5 low cost airline start-ups. Alex Cruz: people are the key
Alex Cruz, former British Airways CEO and seasoned airline executive, interviews five start-up airlines that have either already taken to the skies or are planning their operations. Mr Cruz himself also started up LCCs, including Spain's Clickair.
Talking at the CAPA Live on 14-Jul-2021, five airline start-ups, Avelo, Play, Flyr, Norse Atlantic Airways and FlyPOP laid out their plans and how they plan to handle competition from their main competitors.
Some of the key highlights can be found below. They contain a wealth of examples and knowledge from some very interesting and experienced entrepreneurs.
The next CAPA Live is on 8-Sep-2021.
See also CAPA's three part series, beginning with:
36 start-up airlines line up for take-off. Part 1: Europe
Alex Cruz: Well, good afternoon everyone. And thank you very much for coming to this fantastic session in CAPALive. My name is Alex Cruz and until recently I was running BA but many moons ago in 2006, I started a (Spanish LCC) airline called Clickair and went through the motions of actually beginning to fly and hiring the first pilots and the first set of cabin crew and everything else.
"But what we have today is a fantastic panel with five people that had either begun to do that just now or are in the process of preparing themselves to do precisely that, to start a brand new airline operation. Three have already started or are just about to. So let me introduce you to today's panellists today.
"Number one is Andrew Levy, CEO and founder of Avelo in the United States. Number two is Birgir Jonsson, CEO of Play, already flying out of Reykjavik in Iceland. Number three Bjørn Erik Barman-Jenssen, Chief Group Operating Officer of FLYR, who just started flying in Norway. Number four, Bjørn Tore Larsen CEO of Norse Atlantic Airways. We look forward to hearing from you Norse about your plans and finally number five Nino Judge CEO of FlyPOP here in the UK. Five different models, five different approaches, five fantastic stories. I don't doubt it. So we're going to start in that order. And perhaps Andrew, you will tell us a little bit about yourselves first. Thank you.
Andrew Levy: "So Avelo is a new low fare high value airline in the United States. We started flying on April 28th. So a little over two months ago, we are a 737-800 operator. Our first base is in Los Angeles, Hollywood Burbank Airport which is a very small, easy to use secondary airport that serves Los Angeles.
“And that's really the kind of airport we expect to serve in many points in the United States over time, it's targeting secondary airports of large metropolitan areas where there's a lot of people and we can offer not just a low fare, but also a level of convenience that is better than going into the main airport in these different cities which have become increasingly congested, expensive and just simply difficult experience because of all of that. We're flying from Burbank into 11 different markets in the Western US, it's short haul. It is simple, basic air transportation, but being a start-up, we have the wonderful opportunity to be able to hand select our team. We call them all crew members. And so we've put a very big emphasis on ensuring that we hire people who are just by their nature, warm, friendly, caring people and will deliver a really nice experience for our customers.
“So apart from a great fare and great convenience, making it easy to travel on us, but also on top of it all, have some people who are just naturally nice and like being around people and like treating people kindly. We expect to replicate what we're doing in Burbank and many different points in the United States. Our second base will be in the east coast in New Haven, Connecticut, which is an airport that we view as part of the broader New York metropolitan area. It is also, I guess arguably a secondary market or airport for the Hartford area. We viewed as not just New Haven, which is the home of Yale University, but also being able to capture a lot of travellers who live in the Southern Connecticut region and either work in that area or commute into the New York city Metro area.
“And most of those people are fairly well to do. And they're accustomed to driving into LaGuardia or JFK, which are two big airports that are improving in terms of the experience, but it's hard to get there. And there's just nothing easy about it. And in contrast in New Haven, we will have a nice small little airport that's very conveniently located to a lot of people. And we have a really great expectations for what we can do in New Haven. That starts in the fourth quarter of this year. In terms of our backing, we have a lot of different investors and they range from individuals, friends and family, family offices as well as some private equity institutions. Our largest is a private equity fund that's managed that's managed by Morgan Stanley.
