Serious business: up, up and away

Six Degrees of Separation is the existential premise that everyone in the world is connected to everyone else on Earth by a chain of no more than six acquaintances. But it has to be said that few individuals have the details of GE’s ex-CEO Jack Welch, Pope John Paul II, UN secretary general Ban Ki Moon, Russian ex-president Dmitri Medvedev and Libyan leader Colonel Gaddafi in their little black books.

Giovanni Bisignani does; and the former director general of the International Air Transport Association (IATA) and ex-CEO of Italian airline Alitalia, wastes no time in sharing anecdotes with Dialogue about watching with awe the closure of air travel giant Pan Am and travelling to Kim Jong Il’s North Korea on an airplane with no cabin pressure, where he witnessed the unveiling of Pyongyang’s first set of traffic lights.

Thinking back on his time heading the trade association for the airline industry, he laughs: ‘I knew everybody at the time. I have never taken notes, but I have a very good memory.’

An Italian native living in London, Bisignani displays all the flamboyance and charm that is characteristic of his mother country, but make no mistake: Bisignani is a man who means serious business.

IATA’s stated mission is to “represent, lead and serve the airline industry” and it defines most if not all of the airline rules and regulations. The main aim of IATA is to provide safe and secure transportation to air passengers. IATA acts as a clearing house settling the funds that IATA collects from passengers through accredited travel agents IATA’s board is made up of CEOs of 240 airlines, representing 84% of the world’s air travel.

Bisignani joined IATA in 2002 and during his 10 years with the organization, he drove significant industry changes. He made IATA Operational Safety Audit (IOSA) a condition of IATA membership. In short, airplanes have to pass an inspection from IATA teams before their airlines would be permitted to join the organisation. This contributed to a 42% improvement in safety in the skies over the period 2000 to 2010.

Bisignani also started the “Simplifying the Business” (StB) initiative in 2004. This programme converted the industry to e-ticketing and bar-coded boarding passes, made common-use self-service kiosks an integral part of the travel experience and established the framework for 100% e-freight by 2015.

He also mobilized the industry behind a strategy to deal with the impact of the air travel industry’s carbon emissions on climate change. Airlines, airports, air navigation service providers and manufacturers committed to achieve carbon neutral growth by 2020 and cut emissions in half by 2050.

Finally, the redoubtable Bisignani strengthened IATA’s position as the voice of the industry, with firm advocacy and lobbying to focus governments on long-term issues for the viability of aviation.

Taking the job

All very impressive – but given that he joined just weeks after September 11, 2001, when New York’s World Trade Center and the Pentagon in Virginia came under attack by terrorists who hijacked planes, the obvious first question for Bisignani is “why would you take that job?”

‘Everyone says international organizations are lazy and bureaucratic, and IATA was a monument to the past,’ he explains. ‘Two weeks after September 11, I received a call asking if I would take over as director general of IATA and I said: “I’m the opposite to the kind of person you want to do this job – I won’t act as the CEO of Alitalia, but as if I work for GE”.

‘I asked them for a white sheet of paper so I could run it how I wanted – I wouldn’t have taken the job otherwise.

‘The board said to me: “We will help you do what you want. You have a licence to do this.” The hardest person to convince was my wife, but I told her we would be commuting between Geneva and Montreal for five years while I worked at IATA. I ended up doing this for 10. I knew that IATA could have been run like GE – it has been a great adventure doing this.’

Bisignani joined at a time when air travel itself was under the spotlight following those notorious terror attacks and he freely admits that the airline industry was “dying”.

‘I walked in and told the board “the carnival is over”,’ he says. ‘My job title was director general as is usual in an international body, but I added CEO as well because I wanted to act like a CEO. I said to IATA, you need money; I make money. But I don’t need a management team made up of professors. We wanted to deliver. I had to change this organization and I had to do it fast. I was someone who could deliver.’

Bisignani believed it was time for a new strategy for IATA. It was time for the organization to cease to be a talking shop for airline CEOs and become a change agent to a global industry.

‘The only money IATA was making was from “dues” that members paid. But I said we should run it as a commercial organization; run it as a consultancy for the airlines,’ Bisignani says.

And this is what happened.

His first consultancy project was certainly an ambitious one. ‘Our first client was the Chinese Government. I worked with it to redress the consolidation of Chinese airlines and we merged 26 airlines into six – with the approval of the deputy secretary of the Party. ‘They trusted me. I told them it could take them six years to do this and three years would be a record. They did it in one year.’

Setting targets

But although, on the one hand, IATA was united, with Bisignani receiving support from his board and airline members, the biggest problem he faced was setting targets; for example with e-ticketing.

E-ticketing is something 21st century business travellers take for granted. They book online, and use a kiosk at airports to print tickets and (hopefully) move quickly through the check-in process. Previously, a passenger would have to book their tickets over the phone or in person with a travel agent and even wait for the tickets to be posted to them in some cases.

But Bisignani says: ‘It was not just about upgrading a computer system; you have to change the legislation of some countries. In some airports, you needed paper tickets to exchange currency, for example.
In some countries, people were buying plane tickets from travel agents with bags of cash. This was no fault
of the airlines.

‘Russia was difficult. I went to see [the then Russian premier Dmitri] Medvedev myself and I told him that without a change to Russian fiscal law, people wouldn’t be able to fly and would have to travel by train or car.’ And he listened.

