Airline execs gathered at the Arab Air Carriers Organization (AACO) AGM in Abu Dhabi this week to discuss the pandemic recovery, sustainability and technology. ATW Editor-in-Chief Karen Walker and Aviation Daily Managing Editor Mark Nensel share what they heard at the event.

Don't miss a single episode. Subscribe to Aviation Week's Window Seat Podcast in Apple Podcasts, Google Podcasts and Spotify.

Rush Transcript

Karen Walker:

Hello everyone, and welcome to Window Seat, our Aviation Week air transport podcast. I'm Karen Walker, Air Transport World and Aviation Week Air Transport editor-in-chief. Welcome on board.

And this week I'm talking to you from Abu Dhabi where I've been attending the 55th AGM of the Arab Air Carriers Organization or AACO. And this year the AGM was held with Etihad Airways, the national carrier of Abu Dhabi being the host airline.

We've been hearing the conversations, what's on the minds of all the Arab carriers that are part of that organization. They've finished today with some resolutions and calls to governments for actions and we've been hearing what's on their minds.

So I'm going to be discussing what we've been listening to with my colleague, Mark Nensel, who is the managing editor at sister publication, Aviation Daily. Mark, thanks for joining us. And this is your first day AACO, correct?

Mark Nensel:

Yes, it is. It's nice to be with you, Karen.

Karen Walker:

It is. It's good to be working with you here, Mark. I'm going to just kick off sort of a bit of a sort of a high level general feeling as to what we've heard and the mood, if you like. Today you've got the airline CEOs here and one of the things that struck me was that there was quite an optimistic mood. I was here in November, the last AGM and that was in Doha in Qatar, and that was the first time they'd returned to a live, an in-person event after the pandemic.

And that felt good and positive. But I would say that where things have been going for the Arab carriers in general this year, they're really seeing a turnaround and feeling quite optimistic. I know you were looking a little bit at some of the data that we've heard from here. What were we hearing?

Mark Nensel:

Well, I agree, it was a positive assessment by the carriers. And the data that was provided by AACO said that its carriers' members passenger traffic in 2022 was at about 80% of 2019 levels and it's expected to exceed pre-pandemic levels by 2.5% in 2023. So they seem to have gotten through the pandemic fairly early on and at a much speedier pace than the rest of the world.

Karen Walker:

Yeah, absolutely. I mean, there was almost sort of obviously a pleasant surprise but surprise that they were even telling themselves that. I think there was mention of the fact that at one point they were really saying they weren't going to get back to pre-pandemic levels till '25 possibly.

Mark Nensel:

That's right.

Karen Walker:

And now '23 seems to be the 2019 goal, getting back to the 2019 levels as you say, exceeding that. But in fact, we've seen a lot of the recovery happening fast this year and some of the airlines now have been not just reporting profits in the first half of this year, but record profits. Qatar Airways did that and Etihad right here had their best first half ever. So just a much more positive feeling.

Mark Nensel:

Yes, I absolutely agree.

Karen Walker:

So let's talk about some of the other sort of the topic issues that were discussed here, and certainly one of them was sustainability. There was quite a lot of discussion on that and we had a panel of airline CEOs join that discussion. And obviously we're just fresh off the ICAO assembly in Montreal where they agreed to the 2015 net zero carbon goal.

And the importance of that is that the airlines had already agreed to that a year earlier at the IATA AGM in Boston. The significance of what ICAO is doing, because that's a United Nations body, so that's the government's, and this is about the governments agreeing to support aviation to that 2050 goal.

So there was talk about that here, and it was interesting because I think you definitely got a positive feel among all the airlines that yes, they're fully on board with that emissions-reducing goal and that 2050 goal specifically.

Mark Nensel:

They were, but however, they were questioned as if they were actually going to meet those goals. And there is a fair amount of sort of dodging on that, but by and large they expected to meet the goals [inaudible 00:05:16].