“And we're really happy to have them as partners. It's led by a gentleman with a very long history in the aircraft finance part of Morgan Stanley. He's just been a fantastic partner as well as several other really terrific investors who are backing our business. We expect to have six, seven aeroplanes by the end of this year, combination of owned and leased 737s. And we do believe that we'll have a lot of opportunities to grow into quite a larger fleet by the end of next year. But to some extent because we are targeting used aircraft which I like in terms of the lower capital costs, but I also like it because it gives you a lot of optionality and you're not making multi-year commitments on the front end. And as a result the better we do financially, the faster we'll grow.
“And if we need a little bit of time or then we'll grow quite as quickly. So our commitments really extend to six aeroplanes at the moment. Soon, it'll be eight, the eighth will show up in early next year and then we'll see how we do. But I think that one of the things that is really important for any airline that is carving out a niche is to try to do something that is different and serve markets in routes that are simply being unserved. I'm not a believer in trying to do things like everybody else and just somehow pretend that we can do it better, that's just a tough business. So as an investor, and I'm a big investor in this of course in terms of capital, but also my time, our real focus is to make sure we're doing something that's unique and different trying to serve airport pairs that are unserved today.
“And whereas at least on one end of that pair is unique. And we're off to a great start. We're seeing a nice build in traffic in the US. We're fortunate to be in a market where traffic is coming back quite quickly. And I think we will have tied it pretty well. The flip side is in the US the competitors have been given billions and billions and billions of dollars. And so it's a very interesting competitive dynamic at the moment but I think that'd being small focused, nimble, and having some experience to fall back on are critical. And we look forward to seeing how things play out. We have enormous confidence and a great team alongside me and that's where we are Alex. So I hope that's a brief summary.”
AC: Thank you. Great, great summary. Thank you very much, Andrew. Next is Birgir Jonsson. You just started flying through Stansted, that was your first flight, 60% load factor with no guests in the middle of a pandemic. That must be a record. Tell us a little bit about Play.
Birgir Jonsson: "Well, we like paying passengers so that's one thing. We're based in Iceland and our basic motto is as a low cost airline is to connect the east coast of US to Europe with a stop in Iceland. And we started flying now in June and started our first part of that programme.
“So we are based in Iceland and our fleet we are operating this summer is three Airbus 321 neos. We currently have two of them already in Iceland and the third is coming in about two weeks. And our strategy is basically to build on this A320 family, having a mixture of the A320 and A321 growing up to six aircraft next spring, where we start the US part of the operation, then 10, 12, and up to 15 aircraft into 25.
“And I guess a little bit like Andrew said, we want to be small and nimble and flexible in the market. And basically we see that as a big factor in our success, how to dance around the big boys in the market and try to find some small pots of food to eat around them. We are a leisure low cost airline. So we tried to do things in a fresh manner. We are called Play, our brand is supposed to be relaxed, comfortable. We are Scandinavian country. So we want to have that reflected in our customer service and in our touch and look and feel of our brand and of our service. So I just wanted to show you a picture of a crew uniforms. It's a fresh approach. We don't have high heels for the ladies.
“We have white trainers, we have kind of a unisex approach that people can pick and choose what kind of clothes they want to wear. We don't have very strict grooming standards. We want people to be of course, very presentable and clean and all that, but we want them to be just confident and comfortable in their place of work. And we believe that that translates into a high end good level of service. And in fact already this is generating a huge and really positive response, both from passengers and not least the crew itself. They really like this. We think of this as a two faced building structure.
“We started now, like I said, with these three aircraft now in June and we want to have a flexible ramp up so to speak. We want to be able to time our capacity into the market in a way that matches the demand. So we do enjoy like many start up airlines these days are power by the hour terms on our aircraft. So we can basically have a flexible schedule up until end of this year. And like I said, until next spring, we're flying point to point to and from Europe to Iceland. We have the major cities and then some leisure destinations like Tenerife and Alicante which is a traditional I guess vacation spot, for at least Iceland and most Scandinavians. And then in the spring, we will add three more aircraft and then we will stop the US operation. And then we are in this next phase of the operation, which is basically to connect the east coast of the US and Canada to Europe with a stop in Iceland.
“And that gives us basically the ability to enter a long haul market with basically a much lower cost, basically use a narrow body aircraft and being able to basically pick secondary cities and pair connecting options without having to go into the major markets with direct flights. And we believe that utilisation of our aircraft or this aircraft type is perfect for this motto because we can basically utilise the 24 hour loop. We can go to the US in the afternoon, we arrive back in Iceland in early morning, and then we can use the aircraft for European like to be back in Iceland in the afternoon to go back to the US. So this is a model that has worked for decades because of the geographical location of Iceland.
