“The company which shouldn’t have existed”

Notice to the reader: The following story reflects my own personal experience during my work with SITA, from February 1954 to June 1991. The first five years as representative of SITA for Switzerland, thereafter in various positions at SITA’s Headquarters in Paris as Deputy Director Operations, Director Operations, Director Regions Coordination and finally as Director International Relations. It only involves my own personal responsability.

Ruedi Bébié

Introduction
To understand the creation, operation and growth of SITA it is important to explain a number of special conditions inherent to the air transport industry:

1 An airline cannot operate and provide efficient and safe air transportation without the availability of very efficient telecommunication facilities. One could say these are as vital as the availability of fuel.

2 An airline cannot operate without a multiplicity of cooperative agreements with other airlines in the area of passenger/freight groundhandling, aircraft assistance on the ground, aircraft and engine maintenance, spareparts etc. Though airlines are vigourously competing in selling passenger seats and freight space, they have developed in parallel and from the very beginning of modern air transportation a high spirit of cooperation in many technical areas. Indeed, it would be most uneconomical if every airline would want to implement and operate individually all the infrastructure it needs worldwide.

This second point has been very decisive for the creation and development of SITA. The need for cooperation has been much more imperative in the air transport industry than in other industrial and commercial activities.

The Beginning
In 1944, the International Civil Aviation Organisation (ICAO), as an agency of the United Nations Organisation (UNO), has established in its Convention the ground rules for the safe and efficient operation of air transportation. The Convention defines the responsabilities and obligations for member states to implement and operate all the facilities required to meet the objectives set out by the Convention.

Detailed technical indications are contained in the Appendixes to the Convention, the one of particular interest to us is Appendix 10, dealing with the Aeronautical Fixed Telecommunications Network (AFTN).

In most countries these facilities were implemented and operated by the States themselves through government controlled agencies. In some countries the responsabilities and obligations defined by the Convention were subcontracted to private or semi-public operators. E.g. in Switzerland Radio Suisse SA, a semi-public telecommunications operator has been charged with this task. Notwithstanding these details it was planned in the beginning that the AFTN would handle all telecommunications related to air transportation, including the more “commercial” oriented telecoms of the airlines, the latter however with the lowest priority.

It was obvious and inevitable that the quality of service obtained from the AFTN was not satisfactory and the airlines were looking for other ways and means to satisfy their needs. Naturally there were the Public Telecom Services, such as the telephone, telegraph and telex, provided by the public operators under the monopoly regulations. But these were neither satisfactory and more particularly too expensive.

The Breakthrough
The breakthrough came in 1948 when the International Telecommunications Union (ITU) introduced at its Paris meeting a new service provision: the Leased Circuit Service. A user has been offered the possibility to lease on a flat rate basis a telecommunications capacity between two given points for its own exclusive use and on a permanent availability basis. This was indeed what the airlines wanted. Lease transmission capacity between points of their need. Initially the ITU idea was that only one user, the lessee, was to use the rented capacity. Thus airlines had started to implement their individual circuitry, realising that in doing so they did not meet their requirements for inter-airline communication (cf. point 2 of the introduction).

On an idea and initiative of KLM and Air France, it was suggested that every airline should make available its own circuitry to all other airlines;

This was the basic idea of SITA!

In analysing the first years of SITA’s development we must have a further look on ICAO and ITU. In 1949 and the few following years ICAO was not yet resigned to loose the airline telecoms on the AFTN. Even more so that Appendix 10 provided the possibility for States to levy charges for handling airline “commercial” telecoms providing revenue to the Civil Aviation Administrations in charge of air traffic security. As late as 1953, in an ICAO meeting in London, the UK delegate stated: “SITA cannot be considered as a viable solution for the future and every effort must be made by the ICAO members to repatriate airline telecoms onto the AFTN.”

The ITU members did take an opposite position. They considered that airline telecoms were more of a “commercial” nature and were to use preferrably public services under their control (including leased circuit service). The early fifties have seen a number of disputes between these two organisations until the matter was settled in 1955 in favour of ITU. Appendix 10 to the ICAO Convention was amended …. “where public telecom facilities other than the AFTN are available, such facilities shall be used for airline commercial telcoms in preference to the AFTN.”