But due to this change in the booking process for thousands of e-tickets around the globe, IATA found itself dealing with massive amounts of money.

Bisignani laughs: ‘E-ticketing is worth $660 billion this year alone. I was responsible for $2.5 trillion and was certainly popular with the banks.’

But he is the first to admit that his revolution in the skies – how we travel, how we pay for travel, how airlines measure the safety and security of our travel – is not down to him. Adapting the CEO cliché “people are our greatest asset”,
he asserts: ‘At IATA, people were our only asset.’

‘We employed 2,000 people when I started there and this went down to 1,500 people,’ he explains. ‘I was able to interview everybody for jobs. But once I was away on business, I asked another manager to do this and he said: “We usually just hire the cheapest.”

‘But I picked people who had big salaries. This job
was not a pre-pension position [for airline executives] – we couldn’t have industry experts who had no leadership grip.

‘It was a shock to IATA when I brought in staff from commerce.

‘I’m polite. I never shout. But I’m tough. People understood: if you’re not able to change [with the organization], find something else.

‘I went to the business school of GE and I said “I need help” and I needed someone like [GE Business School consultant] Noel Tichy – but IATA had an annual training budget of $1,000 per year.’

‘Jack Welch said to me: “Noel will do it for free – he wants to enter a new market anyway”.’

‘I changed 40% of the staff – some just came to me and said they didn’t feel right about the new system, so we gave them packages and they left.’

Management restructure

Bisignani, as the CEO, took the stance to completely reorganize leadership and management in IATA. He is emphatic on its importance.

‘Leadership makes all the difference to an organization,’ he asserts. ‘A good leader needs to motivate his team to achieve tough targets in the short term and to work towards a strategy and vision for the organization in the long term.

‘I had a mandate for change. I applied some crucial leadership tips to three key areas: the internal structure and personnel; monopoly providers in the value chain; and governments. I set tough targets and implemented a transparent performance assessment scheme.

‘You need to be able to influence decisions. Being a leader is about taking risks. You won’t hit targets by standing still.

‘Ultimately, every leader develops a unique style. At IATA, I soon became known for my “crazy ideas” and for “shouting politely”. But my ideas were never crazy; they were calculated risks. And for some, my politeness was not always evident.

‘Airline chiefs have big egos. They’re used to being on the front page of newspapers. But with me, they put their egos aside and they just wanted to talk about what was best for the industry.’

‘The small airlines were great at the board level – they wanted to show they were small but good. And I knew I could work with the small airlines. IATA had been a club for the big guys and now I wanted to get everyone on board. So I made a point of visiting every airline in IATA if they invited me
to see them, regardless of how small they were.’

Eleven years on from the beginnings of his organizational turnaround, Bisignani is under no illusion that the airline industry is still in the grip of serious threats. The focus of the business world has moved from developed markets towards the growth markets of the East and South, and the same, according to him, is true of air travel.

And as the recession continues to affect countries globally, the crunch on corporate spending has squeezed business travel – especially given the rise
of teleconferencing and virtual conferences. In fact,
the very day Bisignani met with Dialogue, Skype celebrated its 10th birthday, with in excess of 50 million users worldwide.

‘The US and EU used to be the pillars of the airline industry,’ says Bisignani. ‘Now they account for 28% of air travel. Asia Pacific accounts for 30% of air traffic.’

He had hoped the Single European Sky initiative from the European Commission would have come into effect, by which the design, management and regulation of airspace would be coordinated throughout the European Union – but this has not yet come to fruition.

So what is the future of air travel?

According to Bisignani, mergers and acquisitions and joint ventures will be on the horizon. ‘Consolidation of major airlines is the future,’ he asserts. ‘In Indonesia, Vietnam and Malaysia. In Asia Pacific, air travel is booming. Latin America is playing a huge role in aviation. It has good natural resources and has discovered China – it’s moving from a US-based approach to business to a Chinese approach.

‘Take the LAN [the Chilean airline] and TAM [the Brazilian airline] merger for example, to form LANTAM in 2012 – LAN has leadership; TAM has the market. These airlines are all owned by families that have had good relationships for years. As such, the shareholders can take a long-term strategy.

‘In the Middle East, Arab airlines are 100% state owned. They’re doing what the EU was doing 25 years ago and they are all in the market. They have built a very efficient infrastructure and have good locations for planes. Etihad is surpassing all in terms of class and no airline has developed
so quickly.’ And overall, Bisignani believes the “biggest sin” of the airlines is that they are not handling capacity the right way.

He believes there are too many planes in the sky. ‘If they reduced capacity by 6%, they would see a return of 8%,’ he says. ‘The US is making better profits because it handles capacity better.’

Bisignani welcomes challenges; he welcomes the pressure that the budget airlines are placing on the larger traditional carriers. His changes have arguably revolutionized the industry, but he is clear that the challenges for his successor, Tony Tyler, and the IATA board members are still mounting.

He pauses and takes a breath, thinking about the challenges facing air travel – not least the green agenda, rising taxes and the increase in virtual conferencing – before concluding: ‘This is an industry at risk; an industry with 60 years in survival mode.’

The air travel turbulence looks set to continue.

• Giovanni Bisignani is the author of Shaking the Skies

Flying Ahead of the Airplane, Nawal K. Taneja (2008)