Thursday, October 17, 2019 from 11:30 AM to 1:00 PM EDT
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1100 Metropolitan Ave #125
Charlotte, NC 28204
UPCOMING CWTA EVENTS:
NOV 2019 CWTA Luncheon
International Trade & Tariffs
Thursday, November 21, 2019
DEC 2019 CWTA Event
Salute to the Troops 2019
Tuesday, December 3, 2019
Marriott Center City
Join us at our favorite lunch spot,
Oct. 17th from 11:30AM to 1:00PM
for networking, a delicious lunch
and a forward-thinking discussion on
A Global Airline’s Insights into Trade,Tariffs,
Brexit, and More
with Tracy Montross
Regional Director of Government Affairs
Join us on October 17th to hear from Tracy Montross, Regional Director of Government Affairs for American Airlines, who will share insights into American’s global connections for both passengers and cargo, joint business alliances and open skies agreements, economic impacts of trade, tariffs, Brexit, and the grounding of the Boeing 737 MAX.
The global airline industry is one of the most competitive sectors in the world economy and recently the financial outlook for the sector has darkened in the midst of rising fuel costs, increased competition and the threat of a global trade war. In fact, the International Air Traffic Association (IATA), the industry’s trade association representing 82 percent of scheduled air traffic flights, recently cut its profit forecast for 2019 and is expecting the lowest industry profit figure for this year seen since 2014. As such, it is increasingly important for airlines to carefully assess their hub and connection network and alliances with regard to current economic factors including trade, tariffs, Brexit, and the grounding of the Boeing 737 MAX.
Global Connections for Passengers and Cargo
IATA performance figures for 2018 show that global air connectivity continues to become more accessible and more efficient: 4.4 billion passengers flew in 2018, record efficiency was achieved with 81.9% of available seats being filled; fuel efficiency improved by more than 12% compared to 2010; 22,000 city pairs are now connected by direct flights, up 1,300 over 2017 and double the 10,250 city pairs connected in 1998; and the real cost of air transport has more than halved over the last 20 years.
American Airlines constantly refocuses and reorients its hub and connection network, as it strives to reposition itself and reduce redundancies since the 2013 merger with US Airways.
Effects of Trade and Tariffs
The US-China trade war continues to drag down global airline activity with passenger figures showing a soft start to the peak passenger demand season and air cargo experiencing its ninth consecutive month of year-on-year falls.
According to IATA figures, there was slowing global airline passenger demand growth in July, although all regions still saw traffic increases. Total global traffic in July rose 3.6 percent compared to the same month in 2018, down from 5.1 percent annual growth in June.
Tariffs, trade wars and uncertainty over Brexit are contributing to a weaker demand environment than in 2018. IATA noted that July international passenger demand rose 2.7 percent compared to July 2018, which was a deceleration compared to the 5.3 percent growth recorded in June.
More than 70% of American Airline’s revenue comes from the passenger business, as airfare forms 87% of the revenues of American Airlines.
It is clear that trade tensions are weighing heavily on the entire air cargo industry. Higher tariffs are disrupting not only transpacific supply chains but also worldwide trade lanes. While current tensions might yield short-term political gains, they could lead to long-term negative changes for consumers and the global economy.
Overall, American Airline’s global air freight sector is expected to grow at 7% CAGR. American Airlines Cargo has one of the largest air cargo operations in the world delivering a wide range of mail services and freight. This provides incremental growth opportunities to boost its revenues and market share.
Implications of Brexit
The implications of Brexit for the airlines are less certain but potentially severe. Depending on the final Brexit negotiations, freedom of movement will-to some extent-come to an end, thus restricting the flow of pilots, flight crews, air traffic controllers, ground operators and many other workers across the EU-UK border. A no-deal Brexit also has significant impact on business from a regulatory perspective.
Potential obstacles include transferability of EU- and UK-licensed pilots and registered aircraft, recognition of EU and UK engineer licenses, EU and UK design approvals for aircraft and components, and qualification of UK-registered maintenance organizations. Furthermore, basic air connectivity would be significantly impacted because of EU regulations restricting UK airline ownership and control, restricting UK crew on leased aircraft, denying UK flight between and stops in the EU, and capping UK cargo services at 2018 flight frequency levels.
All airlines are concerned about Brexit travel chaos. IATA has said a no-deal or “hard” Brexit outcome is likely to lead to “a significant disruption to air services,” with flights capped, which would stunt economic growth and possibly lead to an increase in prices for consumers. The UK has the largest aviation industry in Europe, and its geographical position in the network is key, with around 80% of all North Atlantic traffic passing through the UK- or Irish-controlled airspace. Changes to the relationship between the UK and the EU could potentially have considerable implications for all players in this important aviation market.