With the availability of the “leased circuit service” and the settlement of the ICAO/ITU dispute, one would have thought that the road for SITA’s development was wide open. This was not quite so! ITU and its consultative committees only issue recommendations which the members (PTT’s at that time) had a certain degree of liberty to apply or not to apply. In the beginning there was much reluctance by many PTT’s to let SITA and the airlines use leased circuits. Furthermore, leased circuits were to be used by one user only. The airline needs were really to share circuits. The PTT’s gave in by introducing dissuasive multi-user charges. In the average the surcharge was 37,5% on the basic flat rate, in some individual cases this could go up to 100%. In Brazil, Japan and Venezuela SITA was simply prohibited to operate until into the 1970’s.

Notwithstanding these problems I do not believe that PTT’s really wanted to impeach SITA to grow. After all, if they would have prevented us to further expand ICAO/AFTN might have come back on their old ideas as related above. Thus the growing of SITA was a lesser pain.

The first ten years of SITA have been marked by regulatory issues, negotiations to obtain leased circuits with tha application of single-use tariffs instead of the expensive multi-use charges. With the beginning of the 1960’s SITA had achieved in most countries acceptance of its single-user status providing telecom services to its membership. The constants growth of airline requirements has called in 1963 for a very thorough investigation of new technical solutions to meet the demands for the future. The 1960’s were a period of technical challenge. In May 1966 implementation of the first Computer Switching System in Frankfurt (Univac 418).

A new threat
Surprisingly enough the 1970’s saw another regulatory fever period. The Banks, at the example of SITA had created a cooperative organisation incorcorporated in Brussels, like SITA with the name of SWIFT. Its CEO was a former member of the SITA Board of Directors, its objective: the creation of a worldwide leased circuit network in order to meet the specific requirements of the member banks. This project has woken up old anxieties with the PTT’s and their reaction: “We have let SITA take advantage of some of our weaknesses, we cant let this happen a second time!” Tailor made for SWIFT, the tariff Committee of ITU invented the “volume sensitive tariffication” (VST) whereby in addition to a basic flatrate the user of a leased circuit was to pay a volume dependant charge for the amount of data transmitted on the circuit. SWIFT, at the verge of implementing its project, was in an impossible situation towards its members. Swift accepted the conditions imposed by the PTT’s, hoping to negotiate better conditions later.

This was bad policy for SITA, because the PTT’s, more particularly the European ones, in order not to be accused of discrimination, suggested that VST shall also apply to SITA. This was sheer catastrophy! Simulations made at that time showed that SITA’s leased circuit costs would have increased by 300 to 400 %. Considering that circuit costs represented about 30 % of our operating costs this would have meant a doubling of SITA’s overall costs to our member airlines.

Some three years of harsh negotiations were necessary, including an approach to the European Commission who had launched at that time its telecom deregulation program. Lucky enough time was also working for SITA. With the progress of the deregulation process the monopolistic attitude of PTT’s was becoming untenable. Deregulation has saved us from the KO!

Over 30 years ‘1949 to 1980) SITA operated as a kind of exception to the rules under the monopoly reign of the PTT’s. Quoting the CEO of the Dutch PTT of that time: “SITA is the monument of our incompetence!”

Today, in a world without monopolies, SITA is not anymore an exception. It has become similar to other private telecom and data processing services providers with however still a remarkable difference: nobody else has a truly worldwide coverage.

Economic aspects
SITA has been incorporated in Belgium as a cooperative society. As such and from a strictly legal point of view SITA could have operated as a profit making organisation. However, in as much as SITA could only provide services to its own members, the Board of Directors of SITA saw no useful purpose in achieving profits which would only have increased costs to its members. Therefore it was decided that SITA shall operate on a non-profit basis.

The limitation that services could be provided to members only was imposed by the PTT’s. In the very first years the message originator and message recipient had to be registred members of SITA. This was eased later (end of the 50’s) to allow the message recipient to be a non-member.

