IATA Chief Walsh Reflects On Industry Challenges

0:11Hello everyone and welcome to Window Seat, our Aviation Week Air Transport podcast. I'm ATW and Aviation Week Air Transport Editor-in-Chief Karen Walker. Welcome on board. Now we have a very special program today because I am joined by industry icon Willie Walsh. Willie, welcome and thank you so much for joining Window Seat again. Willie, of course, is Director General at the International Air Transport Association, or IATA, that represents more than 370 airlines accounting for some 85 % of global air traffic. Willie took the helm in April 2021, and that continued a long and illustrious career that included the roles of CEO at Aer Lingus, British Airways and International Airlines Group.

0:58Indeed, he started as a cadet pilot at Aer Lingus, so he's also a pilot. Willie will relinquish his IATA role at the end of this week. And, of course, big news last week was that his successor will be Sadia Sahidi, who is currently the Managing Director at the World Economic Forum and who will take up the IATA role on November 1. We'll start off talking about that in just a second. Meanwhile, Willy will soon take up yet another airline CU role, heading up Indian carrier Indigo. So the journey continues. So again, welcome, Willy. Willie, we really have to start with that big announcement last week that Sadia from the World Economic Forum will be the new IATA Director General.

1:49I think that's the ninth Director General. What are your thoughts? Well, I'm delighted for Sadia. I think she's going to really enjoy the role. Obviously, it'll be a big change for her coming into the industry, not having experienced it before. But I think the board was very conscious when making that decision that, you know, she will have the support of the expertise within IATA. And I think it's a strong indication of the confidence that the board has in the management structure of IATA and obviously the support that the board will give Sadia in her new role. So I'm excited for her and I wish her the very best.

2:31And I'll certainly look forward to interacting with her as the leader of one of our member airlines. Absolutely. Yes, that's going to be fascinating. I must say, bravo to the board. That was a big decision. And in the current times, I think that's going to be just a really good fit. So let's go back to your role as the IATA Director General. And in particular, let's look at the last AGM, which was held in Rio de Janeiro in June. It was your sixth and, of course, last AGM as director general, although you quite rightly point out Indigo is a IATA member. So I'm sure you'll be there. In your opening remarks in June, you called out some of those who are making it even harder for airlines to succeed financially and operationally, including the industry supply chain and in particular you cited engine makers and air traffic management providers and governments that slap high taxes on airlines.

3:33From the manufacturer's perspective my question to you is what do you think they could have done differently? Well I think one of the criticisms that was levelled at Boeing going back a few years ago when, if you like, they sort of lost their way, was that they were more focused on capital markets than on serving their customers. And to be honest, I think the same could be said now of the OEMs, particularly the engine OEMs, where, you know, they have been working very hard to satisfy the market and maybe not hard to satisfy their customers. And for me, that's completely unacceptable. And you've got to give credit to Boeing under Kelly and Stephanie in particular.

4:16You know, they've turned that position around and are getting great credit from the industry for the work that they're now doing and the focus that they've had, or if you like, the refocus they've had on their customers. And I think there's a strong lesson in that for the other OEMs. Yeah, Stephanie Pope. Interesting how that relationship, I think, has gone with Kelly Ortberg. So Stephanie being the CEO at Boeing Commercial Airplanes. And then Kelly is, of course, the CEO of Boeing Company. To be fair, Stephanie's done a great job. You know, she's really strong in the role. She has reasserted, if you like, the engineering focus in Boeing.

5:04She's got a lot of respect from within the industry. And I think she's doing an excellent job. And, you know, and Kelly Orberg obviously deserves credit for the work that he's doing in stabilizing the group. They still have some work to do, obviously, and I think they're very clear in saying that themselves. But I think there is a lesson. If other manufacturers want to see how they can do better, I think it'd be well worth looking at what Boeing has done to recover their position in recent years. Yeah, I agree. So, yes, so Stephanie was both at the IATA AGM and then, of course, at the Farnborough Air Show last week.

5:46so I believe you were at the air show too, correct? Yeah, I was there on the Monday meeting up with my future colleagues at Indigo who were making a big announcement in terms of engine selection for their future A3 20 family orders so ordering over a thousand LEAP engines which I think is clearly a massive development so I was very pleased to be there and have the opportunity to talk to some of my industry colleagues. I was surprised, obviously, we've been doing a lot of coverage of the air show. Surprised, frankly, at how much news there was coming out on the commercial side and how much optimism there is in the industry.

