CEO address
SITA CEO Francesco Violante reports on SITA's performance in 2008 and looks ahead to the future in these difficult times.
See the presentation that accompanied the speech
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Transcript of Speech
Thank-you Paul.
Let me add my own welcome to all of you here today. I will report on SITA's performance in 2008 and then look ahead to the future in these difficult times.
I am very pleased to say that 2008 was a successful year and - at the same time - a year of continued transformation for our organization.
This is despite the industry experiencing a global recession unlike any other.
The crisis did begin to impact our volume-based business in the last quarter.
But, thanks to our balanced and diversified portfolio - and the spread of our revenues coming from across the world - we were able to over-achieve all our targets.
So we ended the year in a positive position:
- With a strong balance sheet
- A healthy cash flow
- And no bank debt
For 2008, our revenue reached 1.47 billion dollars. A growth of 3.5% over 2007.
This was the first year - for many years - that the overall company returned to growth - offsetting the reduction in the communication services business.
New business reached 1.18 billion dollars. This is 5.5% better than the previous year.
And our total contracts value grew by 11.6% - reaching 1.7 billion dollars.
Our operating margin exceeded target as well. It stood at a healthy position of $66.7m dollars for the year. At the same time as achieving our margin, we delivered benefits to our stakeholders - our members, customers and shareholders.
We delivered overall price reductions of around $50m and an over-recovery to our members of $16.8m.
We also made a net YPOA repayment to members of $38m dollars during 2008 and we worked hard to keep our customers happy. We were pleased with the results of our customer satisfaction survey. Over 200 customers responded to our surveys in the year.
We found that 91.2% of customers were 'satisfied' or 'very satisfied' with the service they received from SITA in 2008.
Moving to our business units, they continue to be engines of our transformation.
A critical achievement for our Communication Services Business Unit was a good portfolio mix in 2008, as it transitions from core network to higher value services.
Today, our core network revenue represents only 48% of our total communication services.
In 1991 it was 92% and in 2001 it was 72%. This is a vital statistic that demonstrates how SITA's business is changing.
It is a massive shift, while maintaining our market share and overall revenue performance.
We were pleased to see our contract retention rate almost hit the 100% mark for network services.
We also saw growth in other parts of the communication business.
In 2008 year on year revenue growth was 22.4% for transformation services, and 10.3% for our AIRCOM business.
Our AIRCOM business performance has been good. It helped to increase SITA's presence in the US - where we gained a major new AIRCOM contract with UPS as well as a renewal with Delta Air Lines.
Today, we are clearly a different company - not just focused on legacy communication services. We are increasingly embracing high-value communication and infrastructure business, including transformation areas such as:
- Voice and convergence
- Network integration
- Communications at airports
- Mobility
- Service management
- And more
Success also continued for our Applications Services Business Unit - as it achieved a 10% revenue growth in 2008.
Three of the business unit's solution lines recorded extremely high year-on-year revenue growth:
- Government, with 47% growth...
- Passenger, at 11%...
- and Airport at 14%
2008 also saw 96% of our existing CUTE sites renewed.
Our subsidiaries: OnAir and CHAMP Cargo-systems - both made important progress in 2008.
Bringing OnAir to market has been a challenge. But OnAir is now open for business.
We saw many major milestones in the year: Its equipment was certified on the full family of Airbus single aisle aircraft and the European Union approved the use of mobile phones on board commercial aircraft.
By the end of 2008, OnAir had obtained regulatory authorization in 41 countries worldwide. It has now signed around 200 roaming agreements globally with telecom operators.
And we have seen rising numbers of airlines planning to offer OnAir in-flight services.
Success will ultimately depend on the numbers of passengers that will use these services.
CHAMP performed well during one of the toughest years for the Air Cargo market.
The acquisition of specialist cargo software company - Softair AG - reinforced CHAMP's market leadership position. It has generated further interest in CHAMP's capabilities - thanks to the availability of the new advanced and more price-competitive Cargo System.
Six new airline customers selected the Cargospot system in 2008. So did nine others - including General Sales Agents and Ground Handling Agents.
As I said at the beginning, while the company over-achieved its targets, during 2008 we were also able to continue the transformation of the company.
As a result, we have seen major progress in the areas of:
- Customer service...
- Software development...
- Efficiency...
- And investment
We created a single global customer service organization. It is a major milestone in SITA's transformation. Importantly, it means that 46% of SITA's population are now in Customer Service roles.
Another clear message from our members and customers, is that you want SITA to ensure operational excellence.
So we will continue to enhance our global customer service capabilities.
SITA is building an integrated worldwide Service Desk model, as the first and single-point-of-contact for all customers.
The programme is well underway with two level-one customer service desks already operational in Montreal and Delhi.
We plan to grow the number of customers supported by this model from 530 today - to 1250 by the end of 2009.
Our Command Centre project is just beginning.