Initially member airlines were putting at the disposal of all other member airlines their existing proprietory circuitry (leased circuits). The function of SITA was merely the one of a Clearing House, establishing the participation of each airline on each circuit, calculating the individual cost participation and balancing the costs against each airline.

The Board of Directors rapidly recognized that the growth and expansion of the network could not be ensured by individual airline initiatives but required a global approach. Thus the SITA cooperative was given the task to study, implement and operate all new facilities. Existing facilities still under the control of certain airlines were gradually transferred to SITA, particularly when the development and implementation of new technologies required importants financial investments.

SITA and its members
The quality of SITA membership did not entail for the airlines an obligation to use exclusively the shared facilities. While this was not clearly stated in the articles of association, this was at least the policy followed by SITA throughout its existence. Thus many airlines continued to operate their private leased circuit networks within their national territory (e.g. Air France, Swissair, SAS, Iberia ….). Some airlines went further and maintained and/or developed international private networks, e.g. British Overseas Airways Corporation (BOAC) as a typical case, or even joined their private networks for sharing among themselves like SAS, Swissair and Austrian Airlines. Nevertheless, all these airlines maintained interconnections with the SITA network for communication with all other airlines.

This being said, the relation between the airline members and their SITA were very close. Airlines were not only “users” of a service provider, they were the owners thereof and they participated directly in its development.

Airline Representatives were present in
the Board of Directors meeting four times in a year
the Executive Committee meeting almost every month for the preparation of the forthcoming Board meeting
the Technical, Financial and Services Development Committees

One example of this very close cooperation is the SITA High Level Network, the result of a vast airline/SITA initiative, launched at the Brussels Technical Symposium in 1963. Brian Brough of BOAC was the sparkplug, Herbert C. Way, a telecommunications engineer from British European Airways, was our mentor who taught us all about “modern” data telecommunications (packet switching systems).

Another example worthwile to be mentionned is the implementation of SITA’s first computer system in the United States. We were entering a region rather unknown to us. Particularly we were not familiar with multi-station line technology widely used in US. Technical specificationns had to be obtained for our software team in order to program the appropriate interface. At the first cut-over attempt with LH, KL, AF and SN the system rapidly crashed causing considerable turmoil in the operation of these airlines. We had to switch back and establish status quo. Things could have remained there with the acceptance of failure. However, Mike Szaina, Telecom Manager of LH in the US, after having told us in rather crude terms his utter dissatisfaction, offered us his full cooperation for further testing with the LH multi-station lines. After three weeks of intensive efforts of both LH and SITA staff, we reimplemented successfully the computer system. Other airlines, discouraged by the first disaster, reviewed their position and finally also connected to the SITA System.

SITA’s Membership
SITA’s membership including airlines from countries with different political, cultural and religious backgrounds truly demonstrates its international status.
Aeroflot of the USSR joined very early followed by the airlines of the Eastern European block in the later 1950’s.
Arab airlines and EL AL of Israel were members and often their delegates were sitting in the same working groups.
China Airlines of Taiwan was a member. When Civil Aviation Administration of China (CAAC) of the Peoples Republic of China envisaged SITA membership they requested the exclusian of China Airlines of Taiwan. The SITA Board naturally rejected this request. After several years of hesitation CAAC overcame the political issue and became a member of SITA without special conditions. Shortly thereafter CAAC became a user of SITA’s GABRIEL seat reservation system located in Atlanta, Georgia, USA. This before the diplomatic relations between the Peoples Republic of China and the USA were at “beau fixe”.
Another problem arose after the partition of Cyprus. Turkish Airlines had created an off-spring called Cypriote Turkish Airlines and which became a member. This very much angered the Greeks, the Olympic Airline delegate at the SITA General Assembly regularly requested the exclusion of Cypriote Turkish Airlines. The SITA community also resisted this attempt to introduce in SITA’s operation world political issues.

Today, every individual member airline, from whichever country it comes, can be proud to have created and maintained SITA’s truly international status.