6:32There were a lot of big orders and just a sense of optimism. Do you agree? Yeah, I think so. And I've been saying that for some time. You know, I mentioned that at the AGM, that the underlying demand for air travel continues to be strong. I think there is a feeling of confidence in the industry that we can steer our way through the current challenges that we face. And, you know, you heard me say it. I don't see this as a crisis for the industry. Clearly, you know, we're still forecasting profitability at an industry level. It will be very challenging for some airlines. But at an industry level, I think these are, you know, challenging times, but not crisis times.

7:12In some of the other challenges that you mentioned and which you've been working against for most of your time at IATA, ATM provision and governments come up a lot in terms of both the issues that we see with the air traffic management systems around the world and the congestion and also, of course, taxes by governments. Can you just give me as a brief, you know, where do you think in the US? Are we on the right track in terms of ATM modernization? And then what about Europe and the UK? Well, I think to be fair to the US administration, they are starting to tackle the issue. And that's a positive.

7:57Now, there's a long way to go. They have made significant financial resources available to start that process. We need to see that continue. But I think this is a positive development. And from the interactions I've had with them, I believe there's a clear determination to address this once and for all. So I see it as a very positive development. In Europe, I still get somewhat, I don't know, angry, disappointed. Pick any word you like to what I see in Europe. You know, I witnessed politicians celebrating about the renewal of the consumer regulations around air travel. And yet the same people, you know, appear to just completely ignore the issue of air traffic control reform, which is going to be critical if the airline industries continue to grow in Europe and if Europe is to address the environmental challenge.

8:53So it's very disappointing that, you know, we're not seeing more focus on these important issues from the politicians in Europe. And I don't get it, you know, quite honestly, you know, Europe knows that they have to be more competitive. But there's very little action on the part of politics in Europe to actually face up to these challenges. And I worry about the future of Europe as a result. You mentioned sustainability there, and you are absolutely correct. I mean, ATM or efficient ATM is a huge part of this and in something that could be so easily addressed a long time ago. So your very first AGM, IATA AGM as a director general, that was in 2021 in Boston.

9:38And the industry was still reeling from the impacts of COVID. I think if I recall right, the AGM had to be postponed from June to October because it was originally going to be in Amsterdam. And there was another sweep of that virus going through. What motivated you to take the reins at that point? And of course, you also made this commitment to the 2050 net zero goal on the carbon emissions side. So first things first, what motivated you to take that role at that time? Well, you know, I hadn't intended doing anything. I felt somewhat guilty leaving the industry when I did, because obviously I announced my retirement from IAG before the COVID crisis started.

10:26and when the opportunity arose to take on the IATA job, it was a very simple decision for me because I felt I could contribute and I felt that I had a strong enough voice to represent the industry and in fact I've said it to people, to get paid to actually be critical of people who are making our job difficult is a wonderful position to be in. So I think it's very important that IATA is a strong voice for the industry. And I knew what the industry was facing, the challenges that my colleagues and former competitors were facing. And I wanted to contribute. And, you know, I think IATA actually did have an important role through that period and will continue to have an important role, you know, into the future as well.

11:17Yeah. And then on the sustainability side, like I say, even with all of that going on, there was this very important commitment to the 2050 net zero. And of course, what we've seen since is that much of that assumed there would be far more sustainable aviation fuel or SAF, certainly by this point. And yet that is still a major, major hurdle for getting to 2050. So my question to you was, was 2050 the right timeline to set? Yeah, it's a great question because there was some significant debate as to whether it should be later. You know, some carriers put forward the suggestion 2060 was more appropriate.

12:00Others, in fact, said it wasn't going fast enough and wanted 2040. So 2050 seemed a reasonable compromise and it did align with governments. But the important point that we made at the time was that we couldn't achieve it. As airlines on their own, it would require contribution from everybody, including governments. And, you know, it's terrible to have to acknowledge that we're not seeing that now. You know, OEMs obviously haven't played their part because they've been delayed in getting new aircraft into service or gross emissions are higher than they should be. We haven't seen air traffic control reform and that was going to be a critical part.

12:39We haven't seen governments play their party in encouraging the production of sustainable aviation fuel. So, you know, we're at a point where I think, you know, that target is definitely in the balance. I think we can still achieve it, but it's becoming more and more difficult every day. And I know this will be one of the issues that Sadia is going to have to face up to in her role now as Director General of IATA. And I sort of made that clear when I was making my final comments that I think we are at a point where, you know, maybe the industry will need to reevaluate whether that 2050 net zero target is still realistic.

