francesco Violante. SITA run many of aviation’s background IT systems. As ever, my friend Francesco was very responsive and gave them the assistance they needed. MIAT made the deadline.
To extend or not to extend
By February 2007, forecasts for the end-of-year ET compliance figure were running at around 90%. An amazing achievement for sure, but still not good enough.
At the same time, letters from stressed CEOs started arriving at IATA. They pleaded for an extension to the deadline. Russian carriers, which had just received legal approval to issue their first ET after years of government delays, now had only a few months to make a journey that other airlines had taken years to complete. I had discussed this problem with my good friends, Transport Minister Igor Levitin and the Aeroflot CEO Valery Okulov, on a number of occasions. While they had understood the concept from the start, some senior cabinet officials had stubbornly insisted a paper ticket was a fiscal necessity and paper ticket distribution was handled by an unreliable outside agency. IATA strongly supported the Minister Levitin and our staff paid dearly for this support. Our Moscow office was raided by the police at gun point. Two employees ended up in hospital. Our country manager, Dimitri Shamraev, behaved impeccably and the Swiss Ambassador to the United Nations in Geneva, Dante Martinelli, also acted very effectively on our behalf. In the end Minister Levitin finally won out just a few months before deadline.
Other carriers were asking for a delay to e-ticketing for more selfish reasons. JAL, for example, was uncomfortable with a global model and was lobbying smaller Pacific carriers to ask for an extension. And Virgin Atlantic just seemed to be reluctant to join in on an industry initiative. The brand has a trendy, innovative image but in this case the reality was somewhat different and their CEO, Steve Ridgway, had to be persuaded by CS Chew of Singapore Airlines (SQ). It probably isn’t a coincidence that SQ was a major shareholder in Virgin.
In a confidential report prepared for me, the StB team recommended that a four-month extension of the deadline should be enough to meet the target. Six months was the outside figure and anything more than that would be a danger to the project in terms of lost momentum. There were also cost implications for those airlines that had made the deadline. Having to maintain paper relations with a few stragglers was, in effect, a financial penalty for doing the work on time. That didn’t seem fair.
The 2007 Vancouver AGM was now fast approaching where we would be reporting, in a transparent manner, the ET positions of all IATA members. The decision over the extension was weighing heavily on my mind and I ordered preparations for a formal vote on the matter at the AGM, printing the ballot papers and ordering the voting boxes. A proper vote like this had never arisen in the 60 years of IATA’s history. But it showed how important this was. We had come a long way since 2004 and managing the extra 5% to 6% paper tickets gap was so frustrating. I desperately wanted to keep to our timeframe even though only a few years before most of our members and partners were all betting on the paper ticket having a long and happy life.
When the first AGM delegates arrived in Vancouver, it was clear that the supporters for a deadline extension intended to be very vocal. It wasn’t all self-pitying diatribes. Like the Russians, some were genuinely handcuffed by government legislation that insisted on a needlessly cumbersome, bureaucratic paper trail. Why governments resist change and innovation, even when the evidence in favour is indisputable, is one of life’s great mysteries. Delays in changing the regulatory framework are not measured in months or years, but in decades.
Anyway, I worked on a plan with the IATA Board Chairman, CS Chew of Singapore Airlines, and the AGM President, Robert Milton. The numbers suggested that over 90 airlines would still be unable to issue an electronic ticket by the deadline. And although we had managed to achieve over 2,600 IETs, around 32% of interline tickets would still be on paper.
There were two options. Either we took the hard line, which would not have been an issue at Board level but might have upset the rank and file, or we agreed to a limited extension. I had to reconcile my “No targets, no business’’ motto with IATA’s role as an association that wanted all its members on board. Eventually, I suggested extending the deadline by another six months until May 2008. This was carefully thought out. By making sure the deadline was before the next AGM, when all major decisions such as this are debated by the airlines, there was no way IATA could extend it. I had made it absolutely clear that past May 2008, there would not be so much as an extra second, no matter what.
CS and Robert agreed to the proposal and we presented the plan to the Board. The discussion was passionate, but reasonable and constructive. The last to speak was the Saudi Arabian Airlines CEO, Khalid Abdullah Almolhem, who argued passionately for a short extension. In the end we were left with a two-pronged solution: apply the existing deadline to the airlines that could be ready for 100% ET by 31 December 2007 and grant a six-month extension to those few airlines that required it.
Even then, some carriers were not satisfied with this and asked for more time. They had correctly worked out that the Board would not be meeting again until after the new deadline and so there would be no further options to extend. This frightened them. I spent an hour chatting with Katsuo Haneda of JAL, trying to persuade him that the new deadline was realistic while he was warning that other airlines would support his call for a further extension. Other discussions went on all day, with a one-year postponement being pushed hard. Work was started on the text of a motion a few like-minded airlines were ready to submit to the AGM even if that meant having to go through a secret ballot vote. It was an exceptional situation but at the very least I was determined it would be handled properly.
We talked and talked. Groups broke off for separate discussions and then rejoined the main debate, a process that went on all night. There were some really odd conversations. For example, airlines from the same country were adopting radically different positions. All Nippon Airways was saying it could easily meet the deadline but Japan Airlines was adamant that the deadline be postponed by one year. Guess which airline fared better in the following couple of years?
