Giovanni Bisignani: Flight path to survival

The Business Interview: The worse the crisis for airlines, the bigger the opportunity to make governments let them behave like normal businesses, says the Iata director general

Recent news from the airline industry is uniformly dire: a litany of bankruptcies, £1bn increases in fuel bills, and misfiring takeover plans. But in a luxury Kuala Lumpur hotel, overlooking the Malaysian capital's Petronas towers, Giovanni Bisignani, the impish director general of the International Air Transport Association (Iata), is buoyant.

"Every crisis is an opportunity for change," the slight, former chief executive of Alitalia, says. "Unfortunately last time, after 9/11, we didn't see enough change."

The good news, pursuing Mr Bisignani's logic, is that this time the crisis is much worse. After 9/11, airline revenues dropped by 6 per cent in three months, and took three years to recover. This year revenues will collapse by 15 per cent, leaving losses of $9bn, according to Iata. Some 50 airlines have already gone under, and this week's Paris Air Show was far from the usual order bonanza.

The opportunities of such a catastrophe are nothing short of global restructuring, a final push to make airlines a commercial business. Of that, more later. The other big priority is the environmental agenda.

As well the gloomy predictions at the Kuala Lumpur AGM, Iata set a target for carbon neutral growth by 2020. And although it was the loss forecasts that the press contingent sent reverberating around the mediaverse, it is the green story that Mr Bisignani wants for his legacy.

Behind the undoubted charm, the 63-year old Italian has a fearsome reputation. He has blown through the once-sleepy trade organisation like a tornado since his arrival in 2002. Back then, Iata had 1,900 staff. Now there are 500 fewer, and 1,200 of them are different. "After a year, half the organisation was different," Mr Bisignani acknowledges. He tries, only partially successfully, not to criticise his predecessors. "When I joined, Iata was more of a club," he says. "I changed the management not because it was no good, but because it didn't have the edge required to run Iata like a business."

Iata represents 230 of the world's airlines – carrying 93 per cent of international scheduled traffic – as well as monitoring safety programmes, providing a global $239bn (£147bn) per year payments system and pushing through technology standards. "We are a special animal," Mr Bisignani says. "And as a special animal, we can do special things."

Mr Bisignani's strategy has some considerable successes, and he is widely supported by his members. But the top job is a strange mixture of a role – part ambassador, part parent, part bulldog. The plan to introduce e-ticketing across 200 countries was widely considered impossible. But that was without reckoning the man that some Iata staff reportedly dub "Napoleon". "I told members that if they didn't get it right they would stop flying because we would not be distributing any more tickets," Mr Bisignani shrugs, with some satisfaction. "My job is to build consensus, but if that takes too much time I have to take a risk and lead the change." Carbon neutral growth by 2020 may be a repeat of e-ticketing.

In its transformation from torpid bureaucracy to a commercially run organisation, Iata parallels changes in the industry it serves. Gone are the state-owned carriers. Instead, the airlines are listed companies, walloped by everything from oil price fluctuations to pandemic fears. As things stand, it is simply not a profitable business to be in. Over the last 60 years, the margin has averaged just 0.3 per cent, with $1 trillion in revenues producing profits of just $32bn.

Mr Bisignani fought hard to change the culture of Iata. "At the start everyone said it was impossible, but I had to have the courage to do things differently," he says. Post-privatisation, the same is true of the airlines. "If we were allowed to run airlines as normal businesses there would be consolidation, there would be access to international finance and there would be many failures."

There are two major hurdles. One is the disconnect between the competitive airline market and the monopolistic infrastructure of airports. Iata is incensed that airport charges are up by $1.5bn, despite six months of unprecedented crisis. "Everyone in the value chain except the airlines makes money," Mr Bisignani says. "It is not our management skills that are the problem, it is that we are the only ones that compete. We don't want a bailout, we want airports to be more efficient and regulators to be real."