“And this is the model that we're going into. In terms of the financing of the company, we have been quite lucky or we've been very successful in this. We have a funding of about USD90 million that we raised in two funding rounds. We have no debt and obviously no legacy, so we can basically use that cash to build the perfect airline for this model. We are listed on the Icelandic stock exchange and the first day of trading was last week. So that's also gives us a certain amount of obviously access to capital, but also very at least I welcome the discipline and the framework that our list company gives you. You have to have a very clear strategy, clear objectives, clear measurable variables so you can basically run the company in a normal sense and kind of take the best thing about from an entrepreneurial company and pair it with a more disciplined approach to business.
“So in terms if we talk about the turnover, next year, we are turning over USD170 million and growing up to about half a billion dollars in 2025, and obviously very optimistic about the profits and our margins. But we think that using this model, we have the aircraft on a long-term basis obviously and with our funding we are pretty confident that we are on to something that is right. We are actually in Iceland, we have one of the most, let's say highest number of shareholders of any listed company.
“I think we're in the top five of that list. And nearly 4,000 individuals that took part in the float with pension funds, private equity funds, and other institutional investors. And in fact, we had an eightfold oversubscription of our share offering. So all in all, we have raised USD90 million and are basically ready to go. And well on our way I should add. First flight was to London Stansted in June. And we are slowly now, I think destinations, we had Berlin a couple of days ago, Tenerife. We have Copenhagen this week, Barcelona this week. So we are slowly coming online and our main focus is now you have to have the operation up and running and a big group of happy passengers.”
AC: That's fantastic Birgir. Thank you very much for that explanation. We move on to the third carrier and this one is also flying, Bjørn Erik Barman-Jenssen GCOO at FLYR, previously at Norwegian. I'm sure you'll tell us all about it, but FLYR is flying. Tell us a little bit about the FLYR story and what's happening there now.
Bjørn Erik Barman-Jenssen: “Yes Flyr is flying and it was really great for us the 20th of June when we took to the sky for the first time, especially for me since we were flying to my hometown Tromso. We are currently operating two 737-800s. We start small, our strategy is to grow slowly. We have seen a lot of examples of new start-ups that are very eager to grow and spread their wings and unfortunately haven't been that successfully. So we are actually following the same as Birgir says that we want to grow slowly. We have two aircraft in operation at the moment only flying domestic in Norway to the Northern part of Norway that is due to the fact that the summer holidays are starting in Norway and because of the currently in some travel restrictions. A lot of the Norwegians have to spend their summer holiday domestically last year, and everybody was driving around the west coast and the southern part of Norway.
“So now there's a huge appetite of exploring the northern parts of Norway. So we have started with three northern destinations. We will get our third and fourth aircraft by the late July, beginning of August. And then we will add a couple of few more destinations to our network. Also, including international flights, we actually call it domestic light because it's typical holiday destinations where Norwegians and Scandinavians have their summer homes. And so we are going to add Alicante to our network in August. So we built this airline in nine months and building an airline in nine months is a challenge by itself, but building it via Teams is even harder.
“The only way we were able to do that is the fact that we all know each other from before, we know our strengths. We know our weaknesses, we know how to play together as a team. So Teams was actually a good platform for us. We have in the management team more than 200 years experience from the airline industry. So we have several of us had been participating in establishing several AOCs in the past. But we were now given the opportunity to create a whole new airline from scratch. And we had the same as Birgir. We have no debts, we have no legacy. We have no old systems. We actually had blank sheets and we could pick and choose from the best of the systems, the people, obviously a lot of talented colleagues were available on the market.
“So it was really easy to bring the right people on board into FLYR. We make it easy. We wanted to create the workspace we would like get out of the bed every morning and say, yes, I'm going to the office. And we would also like to create the airline that we would love to fly with. We have experienced that and I'm sure all of you have over the years. It's almost like how can we reduce everything? So how can we give less to our passengers? And we earlier decided that we are not going to call our passengers passengers, we're going to call them our guests. That's what they are. They are guests on board, our aircrafts. We want to treat them a little bit differently than everything that has been going on in the airline industry in Europe.