Joint Business Alliances and Open Skies Agreements
A fundamental change in the way airlines do business took place with the creation of large airline alliances; it was a key survival strategy to generate more revenue. Alliances increase network coverage-an airline can offer destinations not covered by its fleet through another airline’s flight. The increase in network coverage may help the airline to become more competitive and attract more traffic and revenue.
American Airlines is the founding member of the world’s third largest Oneworld alliance which currently includes 13 major airlines. Oneworld members together serve more than 1,050 destinations with more than 14,000 daily flights to 150+ countries globally. This increases flight frequencies and efficiencies for American Airlines.
Grounding of Boeing 737 MAX
Boeing’s top-selling aircraft was grounded in March after two fatal crashes and the company has since begun upgrading the model’s flight control system, which has been a key focus for crash investigators. Since then, a further complication has emerged which the U.S. Federal Aviation Authority (FAA) has said that Boeing must mitigate, further delaying the aircraft’s return to service.
The IATA has urged state aviation safety regulators to work together on getting the Boeing 737 MAX back into service, but the implications of this debacle are global. International regulators have indicated they will pursue their own analysis of the 737 MAX and Boeing’s proposed updates, after the FAA suffered a dent to its credibility following 737 MAX crashes.
American Airlines has extended the cancellation of flights on the Boeing 737 MAX through Dec. 3, 2019, but remains confident that impending software updates along with the new training elements will lead to recertification of the aircraft this year. Approximately 140 flights per day will be cancelled through that date.
As the world’s largest airline (based on revenue, number of destinations served, fleet size and scheduled passenger-miles flown), American Airlines offers customers 6,800 daily flights to more than 365 destinations in 61 countries from its hubs in Charlotte, Chicago, Dallas-Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C. American’s 130,000 global team members serve more than 200 million customers annually.
Since 2013, American has invested more than $28 billion in its product and people and now flies the youngest fleet among U.S. network carriers, equipped with industry-leading high-speed Wi-Fi, lie-flat seats, and more inflight entertainment and access to power. American also has enhanced food and beverage options in the air and on the ground in its world-class Admirals Club and Flagship lounges.
American was recently named a Five Star Global Airline by the Airline Passenger Experience Association and Airline of the Year by Air Transport World. American is a founding member of Oneworld, whose members serve 1,100 destinations with about 14,250 daily flights to 180 countries and territories.
Charlotte Douglas International Airport (CLT) is the sixth-busiest airport in the country based on aircraft movement and the most cost-competitive airport in North America. It is American’s second-largest hub carrying carried nearly 42 million passengers last year on almost 700 daily flights serving 149 destinations in 25 countries, including Canada, the Caribbean, Central America, Europe, Mexico, and the U.S. American employs 14,600 team members in North Carolina and more than 12,100 at CLT.
Tracy Montross joined American Airlines as a Regional Director of Government Affairs in January 2014. While based in Charlotte, Montross serves as the airline’s representative in North Carolina, South Carolina, Virginia, Maryland, Kentucky, and Tennessee. Throughout this territory, she is responsible for developing and executing regulatory and legislative proposals that may have a material effect on the company’s business operations; coordinating strategies that support operational efficiencies, tax relief, noise abatement, labor relations, corporate real estate, environmental goals, and corporate philanthropy; and represents American Airlines with various state and local governments, economic development agencies, Airports and Aviation Divisions, and industry associations to advocate for corporate and customer interests. Montross currently serves on the Board of Directors for the Charlotte Regional Visitors Authority, Charlotte Regional Business Alliance, and UNC Charlotte Foundation.
From 2011 to 2013, Montross served as Chief of Staff for the Office of the Mayor in Charlotte, supporting both Mayors Anthony Foxx and Patsy Kinsey on local, state and national issues, constituent concerns, community relations, as well as City-wide planning for the Democratic National Convention in 2012. She began her career in public service in 2005, serving first as the Washington, D.C., scheduler and then executive assistant for U.S. Senator Max Baucus of Montana.
Montross received her master’s degree in public administration from the University of North Carolina at Charlotte and a bachelor’s degree in political science and broadcast communications from Appalachian State University. She has been recognized as one of the Charlotte Business Journal’s 40 under 40, Mecklenburg Times’ 50 Most Influential Women, and the Charlotte Chamber of Commerce Young Professional’s Public Servant of the Year. Tracy and her husband, Jesse Munoz, welcomed a baby boy in April 2019. Together, they enjoy spending time with family and friends, as well as playing golf, visiting breweries, and traveling.
I hope to see you there.
Royallen Wiley, Chapter President
Carolina World Trade Association
PO Box 11462
Charlotte, NC 28220