And the way in which he is working to turn the International Air Transport Association into a market driven organisation bears more than a few similarities to his approach at Air Canada during its two-pronged privatisation in 1988-9.
Pierre Jeanniot does not have a reputation for heavy-handed cost cutting. At Air Canada he laid the emphasis on gradual reductions in the labour force and on a careful restructuring of the network and the airline's different functions - a far cry from chairman Claude Taylor's radical cutbacks shortly after Jeanniot's departure in August 1990. But by then the Gulf war and the recession had started to bite.
Jeanniot is much more comfortable in an expansionist environment and in this respect he is in his element at Iata. His unenviable task within that multinational organisation is to overhaul radically the entire functioning of the various committees, task forces, conferences and the secretariat and to adapt the services they provide to a growing and ever more varied membership - there are now 232 airline members. In short, the challenge is to boost the association's efficiency in a growth environment.
Meanwhile Iata is taking an unprecedentedly strong line on the need for carriers to be market-led and satisfy financial markets. In this respect, Jeanniot's experience at Air Canada makes him the ideal man to prepare governments and state-owned carriers for privatisation, liberalisation and free market economics.
As a Canadian he is also well placed to mediate between the black and white aeropolitical views of US airline chiefs and the more cautious attitudes of the rest of the world.
A firm proponent of the free market, he believes governments and airlines are not fundamentally opposed to liberalisation and that Iata can be instrumental in helping national carriers make the transition. But he stresses that in any open skies negotiation everything, including airport access and distribution, must be on the table. He is also constantly reminding the Americans that US deregulation did not happen in one day.
Jeanniot and his senior colleagues are a force to be reckoned with behind the scenes, constantly lobbying the political forces in national and international aviation, and getting significant results. In public they are actively seen to be taking up positions on an increasing number of issues such as ticketless travel, taxation, the environment, future air navigation systems and airport congestion.
One of the main planks of the structural review at Iata is to make sure the right issues are being addressed in the right manner. There is also a strong productivity drive to cut members' time and expense relating to Iata business.
Meanwhile a pay-as-you-use scheme has been tailored to cater to the concern of larger airlines that they are subsidising services to a growing number of smaller carriers. Membership dues have been reduced to around 25 per cent of Iata's total budget and the larger carriers are being offered an à la carte system which allows them to pick the services they need rather than paying for the whole package.
A student of the great military strategists of our time, Jeanniot will need to display a great mix of patience and determination, and a close knowledge of governments and markets, as he overhauls the airlines' ever growing, ever more complex trade association.
Pierre Jeanniot: Iata had already evolved quite a bit since 1945 but we hadn't recast our missions and goals. I felt it was important to redefine our mission in very simple terms. We actually cast a number of goals in a very precise way that deal with safety, the promotion of the industry, [and] the provision of services - a large part of Iata has become the service provision to the smaller airlines particularly, but also to the larger airlines.
Looking forward to the next decade, this is very much an industry in transition and will continue to be so for quite a few years. Associated with deregulation is the transformation of an industry which was uniquely, with the exception of a few airlines in the States, [made up of] government-owned airlines, to what one day will be almost exclusively privately owned airlines. These two major forces have been changing the industry.
So it was absolutely essential to look back on a very substantial achievement and say: 'We're an industry in transformation. What kind of goals, what kind of mission, what kind of things should we be involved in, as our membership evolves?' I see my role here as basically to prepare Iata for the next century, and that's what I'm trying to do.
The other requirement is for interlining. Even though interlining is increasingly being done by alliances and there is point to point travel growth, about 50 million people interlined last year, so [the airlines] need to have a basis for splitting the fares among themselves.
The third and perhaps the weakest reason is that there is still a need to establish some kind of a reference point from which people discount. I sometimes say tongue in cheek: 'How would you know that you got a 50 per cent discount if there wasn't a reference fare somewhere?' The complexity of fares is such that we still need somehow to cling to the notion of adding a reference fare, though this is a disappearing notion.
I don't know if anybody could even believe today that it's possible for us to influence fares - I mean, everybody charges whatever they want. It's the reference that's agreed to in a discussion today. The next day everybody goes out and does exactly what they feel like doing. Everything's been driven by the market for quite some time now. I personally don't feel very strongly about this.
They are therefore examining the governance mechanism - in other words, all the committees that are being supported by the secretariat. Are they focusing on the right issues? Are we as a secretariat helping these committees to focus on the right issues? What are these issues? Are they in the pursuit of our long-term goals? That's what is being examined. The whole machinery is very vast and we have over a hundred different committees, subcommittees, task forces and so on.
What we are really looking at is each one of those. What are they doing? Are they focusing on what really are the priorities of the industry? Or are they in a self-perpetrating mode which is often the tendency of any form of institution dedicated to its own survival and continued justification? That's what bureaucracies are about and to some extent we are an international bureaucracy. We are trying and we are very much in the process of becoming much more private enterprise-driven, rather than a government airline-driven organisation.