And then, to top it all, I was served with an injunction from a Canadian court to stop the ET discussions because the authorities were concerned that we were raising antitrust issues. Obviously, we can’t discuss ticket prices and the like at an AGM in case we get accused of price fixing. The court clearly thought we were treading a fine line but actually what an airline charged a passenger was completely irrelevant. I had no time for such distractions. I told my team to keep working at full speed and to ignore the injunction. I said we would worry about a court battle later, although to be honest I was convinced from the start that there was no basis to the injunction.
So on it went. CS Chew was woken up at 3am to smooth over some disagreement or other. I was lucky to have both him and Robert Milton on my side. They were both very open and honest and always available. Their determination helped me keep IATA from splitting in two and was absolutely necessary to the final result.
In the morning, Robert was able to bang the gavel on an agreement. End-May 2008 would bring to a close the reign of the paper ticket.
Celebration on the Bosphorus
On 1 June 2008, the aviation world was 100% ET. Out of 560 airlines worldwide only 34 did not make the deadline and they represented just 0.1% of BSP operations. That 34 included only four IATA members. The following day at the IATA AGM in Istanbul, thousands of shredded paper tickets descended like confetti on the participating CEOs in celebration of the success of the industry initiative. Aviation was the first industry to truly enter the paperless world.
We had reached a milestone in aviation and the travel experience of 2 billion-plus passengers would be a lot better for it. Eliminating paper has saved the industry $3 billion a year and the equivalent of 50,000 mature trees annually. In just four years, we had proven to the world that even though IATA was a small international organization, it was relevant to its members and could drive industry change on a massive scale. The dream had become a reality.
ET also laid the foundations for the success of the entire StB program, as the same principles were applied to other StB projects, from self-service check-in to e-freight. Today, a passenger can check in online or use a self-service kiosk at the airport. The boarding pass can be stored as a bar code on a mobile phone. And the journey can be tailor-made, perhaps booking lounge access with an economy fare or a certain type of meal. All of these projects had their own challenges and their own stories. But all of them followed the same pattern as ET and each was only made possible because of the groundwork laid by the founding StB project.
So long live ET. I sent every airline a framed copy of a paper ticket as a reminder that our hard work and cooperation ended in success. If you still have a paper ticket, send it to your local museum. That’s where it belongs.
Good and bad technology
Aviation and technology are inseparable. You can’t put 100 metric tons of machine 40,000 feet into the air—safely—without a lot of technical know-how. The problem is that this relationship has clouded judgment, and IT is often seen as just that—IT. CEOs need to remember that we are really talking about a commercial and marketing tool.
Distribution highlights the issue. In the old days, when global distribution systems were dominant, the likes of Amadeus and Gallileo were run by IT guys. And airline CEOs listened to what they were saying because they had no idea of the technology behind the systems. This meant airline CEOs didn’t have a true understanding of the value of these systems. And remember, this was originally an airline idea, one they couldn’t develop because of lack of funds.
It was Bob Crandall, the legendary CEO of American Airlines, who first really understood how to leverage IT as a commercial distribution tool. I remembered what Bob had done and also drew on my experience with Galileo and OPODO. When I joined IATA I wanted to bring distribution back under airline control, and so, set up a project to see if we could build and run a global distribution system. I asked Rakesh Gangwal, former CEO of US Airways, to spearhead the project. Unfortunately, this opportunity for change was never grasped mainly because airline lawyers were very nervous about airlines getting involved with each other. Rakesh went on to become Worldspan CEO and a major influence in one of the most successful Indian carriers, Indigo. And I still think a new distribution system was a good idea and that GDSs have taken too much money from airlines for too long. It led to me calling the GDSs “leeches” at the 2010 AGM and causing a real storm. But the tactic worked. IATA has now launched a “New Distribution Capability” project and the GDSs look like being willing participants.
Social media is another new “technology” and again I think CEOs are in danger of missing the point. I see social media mainly as a distribution tool. It is not just about information or marketing but rather needs to be integrated with those sides of the business to advance distribution techniques. When you see a company like Google get involved, buying ITA, a major supplier of airline software, you have to worry that an airline ticket will become a commodity. This would be a major problem for the airlines.
With any change, airlines will face the usual dilemma. To innovate and be first to market or wait for the teething troubles to be ironed out and follow fast behind. As Alitalia CEO, I was definitely a fast follower. It was a sensible strategy. Being an innovator is a risky and expensive business. And while the idea for change may be good, it’s unlikely to be a perfect fit for the market at the beginning. It will take a few months worth of tweaks to get the product or system right. And that is where being a fast follower comes in.
At Alitalia, I took a new cargo IT program, not long after launch, called “Fast” that was quickly acquired by all the major cargo airlines. We were able to refine the product even further and we had stolen a march on most of our competitors. The program made Alitalia a lot of money. Years later, during a visit to Japan as IATA DG, Nippon Cargo CEO Masayo Yamaguchi told me that they were still using the program. They were more impressed with the fact that I was the person who had made the Cargo IT program into such a practical product than that I was the IATA DG.
There are always a lot of good ideas out there. Creativity isn’t the problem. Look at the leadership role in the industry being played by my good friend Louis Chênevert, CEO of United Technologies Corporation, for example. He is constantly redrawing the boundaries of what is possible. The obstacle to progress is the need for deep pockets. Look at the aircraft manufacturers. Putting a completely new aircraft into production is a multi-billion dollar gamble. It’s why you don’t see new aircraft every other year and why there are so few manufacturers. Of course, we need new aircraft from time to time, just as we need new technology and software. So there has to be something in it for the innovator. As long as there is a constant push for the product to be improved, once a company gets ahead, it can stay ahead. A company must challenge itself to stay the best.