60 years of air transport know-how - a perspective from Paul Coby, SITA Board Chair
In 2009 we find ourselves around the world in economically uncharted territory. In the UK, for instance, many of the banks have effectively been nationalised. Almost overnight economies around the world are in a deepening recession. Globally, air transport, which had looked confidently forward less than a year ago to a profitable 2008, ended up significantly in the red.
Success stories are hard to find and there are few IT companies or airlines which have lasted as long as SITA - Société Internationale de Télécommunications Aéronautiques - which was 60 years old this February. So what can the global business community learn from the experience of an IT and telecommunications co-operative founded in 1949 by 11 airlines and based in Belgium? Sixty years on SITA has more than 550 members from across the air transport industry, a turnover of nearly US$1.5 billion and operations in 220 countries and territories across the world with colleagues who speak around 70 languages.
SITA exists purely because we, its customers, want it to exist and, we, the Air Transport Community find SITA useful. So why is it useful? First, SITA is very good at generating cash for its owners in the Air Transport Community. In 2000, it returned several billion dollars of cash to the Community, when it sold its physical telecommunications network. Since then it has returned up to $60 million in price reductions every year to its telecommunications customers. This amounts to another circa $500m-plus in cash back.
And now there is the prospect that SITA's subsidiary OnAir - a joint venture with Airbus - will be the first commercially viable provider of inflight communications in the world with customers from Ryanair to Air Asia, and British Airways to Oman Air.
So SITA is pretty good at technological and commercial innovation. Yet few people outside the industry know SITA. How can a company that is so very good at generating value for its customers and owners - the Air Transport Community - be so obscure?
And is cash the real value of SITA? The cash and price reductions are extremely good to have, especially now when times are so tough. But the real value of SITA is that it gives us, its customers and owners, real choice and real innovation.
SITA has the largest portfolio of systems, solutions and services in our business. But SITA must compete on almost everything it provides for the Air Transport Community - whether on a for-profit or a not-for-profit basis. This ensures that SITA's customers always have choice, but it also means we, as an industry, have a unique asset, a world-class company, which we can strategically steer to provide the services we want and need.
It also means that the Air Transport Community is not dependent on the giant multi-national IT providers covering many industries and focused on none. We have our own dedicated services and solutions company.
So is SITA an anomaly, a left-over from a bygone age? Or does the fact that it has not just survived but adapted and prospered for so long, signal an important message for the business community and other IT dependent industries?
At the heart of SITA is the concept of Community: a belief that people, nations and companies sometimes need to work together to produce wealth, health and happiness. SITA is owned by its Community: our customers - mostly the airlines and the airports who use SITA's systems, services and networks.
The SITA Board comprises the 20 largest users and representatives of nine regional groups. So we the users - the shareholders and Board members - can, and do, direct SITA strategically. Our stake in SITA is determined by a unique mechanism; not by how much money we have put in historically, but by how much, in the year just gone, we have used SITA's systems and services. So if you stop using SITA you lose your Board seat and lose your ability to help set the strategy.
SITA was founded when the world was a very different place. The Iron Curtain had come down across Europe and the principal tool for communications was the teletypewriter. Now 60 years on, the world is a much more prosperous and complex one. The old centres of economic growth in the US and Western Europe are being joined by new vigorous centres in the Gulf, India, Asia Pacific and China.
Aviation is facing into "the perfect storm" with collapsing demand combined with unprecedented volatility in fuel and exchange rates. We can probably expect many more than the 24 airlines that went out of business in 2008 to go bust in 2009. In these challenging times, it is important for our industry to know that we have the transformational power of IT available to us in the shape of SITA, a company which operates purely in the interest of us - its members.
In this era of globalization we are inter-connected and inter-dependent as never before. And with the collapse of previous certainties we should be looking for different business models as well. I believe that SITA has a proven Community business model, which has interesting and important lessons for the future world economy. It will not work for everyone, or everywhere, but it deserves serious consideration - 60 years of longevity and adaptability prove something.
Compare and contrast SITA with almost all of our competitors, who have been swallowed by private equity funds - Amadeus, Galileo, Worldspan, Sabre and others. Private equity dispenses with normal Board governance, independent directors and published reports and accounts.
Now this approach can work exceedingly well. Where it has problems is where there is a need for the longer-term view and longer-term investment. Short-term financial targets do not generate a world where co-operation is encouraged and valued, and where communities are nurtured.
It is true that the co-operative model can be inefficient and SITA has not been immune to this in the past, but over recent years, we the SITA Board and top management have transformed SITA into a centre of commercial growth. Our product portfolio for airports and airlines has expanded, and we have developed world-leading solutions in new areas like inflight connectivity.
Our business philosophy is that SITA should provide its services, solutions and networks on a Community-basis and always in a business-like way. This has three fundamental advantages:
- First, SITA can take the long view, and invest for the future
- Second, SITA takes account of the requirements of the whole Air Transport Community
- Third, SITA is uniquely close to its customers who are also its owners.
SITA is a unique asset for the air transport business community which is very well adapted to survive these recessionary times and which offers lessons for other industries - where cooperation and collaboration can be fostered to the benefit of all.
Paul Coby,
SITA Chairman and British Airways CIO
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