It consolidates all SITA's operations activities within one single operations team. The centre will provide operations support for all SITA products, including the pro-active monitoring of application and network services.
Also during 2008, we were able to create a single Software Development organization.
It brought together over 400 staff from across the company - complemented by a 300-plus off-shore development team in India.
It means that we can now further strengthen our software development capability - and improve solution design integration and delivery.
It means that we, in the industry, have a major software asset that is dedicated solely to air transport community requirements.
We also continued our efforts to reduce costs and improve efficiency.
Our Rome Initiative was launched in October 2006 to drive a sustainable annual reduction of cost, alongside service and quality improvements.
The first phase of the Rome Initiative Programme was brought to a close at the end of 2008, with a total of 109 projects validated as complete.
The programme contributed net savings of US $40.6m in 2008 - double the original target.
We were also able to continue our strategic investments. Product development investment in our Horizon passenger management portfolio continued to be a strategic priority.
It will ensure our position as an independent, market-leading provider of distribution and passenger management solutions for airlines.
This multi-million dollar investment is our largest single project investment to date.
There are now over 100 people working in a dedicated environment on the Horizon project - with additional resources available through offshore partners.
And a recently announced long-term strategic agreement, with Oracle, will enable Horizon to be developed using latest advanced computing techniques.
The Horizon programme is proceeding to plan, with the first component - Customer Journey - already released.
There were many other investments across our portfolio. In the airport environment, for example, we are investing in shared communication infrastructure services.
We took a major step forward in 2008 with the introduction of the latest Airport Hub, version 3.0.
This is the air transport industry's only common information and communications technology platform to provide services on demand.
Today, we have more than 4000 Airport Hub connections at over 100 airports.
We are investing in wireless and mobile communications - to bring improvements in workforce and aircraft management.
One result will be a Wireless Aggregator. This will offer aggregated global wireless access to airlines and support service providers at airports - reducing costs and the need to deal with many operators.
We are now working with airport authorities and Wi-Fi operators to make this a reality. As a result, SITA received the 'Wireless Broadband Innovation Award' for best wireless broadband mobility solution in 2009.
Investment continued in our Next Generation Data Centre consolidation programme.
This four-year initiative will further improve Quality of Service for customers.
The programme consolidates SITA data centre operations - and it will increase protection for critical air-transport industry customer systems and applications.
Additionally - as part of our strategy to grow the business - we invested in acquisitions.
In October, we made what is probably one of the most significant acquisitions in SITA's history...
We purchased our Australian electronic border management partner CPS Systems.
The acquisition consolidates SITA's leading position as a provider of border management solutions to governments around the world.
Today, we are ideally positioned in this market. Our neutrality, industry and technology knowledge, combined with our community relationships... gives us a huge competitive advantage.
We also maintained our commitment to R&D and innovation - which amounted to a spend of $76m in 2008.
For example, the SITA Lab continued to undertake strategic research, collaborating with customers and driving innovation for the industry.
The Lab is making good progress in pioneering and prototyping new mobile and wireless developments.
And it is working in areas such as:
- Cloud computing...
- Virtualisation...
- Data mining...
- Service Oriented Architecture
- And more
Also, with the endorsement of the Board, SITA established a working group on Environmental Regulation Implementation.
It brings together over 20 airlines to develop the data processing and data mining capabilities needed to allow the introduction of a low cost, community solution - one that is agile enough to meet the current and new demands for Monitoring, Reporting and Verification of carbon emissions.
And as part of the transformation of our communication services portfolio, our innovation teams have also been working collaboratively with the community to explore the opportunities of next generation aircraft and aircraft maintenance.
Our initiatives are focused on simplifying operational processes, improvements in engineering and maintenance, and integrating aircraft with ground IT chains.
So as you can see ... in a difficult year, SITA not only over-achieved its targets, but was also able to continue its transformation:
- Creating efficiency
- Improving its service capability
- Investing in new product development - R&D and target acquisitions
- And delivering what was outlined in the 3-Year Strategic Plan approved by the Board
As a result of all of this activity, today you have a renewed company with an increased enterprise value for you, our shareholders.
It generates value that remains within the air transport community.
I strongly believe SITA is a company that, leveraging its uniqueness, will get through this economic crisis.
As a financially solid organization, with:
- No bank debt
- Positive operational cash flow...
- And a 400-million-dollar line of bank credit
Not only that, we are:
Better integrated, more efficient, and ready to deliver better services...
We have a balanced portfolio, and a global presence....
And we have a Community mindset.
This is SITA today.
Well positioned for the future challenges.
To close, let me thank Paul and the SITA Board, for their strong support.
My own personal thanks goes to my management team and all SITA employees for their dedication and hard work.
And let me thank you, our members and customers - for your continued trust and support.
I look forward to seeing you in 2010, when I hope we can be reporting against more optimistic industry conditions.
And finally ... I would like to introduce a new video which summaries SITA's transformation over the years ...
I hope you enjoy it.
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