Welcome Reception at the Hilton Americas-Houston Hotel

Registration

Chairperson's Welcome

Canada - ULCCs and transborder JVs arrive to disrupt a stable market 

As the NAFTA is under attack and US-Canada commercial relations become more contentious, bilateral aviation relations in this highly important market appear unlikely to be rationalised further. But in an intriguing market development, Delta and WestJet are planning an immunised JV, which if approved would account for a nearly 30% seat share between the two countries. This creates a formidable defence against Air Canada, which remains the largest airline in the market with its approximately 45% seat share. 

Meanwhile Canada’s airline duopoly has undergone a shakeup in recent times as several new ULCCs launch or plan to launch. WestJet’s plans to create ULCC Swoop shows how vigorously it aims to adjust to the new competition. How will the ULCC movement play out over the next year?

• The challenges of operating an ULCC in the Canadian market. Are there lessons the US and Canadian markets can share? 
• How are Air Canada and WestJet responding? 
• Is the market large enough to sustain the new ULCCs? 
• What untapped customer segments eg Canadians living close to the US Border, are the new ULCCs targeting? 
• What are the prospects of a common aviation US-Canada market? 
• Would aligning foreign ownership rules be beneficial to airlines in both markets?
• What are the implications of the proposed immunised Delta-WestJet JV on the transborder market? How will Air Canada respond?
  
  

All's fare in love and war: is aggressive pricing a new competitive reality? 

Bankruptcy and subsequent consolidation have delivered the majors a low cost base and strong market positions, especially at their main hubs. But a combination of lower fuel prices and a resurgence of low price competition has created downward pressures on yields over the past year. Unlike their Asian and European full service peers - who are much more exposed to LCC pressures - US airlines have not resorted to establishing low cost subsidiaries.

Instead they have used various pricing strategies on their mainline operations. To date this appears to have been successful. As low cost competition grows and cost bases rise, this may call for new responses. 

• Are existing pricing strategies capable of competing effectively with ULCCs? 
• How are the network carriers defending their hubs from LCC and ULCC incursions? 
• How important is loyalty in this ultra competitive environment? 
• With yields under pressure, how much are the majors investing into product and the customer experience?
   

Should the US relax foreign ownership rules for domestic airlines? 

The US applies one of the most restrictive regimes for foreign ownership of airlines of any developed country. While there is a great deal of rhetoric surrounding the reasons for this, there has not been a great deal of empirical evidence that it is in the national interest - or even that of the incumbent domestic airlines themselves. One argument sometimes raised is that in times of strategic emergency a largely foreign owned airline might not be available for national uplift. 

Pilot and other unions have been particularly strenuous in their opposition to increased foreign ownership. Here again there appears to be no generic reason for their resistance to change, other than unsubstantiated claims of the possibility of lower paid workers being introduced. 

Meanwhile some US airlines have taken advantage of other countries' rules to acquire up to 49% of their national airlines in order to strengthen their market position. 

• How do the US foreign ownership rules compare with other countries? 
• What are the benefits of higher foreign ownership limits in the US market? 
• Would a more relaxed regime be a threat to incumbent airlines or existing airline employees? 
• If the US relaxed its rules, would that encourage more other countries to allow US investment in foreign airlines?
  
  

How can airports attract new air services - and differentiate their attractiveness? 

In recent years airports around the world have become much more active participants in the aviation equation. They have engaged airlines at the network planning level and, often together with local business and tourism interests, offered incentives for new air services. The advent of smaller wide and narrow body aircraft also are suddenly introducing new prospects, long and short haul, introducing city pair opportunities that would never have been viable in the past. Inevitably geographic position plays a large part in an airline's decision whether or not to fly to an airport, but there are many other factors at play. 

In the US, a large number of airports have suffered reduced service post-consolidation and are actively seeking both domestic and international airlines to rebuild their traffic. There can be extensive synergies between domestic and international operations in terms of locking them in for the long term, so the process of attracting new business can require sophisticated market solutions. Some of the new "experimental" international routes in particular can be fragile, as has been illustrated recently. 

Differentiating the offering is one aspect. Aside from ensuring they have the appropriate facilities, fee structure and services to meet the needs of their airline customers, there is huge untapped potential for airports to share data and co-operate commercially with airlines for mutual benefit; this could prove a key factor in attracting and retaining carriers assessing the viability of a new route. 