“We are always cutting down and cutting down. So we are offering a little different product portfolio than our competitors. We were able to get the right people with the right competence. Obviously the market now with all the start-ups, the market's been really good and available 737-800s are shrinking, but we were at least able to get cheaper leases than were normally in the market. We are operating in a part of Europe where the Nordic salary levels are not necessarily competitive with other areas of Europe. But we said that this is super important for us. We are a Norwegian company. We are going to support the Norwegian model. We have signed the collective labour agreements with both our cabin crew and our pilots long before we started to fly. And that's for us also to ensure that everybody feel that they are taken care of in FLYR.
“They are just not the number on the payroll. We are emphasising a lot of building the culture where people actually feel welcome. You don't need to look over your shoulder when you're working in FLYR because you know that everybody behind you is there to support you. They are not there to make you look like the one that I made a mistake. We will definitely make mistakes, but we will also have a way of learning from that. We are fully digitalised. We had the opportunity to choose from the systems that everybody else in the industry works with or we could be super bold and go the other way. Operational excellence is a key word for us. It is important for our guests and we will do whatever we can to get them there on time.
And I know you Alex to have started an airline know that when you are small and you have only two aircraft, you are scared of having delays, but we have a fantastic team of young people sitting on our customer support in our headquarters in Norway. They are not outsourced or put to a cheap labour country. We have said that we want to do everything internally in FLYR, and that's the way we are going to support the Norwegian model, and also make sure that we grow at a pace where we can actually create safe workplaces.
“On the digital and customer centric focus, we are the first airline in the world that goes pure NDC/One Order and that gives us a huge opportunity going forward and for the growth and that we think that will be the way we will be able to do something different in this industry than all our competitors.”
AC: Thank you very much for your information. This last topic, obviously being particularly fascinating, perhaps we will have time to come back to it. Next is Bjørn Tore Larsen, CEO of Norse Atlantic Airways. An airline that it's preparing to fly. Hasn't just began to fly quite yet. Please tell us a little bit more about your project.
Bjørn Tore Larsen: “My name is Bjorn Larsen and I'm the founder and CEO of Norse Atlantic Airways, which just like the rest of the panel, a brand new airline. And it's kind of interesting to see that among the five panellists, the three of them are from Scandinavia. So we might have a different risk appetite than the rest of the world. Anyway, we're a little different from many other start-ups in the sense that we will fly long haul and we will fly long haul only.
“And we will try to beat the conventional wisdom that you come to low cost long haul. In my world, the low cost is never a disadvantage, but I realised that we are up for some interesting challenges. We think we have found a recipe. We think the timing is fairly good simply because of the availability of aircraft, we have secured nine Dreamliners that is on lease to us at very competitive rates and also very flexible terms. But of course at the end of the day, everybody will fly a competitive aircraft or fuel efficient aircraft. So we know that we need to go beyond that to be competitive. And what we are focusing on is the leisure market, we are of course welcoming anybody on board who would like to fly with us, but our main passenger groups will be passengers going for vacation, visiting friends and family, and we will concentrate on the transatlantic routes.
“So we'll be flying between Europe and North America. Also, our strategy will be a little different when it comes to where we fly. We will look at secondary airports and we will whenever it is possible whenever the catchment area is big enough, we will look for point to point business rather than a typical hub and spoke. Having said that, there will be certain areas where we will need theatre agreements and we have several interested airlines in both sides of the Atlantic there. And we believe that by having a good product, by having point to point connections and more affordable fares, we will not only fight for existing business, but we think we can actually stimulate demand so that the number of people travelling across the Atlantic will increase as a factor or as a consequence of these what should I say new opportunities for our customers in the market.
“I did mention the planes. Those are not the most important in our business. The most important for us like everybody else is the people. And we have thousands of applicants that have wanted to join our team, fantastic, passionate, enthusiastic people who will not only be working in the organisation on the ground, but more importantly, will fly our aircraft, both the cockpit and in the cabin. And the people on board will really be the ones who will make our airline and our brand. So I can only echo what my fellow panellists have said. People and culture is absolutely paramount if we will make this a success. We need more than that. We also need some cash and we have raised in the Norwegian stock market sufficient amount to take us through both the pandemic, even if it lasts for a few more years, and to grow our fleet to between 12 and 15 Dreamliners.