13:24And it's also somewhat ironic, really, that with all that's going on in the Middle East at the moment and the oil prices, if anything, that shows even more the susceptibility, the vulnerability of being entirely reliant on traditional oil. So what's the biggest thing that the conventional oil industry might contribute to all of this? Well, they could produce some sustainable fuel, not just for aviation, but sustainable fuel for every industry that requires a liquid fuel source. And, you know, there's little incentive for them to do that because they're continuing to receive financial incentives to, you know, produce oil and, you know, the incentives to produce sustainable fuels just isn't where it should be.

14:14So it's very disappointing. All of the major manufacturers or oil producers have actually walked back from commitments that they've been making over the years. And they're the source of the problem. It's the oil and the fuel, the kerosene that develops the CO2. And it's just, it's actually, it's unacceptable that they're not playing their part. They really do need to come to the game and start putting some of the massive profits that they've made and clearly are making today, given the current crisis with the oil supply, putting some of that money into a sustainable future. Yeah, and the sad irony, of course, is that none of the pressure seems to be going on to those industries.

15:04And yet, as you well know, many, there are governments around the world that are putting mandates on the airlines to use that. As we've said, you know, mandating something that doesn't exist makes no sense. You know, there is a sequence of measures that could be taken and mandates could well play a role. And in fact, we've argued that there is a role in some cases for mandates, but you have to have the production of the product available first. And then if you see that the product isn't being used, isn't being acquired in the way that the industry has committed to doing so, then I think you could introduce mandates.

15:41But saying that you're mandating people to use something that doesn't exist and where the producers of the product don't want to produce it and don't care if they suffer financial penalties because they'll just pass those financial penalties on to their customers. You know, that's a crazy situation to be in. And it isn't sustainable from a financial point of view, never mind from an environmental point of view. Right. Right. Now, you also said in Rio that aviation makes the world a better place by bringing people together. It offers hope and enables freedom. Of course, it also enables trade. You could have had careers in so many other industries, I'm sure.

16:23Is optimism a must-have character trait, if you like, to stay with airlines, especially for as long as you have and through so many different issues that struck the industry? Well, I think you know this, Karen. You talk to anybody in the airline industry and they'll tell you it just gets into your blood. You know, it's a fascinating industry. It can be very frustrating at times. It's incredibly challenging. But it's a great industry to be in. And, you know, I've always been optimistic about the future and I continue to be optimistic about the future. You know, I'll continue to criticize those who are making the future more difficult for us.

17:01But, you know, it is a fantastic industry. I've enjoyed every minute of my time in the industry and I'm looking forward to spending more time in it. And of course you're going to an airline in a region that is a very fast-growing one too. Yeah, it's a country that I've been highlighting for many years, identifying the difference between the benefit of aviation in an economy like India, which clearly has not seen the significant benefit that Europe has seen because its industry is only at the beginning, really. And you look at the growth in the domestic market and the potential in that market, but more importantly, the economic contribution that aviation will make to the Indian economy, both in terms of domestic connectivity and then, more importantly, international connectivity, which they can't get via road or rail.

17:58So when we in Europe talk about trying to shift people to rail, it's just not going to be possible in many of these countries. So I'm excited to be able to contribute to what I think is going to be a fantastic industry and making the contribution that it has made, but more importantly, the contribution that it will make to the growth of the Indian economy. so maybe just a last sort of a last couple of questions if i may and first of all what have you most learned or and most enjoyed about being iata director general and secondly then any snippets of advice for sadia well i've really enjoyed working with the people fantastic people in iata it's a it's a great organization you know you talk about multicultural but when you have 120 different nationalities working with you.

18:53It truly is a unique environment and I've thoroughly enjoyed meeting great people from all around the world. You know, not just the members, but the people that work in IATA. And my advice to Sadie is don't take advice from me. And she'll be great in the role and she'll do it her way. And I wish her the very best. As we wish you the very best in your new role, Willie. It's nice, I have to say, that you're not leaving the industry. I'm sure you will still very much be a voice of the industry, but we wish you all the very best. Thank you very much, Karen. And so thank you, Willie, and thank you also to our producers, Perry Myers and Natalia Pelleo.

19:40And of course, thank you to our listeners. We enjoy having you on board also. Subscribe to Window Seat on Apple Podcasts or wherever you like to listen so you don't miss a single episode. This is Karen Walker disembarking from Window Seat.