Chair report
Paul Coby discusses how SITA is meeting the needs of our customers, even in this trying economic climate.
See the presentation that accompanied the speech
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Transcript of Speech
As you may know, this year holds a special significance - it is SITA's 60th anniversary.
Over those 60 years, the air transport industry has benefited from extraordinary change in the telecommunications and IT industries.
In two generations, we have gone from the tele-typewriter and manual switching to high speed, high capacity fibre optic networks that transfer voice, data and video instantaneously around the world.
Today, all the World's information is laid out before us by Google, The Cloud, Virtualization, Web 2.0 - and Service Oriented Architecture offer connectivity, mobility and business agility that only science fiction writers contemplated, when SITA was formed in 1949.
But right now, our concerns are focused on change that has come from another direction - the extraordinary deterioration in the economic conditions we face globally and within our industry.
IATA earlier this month forecast $9 billion of losses for our industry this year.
Top of all our agendas is the need to preserve cash - in order to survive. Today, that means smaller investment budgets, with smaller IT budgets.
I used to say the job of the CIO was to "do more with less"... it's now, "to do even more with even less."
It is critical that service providers quickly adapt to support all of us.
Everyone talks about "partnership" - it's at times like these that we find out who our real "partners" are.
I'm pleased to say SITA has recognized and risen to this challenge, as you would expect an organization owned by its customers to do.
SITA is responding to our needs - as it has done for 60 years:
Firstly, by reducing costs.
Take just one example...
As we know, communication infrastructure at airports is critical to our business.
It is the place where technology has made a really huge impact and the air transport community is highly dependent on its reliability.
Equally, we are concerned about its escalating cost. This was recognized by SITA.
SITA's response was 'Airport Hub' - a community platform - which customers have called 'the best SITA innovation in recent years'.
It is having a major impact by giving airlines and ground handlers within the airport a common networking infrastructure. It does so in a highly cost-effective way, reducing the total cost of ownership by up to 20%.
Not only that...
As we know, trusting the communications capabilities of local suppliers at distant airports is often a leap of faith.
Airport Hub puts critical infrastructure into the hands of our trusted supplier: SITA. There are other great examples of cost reduction initiatives by SITA.
'Voice Exchange' provides a shared air transport community voice platform. It allows customers to make free calls inside their own company as well as within the community, and it provides cheaper international call rates by traffic aggregation.
So the industry receives simplified communications at lower costs through voice over IP, with global cost savings of around 20%.
The second way SITA is supporting the industry is by generating value.
SITA delivers additional value to its members in ways that no other industry service provider can.
It does this by providing network communications on a not-for-profit basis. That means SITA returns money when a surplus is made and as we know well - gives price reductions each year.
In the last 8 years, SITA has returned almost half a Billion dollars in price reductions to its network customers.
In 2008, these network price reductions amounted to US$ 50m.
SITA also made an over-recovery in 2008 again, of almost US$ 17m, which will of course be returned to us, the members.
We know SITA generates strategic value for us, because we, as members, play a vital role through our Board, in determining its strategic direction and portfolio - ensuring it provides the future services that the industry needs.
That strategic direction is based on four fundamental pillars:
- Growth...
- Community...
- Portfolio...
- And service
In each one, SITA progressed during 2008.
Let me take the first pillar: growth.
This has probably been the most difficult goal to consistently achieve - given that the core business of SITA was built on communication services, and that these services have faced inexorable commoditization over the last two decades.
Nevertheless, SITA achieved growth in 2008. It did this by replacing the commoditized services with ones offering a higher value to its customers and by strengthening its position in strategic markets.
In outsourcing, SITA signed a deal with Tunis Air for the complete management of the airline's IT needs for the next 10-years.
SITA was awarded a Master Systems Integration project at Dublin Airport during the year.
This required a wide set of skills and capabilities to cover the whole opportunity.
Another area is Border Management. This provides a good example of where SITA has positioned itself as a leader in a strategic market. The US government clearly recognized this when it gave approval for SITA to transmit passenger data at check-in.
SITA was the first provider to get this approval.
So all in all, thanks to business like this, SITA grew 3.5% in 2008 - a commendable effort under very challenging circumstances for our industry.
The second pillar is community.
SITA's community focus underpins a large part of its investment. Never more so than in 2008.
SITA set up the SITA Lab, to work directly with customers and taking the lead in areas that can benefit our wider air transport community.
Another community area for SITA in 2008 was concern for the Environment. This is of course a huge issue for the whole of air transport.
Technology innovation is clearly going to play a big part in finding solutions. So I am delighted that SITA has shown initiative and formed a cross industry working group on implementing Environmental Regulations.
Already there is a great deal of interest in the approach, with several AACO members signing up and a first commercial product launch expected later in 2009.
The third pillar is SITA's product portfolio.
SITA's portfolio innovation is now one of its great strengths.
The SITA Supervisory Board gave the go-ahead for US $100 million investment to turn Horizon into a leading next generation Web Service-enabled passenger management system.