“As I mentioned, we have nine at the moment but we will be targeting another three to six which will be our sort of ideal start-up size. When we will start to fly, we'll break. It depends on when borders opens again and regulations cease to exist. And of course that is all COVID related. And we realised that the long haul market will come later than the short haul market or the regional markets. Having said that, we think that a year or two from now, we are pretty much back to where we were and we have a great optimistic view on the long-term prospects of long haul travel. So I think that is in short who we are and what we want to do. As any strategy, it might look great on paper, but it is the execution that counts. And we have a lot of things to prove, but we are optimists.”
AC: That's fantastic. Thank you so much Bjorn. And absolutely you're all in the execution mode in one way or the other. So I can see the challenges. Last but not least is Nino Judge, CEO FlyPOP, also a project that hasn't just taken off, literally the planes haven't taken off yet, but he's been working on for quite a long time. Nino, the floor is yours. Tell us a little bit about Flypop.
Nino Singh Judge: “I've taken lots of notes from my colleagues and I think I'm in much better shape now. It's fantastic to see everybody do. And of course we are all low cost. There's no legacy start-ups. I'm having a big argument with the Delta variant at the moment, hope to resolve that very soon. And so we can start then. Our initial network is we're starting from London Stansted. We're starting with two 330s flying to second cities. So we picked Stansed because the costs were extremely compelling compared to the other London airports.
“And we're flying to secondary cities like Ahmedabad, Amritsar and hopefully Goa as well taking in a bit of leisure. But these are extremely important secondary cities to our passengers, the South Asian diaspora, the Indian diaspora in the UK. The Gujarati population wants to go to Ahmedabad, the Punjabi population to Amritsar, and a lot of the Tamils etc want to go to the south in Goa. Passengers can basically take on a rucksack, a small rucksack and buy extra baggage with a very generous allowance. We have onboard digital trolleys. We have IFP wireless Blue Box on passengers devices, and we're selling really unique, delicious, authentic Indian food on board. Every passenger will be fully carbon offset because we'll be planting a tree on their behalf.
“On the investment side, we were very fortunate and humble to be funded by the UK Treasuries Future Fund via the British business bank last October at the bottom of the market. And since then, since we passed the government due diligence, we have had a big chunk of private equity investment that followed after that.
“Short term plan is if we can serve six second city destinations in the first two years from London Stansted, and really nail that to go six days a week to each of those destinations, I'll be a really happy bunny. Medium term we want to connect also to the east coast of north America and the rest of the secondary cities in south Asia creating our own feed at Stansted from North America and then shipping them off to their different destinations in south Asia, key success factors. We are uniquely going to be offering the lowest fares to South Asia from UK. There's never been a low cost offering from the UK to South Asia. And we hope to really nail that.
“We are only flying non-stop to the secondary cities to create our own demand. We are targeting specifically the South Asian VFR market and treating them with respect because they've never been really treated with respect. They're always piled on at the end of any business plan. For us they're right up front and centre. So that's really it, Alex, that summarises everything. I don't want to give too much away, we haven't launched yet where competitors and all that."
AC: Fantastic. Thank you so much Nino.
What an array of projects! Now I'd like to ask you all a question. When I started Clickair, I had worked for an airline, but I had not started an airline. Most of you have some interesting backgrounds. Some of you starting airlines, some other operating in locals carriers, some in full service carriers. It seems like you're bringing in a lot of lessons learned.
I'm interested in understanding when you get together in the intimacy of your own teams, what are the mistakes that you've seen that have been made in the past, irregardless of whichever project you've been involved in that you're definitely not going to be doing this time around or that your team or your company - or this new project will not do around. What are some of those lessons that are learned? I'll go ahead and invite you to speak in the same order.
AL: “I'm also on the board of COPA. So I have something in between. Look, I think lessons learned are I think you need to be extremely focused. I think it's very tough to try to be everything to every customer. And I think that certainly that's one of the biggest challenges that the large legacy network airlines have, like United is trying to be good at serving all types of different travellers. What we did at Allegiant and what we're going to do at Avelo is really focused our product offering on a specific subset of the marketplace that we're in an enormous air market in the United States.