• What strategies are airports using today to attract - and to keep - new air services? 
• How do needs vary between full service and low cost airlines? 
• How can airports help airlines develop a business case for establishing or expanding a new route? 
• Sharing data offers opportunities for deeper commercial co-operation such as in retail and merchandising. Is there the will to share - and what are the implications for both sets of parties?
  
  

Chairman's Wrap

Panel: Embracing digital disruption in airline distribution 

Most airlines appreciate that technology is radically changing marketing and distribution models, yet the structure of airlines remains focused on the business of flying metal. How should airlines prepare for this brave new world in which ambitious technology upstarts and intermediaries - constantly interrupted by the informed consumer - retain their (sometimes limited) control over distribution? 

Airline management teams will need to undergo the requisite paradigm shift and innovate their marketing and distribution strategies to position their companies as retailers in the digital realm. 

• Data is power - why airlines should start behaving like tech companies 
• How does Google's role as an intermediary different from others before it? Are airlines creating a 'perfect storm' of monopoly and access by giving Google its inventory and pricing data? 
• With the harnessing of big data, how important are online consumer channels like Amazon, Facebook, Alibaba, Airbnb becoming? 
• What kinds of low cost automated distribution channels should airlines invest in? 
• What is the future role for the GDSs?
  
  

Panel: The informed customer is a happy customer: Leveraging the Internet of Things to personalise the traveller experience 

The IoT, in which physical objects communicate with each other via internet connected sensors, has many potential applications in aviation, in turn generating operational and cost efficiencies. The most obvious deployments of the technology include, for example, automated check-in or using RFID sensors to track baggage in real time. Yet it is the data collected from these sensors that hold immense value for airlines and airports looking to gain deep insights into their customers' behaviour, opening the way for personalisation at all points of the traveller journey. 

• Where are the common traveller pain points on the ground and in the air, from check in to baggage to catching connecting flights, which could be improved with IoT applications? 
• How serious are airlines (and airports) about investing in IoT? What are some of the structural impediments to further implementation? 
• Adjusting business processes to cope with and turn the massive influx of data into actionable information 
• New ancillary revenue opportunities - What will Inflight retail and merchandising look like under an IoT architecture?
  
  

The Great Debate: Is there a future for open skies agreements? 

When the US government first began promoting Open Skies agreements, the concept met considerable opposition from the US' foreign counterparts. Back then, most of the US major domestic airline incumbents also opposed the relaxation, fearing inroads into their dominance of domestic US market access and reducing their one-on-one power. Open skies not only relaxed pricing and capacity controls, but also made it possible to serve many more points behind the previously restricted number of international gateways; in doing so it reduced the proportion of beyond-gateway domestic connections on US airlines. Another by product was to enable much more extensive sixth freedom operations. 

There can be little doubt however that US airlines have been the main beneficiaries of the subsequent global liberalisation. FedEx for example has a Middle East distribution hub in Dubai, where regulatory access is virtually unconstrained. And US airlines have available to them a vast array of open skies markets with fifth (and sometimes seventh) freedom rights, although they mostly choose not to exercise the rights. As global alliances have allowed the formation of metal neutral JVs, notably across the Atlantic, and domestic profitability has soared, the US majors' appetite for risk has seemingly disappeared. In a broad atmosphere of economic nationalism and an uncertain Administration long term attitude to strenuous lobbying efforts from the Big 3, open skies may be challenged. 

In Europe, the EU has adopted a relatively liberal stance, although there is far from unanimity among the bigger powers. France, Germany and Italy are actively more protective than the UK, which has typically led the liberalisation charge. As the UK exits the EU and its future role remains unclear, it is quite possible that the EU's position will change. It is suggested for example that the current EU-Gulf states multilateral discussions are intended simply to prevent any further bilateral access rights to the Gulf carriers while the lengthy multilateral talks are in train. 

• Is the US Big 3's campaign against the Gulf Carriers (and apparent support for Canada's restrictive policy) just a re-regulation Trojan Horse? 
• What is a level playing field? 
• Are US airlines taking advantage of the market access opportunities they have available under existing agreements? 
• As China becomes a major market, is an open skies agreement likely - or necessary, to secure JV authority? 
• Is there a global trend to rolling back open skies?
  
  

Summit Wrap