Passenger management and reservation occupy a position at the heart of any airline's commercial enterprise, so the Horizon investment represents a major strategic initiative for the future.
As it builds its future portfolio, SITA has the needs of the community foremost in its approach.
SITA's philosophy is to develop next generation communications using shared infrastructure, on which SITA will deploy new applications, based on latest technologies.
The fourth and most important pillar is customer service.
SITA took great strides in 2008 towards its goal of presenting a single face to its customers and providing best-in-class service.
The first step was the consolidation of central and regional service delivery functions into a single global customer services organization. This is now complete.
SITA Global Services, as it is now called, has 1,700 customer service staff in more than 200 countries and territories... many of them based at airports - close to SITA customers. This gives SITA both a global and a local footprint that is unmatched in our industry.
SITA is building a totally integrated global infrastructure for all its service desks. New centres, in Montreal and Delhi were completed in 2008, with more to follow as the project continues.
As a result, customer satisfaction reached record levels in 2008.
Let me turn now to SITA's financial performance for 2008.
SITA's performance in 2008 would have been a good performance in a normal year - but in the context of rising fuel prices followed by a fast deteriorating economy,
it was a major achievement to exceed all key performance targets for revenue, margin, and sales. Credit for this must go to Francesco and his management team.
It is particularly commendable that the Board and management team took early action to mitigate the impending downturn. Not waiting till they saw it in the figures. Their single-minded focus on cost control, delivered net savings for 2008 of over US$ 40 million.
2008 also saw a major step forward in both the technological and commercial progress of OnAir - in which SITA has the largest stake. There are now more than 15 customers signed up for the service.
SITA's other major subsidiary, CHAMP, completed the acquisition of the cargo software company Softair, which enables CHAMP to provide a complete new generation cargo solution ahead of plan.
As Chair - I now want to personally thank everyone on the SITA Board for their dedication and commitment. They are what make SITA unique - they are an essential part of our SITA community and as Chair of SITA, I am enormously grateful for their wisdom and guidance.
Our Board members are all very busy people in their own companies, faced with many of their own challenges, so the dedication and commitment they show to the Board is remarkable.
Their breadth of knowledge and experience, as we continue through this period of uncertainty, is invaluable in ensuring SITA maintains a steady course through the fierce headwinds and storms we face.
As usual, we have welcomed new Board members for 2009 and said goodbye to others.
- Raghu Menon joined the Board from Air India...
- Omar Jefri replaced Mowafaq Jelaidan from Saudi Arabian Airlines...
- Kazuyuki Tsuda replaced Muneyuki Mitsui from Japan Airlines...
- Daniel Henry replaced Patrick Morin from American Airlines...
- Sopit Pokasoowan replaced Saroj Yuttatri from Thai Airways...
- Dong Liu replaced Song Yan Zhu, both from Air China - representing the Asian Airlines A Group
On behalf of SITA, I would also like to offer my appreciation and thanks to those that have served and so generously given their time:
Ingvar Söderlund of Scandinavian Airlines System and co-opted Board member, Ali Saleh Al Balooshi - both of whom left the Board in 2008.
Finally, let me conclude by extending heart-felt thanks to Francesco, his management team and all SITA employees around the world for their excellent achievements in what was a very challenging year.
They have built a strong and sustainable business and their work and dedication has placed SITA on a solid footing as it faces this unprecedented industry downturn. A successful first quarter of cost control in 2009 underscores this.
No one should underestimate the task and challenges ahead. 2009 will without doubt be the most challenging year any of us has ever experienced in the Air Transport Industry.
But SITA is focused on delivering what our industry needs: community-based products and services at value for money prices.
When I look around at the state of the global economy... the failure of many household names across many different industries... the breakdown in trust in the financial and banking sectors... it makes me very proud to Chair an organization such as SITA - an organization that has succeeded for 60-years by building real value and trust... by valuing its customers, who are also its owners.
SITA is built on solid foundations, and is an organization that is stable, cash generative and free of any bank debt. Critically, SITA can only do this because it retains the confidence of us, its members, its customers and its owners.
This is seen in the results, but I believe confidence should also come from something else that SITA is trying very hard to do: and that is listening to us - its customers.
SITA does this through many Boards and Groups - too numerous to mention here.
I, Francesco and SITA, are committed to listening to and understanding your concerns and your priorities in these troubling times.
Your confidence will be even more crucial as we work through this most challenging period in our industry's history.
As I say at all SITA AGAs, we need to use SITA - this unique asset - or lose it!
We are in a time:
When technology and its reliability are critical for the success of our own airlines and airports...
When the accelerating pace of IT-driven change means we all need an informed and friendly voice to help us understand its value...
And when economic volatility in the market demands financially sound and stable partners, who are on your side.
I believe the air transport industry needs SITA as never before.
So let us move forward together through these turbulent times with a shared purpose - to create a mutually beneficial future for the whole Air Transport Community.
On behalf of the SITA Board, thank you.
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