“It's highly consolidated at this point which creates its own challenges, but also its own opportunities. And so look as much as we will take anybody who wants to get on our aeroplane, our complete focus is on the leisure side of the market. People who are travelling for personal reasons, whether it be to visit friends and relatives or whether it be to go on a vacation and our entire product offering really is geared toward that type of customer. So I think that that that served us well at Allegiant. I think that I've seen lots of airlines try to do too much for too many. And instead of just remaining highly focused on the core customer base that they're targeting. I think that's probably the single biggest thing is making sure that you stay focused and stay agile.
“And also, I think just move quickly. Let the data tell you what's working and what isn't, and then make quick decisions. So I think that's truly our biggest competitive advantage when you're small is that you can move at a faster pace. And so those are a few things. I think lastly I'd say is operational excellence. We use that same term. That's an area that we really didn't succeed in the early days of Allegiant. And I've certainly taken a very different approach at Avelo in bringing in just an outstanding operations experience team of people and really investing very much in the operations to make sure that we do a really great job for our customers, getting our customers where they need to go, on time. And that's an area I think that is a little bit of a lesson learned. I think I took away from my experience at Allegiant is again, focusing on the operational integrity from day one.
AC: Great, and Birgir, you must have heard this question 100 times, there was a colour purple airline in Iceland just a few years ago are run and started by our friend Skuli. What's different about Play? What have you learned from WOW, that definitely would be different in Play?
BJ: “Well, I used to be a deputy CEO with Skuli at WOW, so I saw some of that story firsthand. And I have a huge respect for him and what he achieved. Me personally, I don't have a huge aviation background. I was also a CEO of another local airline in Iceland called Iceland Express. But apart from that, I just come from general management and I've been focusing on restructuring and kind of turn around cases. Most of my career, I lived in Eastern Europe, in Hong Kong and in many places. My last project before this was CEO of Iceland Post, basically restructuring and the postal service. So my approach to issue this is we have to run an airline like we run any other business and we have to have very clear strategy and a clear goal, and we have to have a clear structure and we just have to execute according to that.
“And that is really what has happened in my view of so many start-up airlines. They are founded by an individual, a very colourful entrepreneur that kind of drives it but those kinds of characteristics, those kinds of persons are not usually not very strategic in their thinking. They're just kind of visionaries. And these companies simply don't have a structure or they let's say the actual skeletal structure to survive the growth. So they just grow too fast and they implode. So my focus and our approach is to do this slowly and very, very secure steps, but very concise steps. And I think that's the reason why other companies succeed. And that's also the reason why most of the airlines that I know of have not succeeded. So we are kind of bringing in some good old fashioned kind of daily operational management into this business.”
AC: That's about execution, which is what you mentioned earlier. Bjorn Erik when you and I last saw each other, you were an employee of Norwegian Airlines. You liked it so much that you've decided to start your own Norwegian airline FLYR. What is going to be different this time around? And of course, knowing that Norwegian Airlines is still flying and it looks like it's going to be flying.
BEB: "And I have to say I had a great time in Norwegian Airlines. I learned as much as I did in SAS and in Braathens before that. I'm not like the other ones that have spent many years in schools and studying. I started as a check-in agent in Braathens, 34 years ago or so and the only reason for that was my father worked 35 years in the industry. So what I have learned from all the airlines I worked for before is don't try to grow too fast. Have a clear strategy. When you order an aircraft, know where you're going to put it before you order it. Don't order aircraft and then they come delivered and they go like, where am I going to put this aircrafts? You have to have a clear strategy. You have to stick to your strategy.
“You have to remember who is paying for your salary. You have to treat your guests with respect and you have to take care of your colleagues that you are working together with. You have obviously we are investing a lot of money in system support. You need to have the right booking solutions. You need to, you cannot go into these old legacy systems that gives you a horrible time to market if you want to do any changes. You need to go with the new technology. You need to dare to take those bold decisions saying that as we did, we said, no, we are going 100% NDC and One Order. Nobody has done it before, but we have this we just call him the IT dude. He has worked in several airlines before they have helped several other industries digitalising.
“And we said that we are all in. We are going to follow the new standards. We are going to be, despite the fact that we are in a start-up, we are going to be the leader in this. And I think that's what are going to make us successful. We have invested in the best systems. We are going to give our employees the best tools. We're going to take care of them. I love Birgir said white sneakers, we did the same. Our uniform decisions as you can wear sneakers if you want to. And the crew just loves it. So take care of your people, take care of your guests and invest in the right infrastructure. And you will definitely have a success story to tell for years.”