Will the products and services that are expected of Iata be the same in the future as today? In the first place the profile of our membership is changing, so that in itself is an indication. Even though cooperation is going to remain an important dimension in the future, we had better get accustomed to the fact that our members increasingly are aggressively competitive with one another and yet they have to cooperate on a whole bunch of other things, like airport expansion. So Iata has to down tools on anything it was doing of a commercial nature - in fact the word's almost erased from our vocabulary. On the other hand there are certain things that we must expand on.
We are in fact encouraging governments around the world to push for the market-driven economy. The question is not whether or not we should be market-driven but the speed at which that should be brought about. I am concerned with ensuring that governments, and the airlines owned by governments, understand the pressure of these forces and - if they haven't done so yet - that they begin the adjustment to it.
In other words I see our role as actively promoting the market economy, but at perhaps different speeds; actively promoting the need to be financially responsive to the financial markets. That to me is a very different position to that held by Iata five or six years ago. I think that we are resolutely financially market-driven and that we have a role to encourage our people to be that way and to adapt.
In the process we are looking at the products and services we are offering and saying, 'OK, what is really of the past and what's ahead in the future? What will the private airlines of the world need that we are not providing today?'
At our annual general meeting, for the first time in history we asked our members: 'What would you like to do at an AGM?' We used to spend a whole day doing the traditional things that will be compressed in half a day now. We are going to do it more like a private corporation and get the routine resolutions out of the way and then get more discussion on fundamental issues and more information sent out. We are going to be far more driven by what our membership wants than what perhaps we assumed it wanted in the past.
Open skies is different. Today the situation is far more complicated than just access to markets. You have to look at airport access, distribution processes and so on. When you talk about open skies you really want to talk about an open market. The only way to get that result is to put it all on the table.
We are putting a major emphasis on Fans, which is one of the major challenges because it attacks so many taboos such as the air sovereignty of nations, and also the human dimension problems such as the retraining and repositioning of quite a few air traffic controllers. Plus the revenues that are being generated from air traffic sources which are all over the place, and are used in some places as disguised taxation. This needs to be rationalised.
The other one is our continuing role of standard setting. One of the first values of Iata was the development of that universal language and code used for tickets and by aircraft around the world. This is continually in evolution. We are very much involved at the beginning of ticketless travel: in a multilateral international environment, what does this mean and how are we going to evolve that? Our role here is to ensure that there is a commonly understood language.
You can really look at Iata as a major multiple product service bureau, an organisation that has major issues to try to move forward to assist industry growth, and of course the standard-setting which is the basic machinery that keeps it all together.
The cost of an association is, broadly speaking, in two parts. The more obvious one is the membership dues. But this is actually not necessarily the largest part. The members spend their own time travelling and participating in work groups and studies, and they have their own out of pocket expenses. We set up conferences, and task forces and meetings, around the world. So if you look at the amount of time and man months associated with us, it's quite substantial. And quite rightly we want to make sure that they are all being spent on the most crucial items. What are the main issues that we need to resolve and what is less important? They may have been important 10 years ago but maybe we will continue to look at it, maybe not. So we have committed ourselves to a reduction of at least 20 per cent of that investment of time, travelling and technical expertise by our members.
It will sustain the downward pressure on the membership dues. We have been successful in the last five years in reducing, proportionally speaking, the membership dues by about 25 per cent - while increasing the membership by about 30 per cent. So in terms of efficiency we're actually serving a membership that's about 30 per cent bigger than it was five years ago with about 25 per cent less net contribution. And we're going to continue that pressure.
On the other hand the membership is growing very rapidly and we are probably going to have to modify our regional representations. Asia is one of the areas with rapid growth; the former Soviet Union empire is breaking up and requiring a lot of services; China is awakening and requiring us to get more involved; India has deregulated. Asia and the FSU in particular are causing us to increase resources in those areas.
One of the things I am trying to bring about is greater regional concentration. We are extremely fragmented right now - we have offices in about 56 different countries, in some areas for prestige purposes. In terms of bank settlement plans, I would like to see a greater regionalisation to bring about more efficiencies. I would like to end up with a lot less offices that are much more efficient. We can get some additional savings out of that.
Second, we have been reexamining what is bundled in the membership and what should be à la carte. The part that has been growing is the à la carte part. The smaller carrier that requires more and more services because it doesn't want to do its own training or documentation can come to us. The mega carrier that has it all in-house can say: 'I don't need this and I don't want to pay for it.' As we move along in our restructuring we'll accelerate that as well. My aim is that you pay for what you get, and to try to get that core that everybody buys as basic as possible.
About 10 per cent of the staff in Iata in the last two years have been totally repositioned. We have been reallocating our resources and I think we will be doing that for the next three or four years because there's a lot of things in flux right now.
Source: Airline Business