Karen Walker:

Yeah, I mean, certainly Etihad is an example of where they were saying, "We will meet the goals." And I don't think there's any of the airlines that we're not going to not make that statement.

I think what was interesting, we both heard this I think, that several of the airlines talked up their new aircraft fleet. And of course, this is a region where the airlines are buying a lot of the new aircraft or certainly were before the pandemic struck.

And so several of them made reference to the, "We're a sustainable airline because we've got all new aircraft, whether they're Airbus or Boeings, and they use 15% less fuel." So that did strike me that there's still a little bit of that story being told and we all know that while that's good, it's going to absolutely not be enough to get to 2050 net zero.

Mark Nensel:

Yeah, absolutely. And it's sort of a convenient example that they can bring up because they ordered the planes way back when mainly to cut costs, not necessarily with a sustainability emphasis.

Karen Walker:

Yeah, that's interesting. Exactly. I mean, obviously nice new airplanes, they're more efficient, they're nice for the passengers. But the big selling point before the pandemic and before the sustainability efforts were really peaked in terms of getting public attention. The 15% fuel savings was typically mostly about reducing their costs and now it's a sustainability story.

Mark Nensel:

Yeah, it was basically for their own companies.

Karen Walker:

Yeah. But nevertheless, there was quite a lot of discussion about a sustainable aviation fuel. One of the resolutions that they called of course was essentially calling on governments to incentivize airlines to use sustainable aviation fuels by removing taxes and fees and therefore the price of SAF, sustainable aviation fuel. And they also have called for international standards to account for all airline certifications relative to SAF.

So there was quite a bit of talk about that and quite a bit of talk about the real need that the industry and airlines can't just create the SAF supply on their own. That's government policy, if you like.

Mark Nensel:

Yes, there is a fair number of calls for more government investment in the technology involved for new sustainable aviation fuels and also for aircraft and engines as well.

Karen Walker:

Yeah, something very specific there about the research and development investment that needs to be made and just also saying that this has got to be a sort of a partnership, if you like.

So we certainly heard quite a bit about that. Going back to sort of the lessons learned from the pandemic, there was quite a strong, and again, that was in one of the resolutions about how governments shut borders down pretty much overnight.

And I think it was the Flydubai, it was, the Flydubai CEO made a very strong statement in the room saying, "Governments must never shut borders down again." We heard the secretary-general also of the organization saying that shutting borders did not stop the virus from spreading. That was quite a strong feeling from these airlines. Do you agree?

Mark Nensel:

Oh yes, I agree. The virus does not stop at borders.

Karen Walker:

That's exactly what was said, yes, that the virus didn't care if they shut borders down, so it didn't help. So there was a lot of talk about that.

And then there was a sort of an interesting discussion, and I think this is quite interesting, about why this particular set of airlines, this regional organization, they tend to have quite a big focus on technology. And there was a long discussion on digital transformation and where the next steps they could go to make the journey less hassle, more easy using technologies.

But what it struck me was that there was some of the same old language being used. The, "That way we'll be more customer-centric, seamless travel." These are the sorts of things we hear again and again, but I'm never quite clear even when they're talking about digital transformation what it really means. Did you get any clues?

Mark Nensel:

They were talking about using the passports and the chips in the passports as being some overarching method of ordering your tickets and walking through the airport and not dealing with any other humans.

Karen Walker:

And not stopping at all.

Mark Nensel:

Going directly onto the plane. And it just, it was a bit fanciful.

Karen Walker:

It sounds wonderful but I didn't hear anything specific that said, yeah. I guess it's not quite true. There was a company here that talked about the WestJet, that they're doing that with WestJet, which of course is a Canadian low cost carrier, not an Arab carrier. But I still felt that there was not a real understanding of how they take that next leap in technology.

Mark Nensel:

Yeah, and I'm trying to understand, well, exactly what the blockchain is and what does this mean at this point? I will not have any sort of ticket, I will not be showing my phone. I think the idea is it's biometric as well related. It's all very complicated for us oldsters.