AC: Thank you very much Bjorn Erik. And I'm sure that the change from obviously knowing Flyr and Braathens and then Norwegian, that must be a big change for you in the head office. Now Bjørn Tore Larsen also you have a tremendous amount of knowledge and experience that you bring in. But I guess the question that everyone is asking themselves in Norwegian failed or eventually gave up on long haul. Why would it work this time around and what are the main things that you think are lessons that you'll be able to take forth on your project?
BTL: “Well, I won't commit sort of comment on what the previous guys did but what I would like to say is that I'd like to echo what Andrew mentioned about focus and about not trying to be everything for everybody. So in my mind, I much rather take one gold medal and make it right than trying to cater for various markets. And we have a very clearly defined strategy. We won't be a leading player transatlantic in the long haul, low cost market catering to leisure travellers. Having said that, there is a limit to how many aircraft you might put into operation at least in a short period of time and not to taking more capital commitments or leasing commitments than you can actually manage in the proper way as part of our survival strategy.
“I much rather like to make money with 12 aircraft than lose with 24, and then again, as I mentioned earlier, it's about execution. You need to have people who are 100% competent and passionate, willing to go that extra mile to make this a success. Having said that even if you have a good strategy, my theory is that if it doesn't work, you have to change it. So being nimble again, as Andrew mentioned, I think is paramount. And I usually like to quote Darwin. It's not on survival. It's not the most the strongest of the species that survive nor the most intelligent, but the most responsive to change. My background, I'm the newest guy here, and I have everything to learn. So I should probably listen more than I speak, but I'd been in maritime transport for more than 30 years. It's a very very competitive business. And you have to focus every single day on operational excellence, but at the same time on reading the markets and the trends and making sure that you take action quickly. If something doesn't work and if it works, then do it again.”
AC: It's really interesting to see how you share a number of principles all of you and in this respect. Nino, I don't know if you have any other comments that you may have but once again, looking at your own experience, what do you look forward to not doing or doing based on what you've seen others doing or not doing? What are some of the lessons learned for you?
NJ: “I think there's two main lessons - controlling costs and I think it's so easy to let those costs slip. And I think lessons learned from other airlines, Jet and Kingfisher serving south Asia was the costs were just out of control in the end. It became extremely bureaucratic and really they squeezed themselves. And the one thing we're going to do is make sure we are absolutely 100% focused on controlling our costs so that we can offer the differentiating factor, trying to be 30 to 50% cheaper than our competitors.
“It's as simple as that at all times. That's our USP. We're going to do all the smart moves to be able to retain that low cost element. So that's number one. Number two is really focusing on our target market. We have identified a specific target market and this south Asian diaspora has never been recognised as such in the past. And it connects all the way from north America. So one day Bjorn you and I are going to be competitors, because we are going to connect to the east coast of north America, pick up our diaspora from there, taking them via Stansted to the second cities of south Asia so get getting them there in at the lowest price with the highest comfort that is possible in that bracket and treating them with respect. It's not capital class, it doesn't need to be capital class but we are cutting costs. We're not going to give any frills away. They can customise their journey and truly live that low cost DNA, which I think others haven't in the long haul sector. Let's put it that way."
AC: That's great. Well, we have time for one last question and I'll ask you to be brief, if you don't mind. I'm going to play full service airline now because you will be very aware of your local carriers that you may competing against at one point or the other. But let me just pretend that I'm one of your full service competitors, and let's pretend that I'm a little scared by all these new aeroplanes and capacity that you're putting in and your ability to attract passengers via price. But guess what? I've got my own set of weapons. I've got really powerful frequent flyer systems. I've got incredible distribution mechanisms all around. I've got the ability to reach out to the business travellers in a way that perhaps initially you may not be able to attract. And I've got a lot of really experienced people in my team. I've run one of those airlines as well. So I feel comfortable saying those things. So my question to you, and if you can say it in a couple of words, what are you going to do in order to compete with those guys in your own regions? Andrew?