Unlike his predecessors, Mr Bisignani knows how to apply pressure. Six months after taking the top job, addressing an airports conference in Japan, he took a sufficiently truculent line on the fees at Tokyo's Narita airport that the first three rows of the 1,000-strong audience walked out of the auditorium. "I was expected to make a speech on the partnership between airports and airlines, but I said that the government had given Narita a licence to print money," Mr Bisignani says, grinning. "My tools are to embarrass governments with figures and facts." He is also a canny media operator. At this year's Iata AGM there were 250 journalists. In 2000, there were 12.

But a shake-up of airports and their regulators is still only a small step compared with the heady issue of liberalisation. Despite recent attempts to open up the international market – most notably last year's Open Skies treaty – airlines are still bound by laws governing national ownership. "There has not been the courage to liberalise the whole system," Mr Bisignani says. "Airlines are the weak part of the value chain because others are not playing the same game. It's like boxing with one arm tied behind your back, you start as a loser."

There is quite a prize at stake. Pre-crisis numbers predict Asia will be the biggest market by 2010. And while the West succumbs to regulatory sclerosis, Far Eastern governments such as Singapore and Malaysia are liberalising apace. "Europe and the US once played an enormous role in aviation and set the rules," Mr Bisignani says. "Now they are becoming irrelevant."

All of which leads back to the prognosis for the limping industry. Freight may pick up towards the end of the year, but cargo only brings in about 10 per cent of revenues. When the high-margin passenger numbers will start to improve is anyone's guess. "If this crisis is prolonged then it won't just be the small carriers failing, national carriers will go too, and that will be a problem for governments," Mr Bisignani says. He certainly knows how to apply pressure.

Giovanni Bisignani: The CV

2002-now Director general, Iata

2001-2 Chief executive, Opodo

1989-94 Chief executive, Alitalia

Other posts include: chairman of the Association of European Airlines; chairman of Galileo International; president of Tirrennia di Navigazione, one of Europe's largest ferry operators; chief executive of SM Logistics, part-owned by GE Capital

Married with one daughter. Enjoys golf, tennis and horse-riding

ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs People

Chief Executive

£28, 700: Whiskey Whiskey Tango: Property Management Company is seeking a brig...

COO / Chief Operating Officer

£80 - 100k + Bonus: Guru Careers: A COO / Chief Operating Officer is needed to...

HR Manager - Kent - £45,000

£40000 - £45000 per annum: Ashdown Group: HR Manager / Training Manager (L&D /...

HR Manager - Edgware, London - £45,000

£40000 - £45000 per annum + Benefits: Ashdown Group: HR Manager - Edgware, Lon...

Day In a Page

Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?
Why do we like making lists?

Notes to self: Why do we like making lists?

Well it was good enough for Ancient Egyptians and Picasso...
Hong Kong protests: A good time to open a new restaurant?

A good time to open a new restaurant in Hong Kong?

As pro-democracy demonstrators hold firm, chef Rowley Leigh, who's in the city to open a new restaurant, says you couldn't hope to meet a nicer bunch
Paris Fashion Week: Karl Lagerfeld leads a feminist riot on 'Boulevard Chanel'

Paris Fashion Week

Lagerfeld leads a feminist riot on 'Boulevard Chanel'
Bruce Chatwin's Wales: One of the finest one-day walks in Britain

Simon Calder discovers Bruce Chatwin's Wales

One of the finest one-day walks you could hope for - in Britain
10 best children's nightwear

10 best children's nightwear

Make sure the kids stay cosy on cooler autumn nights in this selection of pjs, onesies and nighties
Manchester City vs Roma: Five things we learnt from City’s draw at the Etihad

Manchester City vs Roma

Five things we learnt from City’s Champions League draw at the Etihad
Martin Hardy: Mike Ashley must act now and end the Alan Pardew reign

Trouble on the Tyne

Ashley must act now and end Pardew's reign at Newcastle, says Martin Hardy
Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?