Karen Walker:

And then another interesting aspect of this particular AGM is that literally just at the end of last week, Etihad, as I said, they're the host for this AGM, announced a top leadership change. And Tony Douglas has been with Etihad as the group CEO and for almost five years, and so he'll be stepping down and we believe, I think the statement was to take up an opportunity elsewhere. We don't know what that is.

Mark Nensel:

That's the official statement at this point.

Karen Walker:

That's right. There's various conversations about where he's going, but we don't know. So Tony will be leaving and Antonoaldo Neves will be joining as the new group CEO. And-

Mark Nensel:

Former TAP Portugal and Azul-

Karen Walker:

Azul?

Mark Nensel:

... CEO.

Karen Walker:

That's correct, yes. Azul is the Brazilian airline. So he's young, he's got a very good reputation from the airlines that he's been working at. And so what happened here was that Tony did a sort of, well, essentially a sort of a quite an emotional-

Mark Nensel:

Farewell address.

Karen Walker:

Yep.

Mark Nensel:

Last night.

Karen Walker:

An emotional short farewell address and thank you at the reception last night. And then Antonoaldo came on as chair for the AGM proceedings through today and then took part in one of the panels.

And so that's all a big change and yet here he was very quick doing that. It was obvious that he wasn't going to talk to the press just yet, that's understandable. And he didn't really want to talk too specific on Etihad. But he did make some pretty strong statements about sustainability and that Etihad is certainly committed to a sustainable future.

Mark Nensel:

I think his most fervent things that he said that he totally rejected the notion that we'll be sustainable if we travel less. It was an impressive thing to hear.

Karen Walker:

Yeah. So we saw and heard from the brand new CEO at Etihad. Tony certainly goes out on a high, like I say, he's restructured that airline in those almost five years and led them to a record-breaking profit. So I'm sure he's going to, although maybe even bigger things, but I think this will be an interesting time for Etihad and we got to see a little bit of the face of change.

So those were the key issues definitely that were raised and the resolutions that were brought up at this AGM. They also of course always announce then where the next venue will be. So next year Saudia will be the host airline so this will be held in Saudi Arabia. And unusually, they actually announced the following year. They usually just do it year to year, but they also announced that Royal Jordanian will be the host in '24. And so of course that will be in Jordan.

So all in all, I thought, I've been to several of these, I'll be interested to see what your impression was, Mark, [inaudible 00:14:44] not been on one. All in all, I think my impression was there was a lot of good news here, as we said, with a lot of optimism about the recovery, but it still seemed a little bit of a low key event relative to some of the ones that I've been in at the past.

Mark Nensel:

I'd agree. Qatar Airways was not here. But we understand he was involved with the FIFA work at this point.

Karen Walker:

Yeah, I'm just going to clarify in that, Qatar Airways was here, they did have representatives. I think more specifically Akbar Al Baker, the group's CEO, who of course is a very dynamic personality and usually has quite a lot of statements and was not here. And for that matter, Tim Clark at Emirates just across the way in Dubai was not here too. So I think it was missing some of maybe the big gun personalities.

Mark Nensel:

Yeah, the CEO panel I thought was interesting in that they were, I don't want to quite say second tier, they were low cost carriers by and large. Well, I mean, there was the CEO from Pegasus, which is Turkey.

Karen Walker:

In Turkey.

Mark Nensel:

And the Flydubai CEO and Kuwait Airways, which is not a low cost carrier, so.

Karen Walker:

And of course that was where Etihad was on that one, that too. But I think that reflects how much this region has changed recently in that they have got a lot of low cost carriers now, and a lot of them are the most successful carriers now financially. Air Arabia is another one that was here, their CEO was here. So I think that was just reflecting that.

So thank you, Mark, for being here and for joining me on the podcast. And thank you to our audience for listening. Look forward to joining you next week.