AL: "I'm going to stay away. That's what I'm going to do. That's the whole premise of my business plan is to stay away and but if they keep chasing me well, that's what cheap aeroplanes lets you do, is fly only at the peak days at the best times. And at the end of the day that's where we can always win is by having the lowest costs and a flexible asset that doesn't need to fly all the time. But my main goal is to stay away and do something that they're not interested in and that they probably will never think would ever work. Did that at Allegiant once. I think we can do it again at Avelo and yeah, stay away from the big guys. That's always a good thing to do.”
AC: That sounds like an interesting strategy if you can afford to do it, but Birgir you will have a natural competitor at home which doesn't seem to be dying. How are you going to deal with that traditional approach towards airline flying?
BJ: “Yeah, I mean, one of our biggest competitors Icelandair and I definitely don't want them to die because it's a solid company and as a safety support in this country, it's a very important factor of our industry, of our tourism industry. And also as a competitor to us, we very much would like them to keep on spending on marketing and creating the will to travel and introducing Iceland as a destination. So we can come and steal the passengers when they want to book a ticket online. But I think it's a similar strategy and to, I mean, we don't want to be the biggest airline in the world. We want to be flexible and we want to be very I guess nimble is the word that is the theme word of the day.
“We want to be able to basically work around those bigger companies, but at the end of the day, it's a question of who has the lowest cost. And we believe that we are starting with the lowest cost that is possible. And the biggest fun thing. I mean, we are actually, we have more money than Iceland Air actually in the sense. So I think we just have to be focused on our core strategy and then not have any grandiose ideas to eat the elephant in one bite.”
AC: Great, thank you for that. Bjorn Erik. What are you going to do about it - competing with SAS?
BEB: “I'll try to be short, it's not in my nature but first of all, we have 100% dynamic pricing on our flights. That's what you get when you invest in our systems. Our CFO used to be the general manager running a very successful remote programme in a previous airline. So let's see what we'll meet the competitors, but our target is to surprise our guests positively. We have said that we are going to do something completely different. We are taking away all the fees that all these airlines are living out of and we are making it easy, hassle-free to be a guest on board on a FLYR aircraft, and those who want to compete with us on that, they're going to give away the margin. So I think we are pretty good in shape to stay and put up a decent fight for our guests."
AC: Thank you for that. Bjorn Larsen?
BTL: “Well, I think competition is great. Actually what happened lately is that most of the long haul competitors have been funded so much by the respective governments, that they have no incentive to reduce their costs. So we will start off with a great cost advantage. At the same time we are going to fly where other peoples are not. And quite frankly, I think once regulations are taken away on travel, a lot of people will travel. So I personally think that there will be too little capacity across the Atlantic and not too much. That's my guess. Having said that we have to be prepared for competition every day and being best in class on cost is one and being very lean in the way we operate, because complexity adds a lot of expenses. And you've mentioned an airline that is great, that has a lot of services to the passenger, but that costs a lot of money. We might not be the right guy for the Euro boulders or for the one world gold member, but he's not our target either.”
NJ: “No, I fully expect them to but it's a completely different business model and they're focused on the premium end, the first class, the business, etc. And we are completely focused on the other end of the spectrum. And I think there's enough demand for both to exist. So I don't really worry about legacy carriers coming on those routes because we'll track 30 to 50% cheaper because we just have, we've locked all our rates in whether it's capital, crew, aircraft, we've locked them in at the bottom. So we know how low we could go with our pricing.
“But we're just in a different ball game and the demand for the VFR is so huge. There's enough for both people and so I fully expect them to come as long as it's not Air India, because they can just write checks willy nilly. As long as it's a serious player that comes who will be sensible with the finances but yeah, it's just the other end of the spectrum. And I agree with Andrew, in the demand that comes back, we expect the legacy carriers to focus on the hubs and that's where their infrastructure is and to scoop up the demand that's there. We're creating new demands, not taking them on. We're creating new demand at the secondary cities where they don't fly."
AC: Everyone, thank you so much. There's one thing I like to tell you at the very end out of my own personal experience, you have all mentioned people, your own teams, your own crew members.
Please, stay at that. It is the key to success. It was the key for success in my case in Berlin. And I can assure you that investing and taking the time to invest in your own people in your own team, it's what will make you successful at the very end. Thank you so much for your time. Thank you so much for all your thoughts and the descriptions of your projects. We look forward to flying with you very soon. Thank you.