CAPA Live: BA CEO Sean Doyle - "we'll come out the other end”
Talking at the CAPA Live on 14-Apr-2021, British Airways CEO Sean Doyle spoke with CAPA’s Peter Harbison.
In some verbatim extracts below, Mr Doyle discussed:
- BA's "rightsizing"
- "airlines are better run when they're run as businesses"
- sustainability, fuel efficient fleets and net zero by 2050
- vaccine progress should help open up the UK-US market and "fatigue with zoom calls"
- the the potential of the "A321neo narrowbody opportunity"
- the importance of the Qatar Airways partnership in opening up Asian networks
- the China market's importance as it parallels the UK's services sector
- London City Airport has great potential
- creating a framework for travel to reopen, cheaper testing, vaccinations
- APD makes the UK industry uncompetitive
- a focus on integrating APIs into BA's core airport processes
- sustainability: " IAG was the first airline group in the world to commit to net zero by 2050"
To watch the interview in full, please see In-depth interview with new British Airways CEO Sean Doyle
"As a group at IAG we were very quick to act. We raised liquidity in the commercial sector when we realised the gravity of the situation and changed the business pretty quickly. It was very tough on our people, but if we didn’t sort of rightsize the business last summer we would be facing a much tougher situation."
“The first thing I would say is that, at IAG, we were very quick to act on self-help, and that was focused on probably three to four different streams."
"The first is to go out and raise liquidity in the commercial sector as best that you can, and we've been successful in doing that. We had a rights issue, we went to the bond markets, and then we actually tapped into some government facilities in the form of UKEF for British Airways, to the tune of two billion before Christmas , and Iberia, Vueling and Aer Lingus have actually pursued similar paths."
"So I think credit being available on commercial terms was one of the sort of streams that we were looking to be enabled, and we've tapped into that."
"The second thing was to recognise the gravity of the situation and to change your business pretty quickly, and both British Airways, Aer Lingus, and other airlines across the group did that."
“And that was very tough and it was very tough on our people, but if we didn't sort of rightsize the business last summer, we would be facing into a much tougher situation than we're in today. And, look, we're by no means out of the woods yet, we still have a choppy path to recovery, but I think rightsizing your business, acknowledging that the next three to four years are going to be very different to the last three to four years, and buffering the balance sheet through every lever that you have, has been successfully achieved.”
"I fundamentally believe that airlines are better run when they're run as businesses, and we've demonstrated that through airlines that were historically state carriers. When we do see the dust settle on this crisis, the ability to run your airline like a business will be as compelling as it's ever been."
“I wouldn't really comment on what's happening in Europe. I fundamentally believe that airlines are better run when they're run as businesses, and we've demonstrated that through airlines that were historically state carriers. And when they've been, number one, privatised, and number two, worked in a group such as IAG, their fortunes and the fortunes of the airlines in terms of growth prospered, and I still fundamentally believe that. When we do see the dust settle on this crisis, the ability to run your airline like a business will be as compelling as it's ever been.”
“We all have new challenges, we've never seen anything like this. Before this we had 9/11, which was kind of not as dramatic a demand shock. We had the global financial crisis, but we've never seen situations where, over a summer, airlines have operated at 5% of their capacity, so it's a unique situation."
"And how we come out of it, and what the impact is to the industry, has yet to be clear and yet to play out. I fundamentally believe that we as a group move quickly, and we're all the better for it, and I think we're rightsized heading into the future. With a business switch, we'll be better when we come out the other end of the pandemic, and we'll have to be, because it's going to be pretty competitive out there.”
"We’ve taken the opportunity to be more sustainable because we have retired 31 747s, and [we're] flying 787s and A350s, which are up to 40% more fuel efficient. I think being sustainable is going to be a key dimension of an airline’s right to operate in the future. "
“We’ve taken the opportunity to be more sustainable because we have retired some of our older aircraft in the form of 31 747s, and we're now flying around 787s and A350s, which are up to 40% more fuel efficient. So, I think being sustainable is going to be a key dimension of an airline's right to operate in the future."
“The A350 works very well for British Airways. Because of the sheer volume of aircraft that we have retired, I think we do have a place for the A380 and it's in our plans, and we can fly it to many destinations. We flew it to places like Hong Kong and Johannesburg, but it also worked fairly well into markets like Boston and Dallas, so even to the east coast of the US and to places like Miami, we found that the A380 worked very well. So it's got multiple purposes in terms of mission capability for British Airways, and that's why it is retained in the fleet.”
"The vaccine progress of both the UK and the US are more or less mirroring each other. That should lead to the ability for the UK and US to lead the way in opening up air travel. You do business with people, not organisations, and we do see fatigue with Zoom calls."
“There’s probably two different time dimensions. One is an immediate opportunity to open up the US. If you look at the vaccine progression of both the UK and the US, they're more or less mirroring each other, and both countries have implemented very successful vaccination programmes. And then that should lead to the ability for the UK and US to lead the way in opening up air travel, and I would hope that the US administration looks at the repeal of Section 212-F sooner rather than later."
"I also think that the US is kind of representative of the importance of aviation. There's a lot of focus on holidays, and holidays are important to give people something to look forward to, but the US is about trade. It is the UK's second biggest trading partner, the UK is the US's fifth biggest trading partner."
“The amount of foreign direct investment, there's over a million people of British nationality living in the US, so there's a huge amount of visiting friends and relatives traffic, but the sheer amount of economic activity enabled by that relationship is significant. And you do business with people, not organisations."
"I think we do see fatigue with Zoom calls. We're hearing about people who want to invest in the UK, and vice versa, saying they need to get back travelling again, and we're impressing that kind of perspective on the UK government. There's an expression in Ireland, which I like. It says, "If you want to buy the farm, you've got to work the land," and I think that's very true when it comes to travel and investment and business activity as well."
“So, in the near term we should be leading the way in terms of the UK, US, opening up, and the progress in Europe, as well, of vaccinations coming in the second quarter, that could be a template that others follow. In the medium term, I do think that trade between the UK and the US will be a key focus, and that presents opportunities."
"But British Airways was already a leader in the US market. We flew to more airports directly out of Heathrow than any other carrier in Europe. We served 26 cities in the US and over 30 North American destinations, so that kind of breadth and depth of the network we historically have provided there has been a competitive advantage for us.”
"It would be a great opportunity if we could move early to the US. I'm quite confident that we'll be, one, very relevant, two, very competitive, and three – if we can get going earlier than the pack – even better."
“It would be a great opportunity if we could move early, and I think we've got a number of levers."
"For one, a direct network really helps. If you're flying to more places directly, you just have an ubiquity of offering that tends to win."
"Second, the hubs are very important – both the hubs that we fly into in America and the hub we have at Heathrow. Because if you look at the retirements across the industry, you're seeing aircraft like 75s and 76s retire, and that means a lot of secondary spoke operations between the US and Europe will inevitably shrink, and then the hub O&Ds will be the way that people will travel in the future. So I think optimising the hub and redesigning our hub to really pursue that opportunity is something that we can pursue. "
"And we have a very significant direct network but we've got a fantastic behind network into both Europe, the Middle East and places like Africa, so I think that's a big opportunity."
“And, of course, we fly into places like Dallas and Chicago, and into American hubs in the US as well, like Philadelphia, which give us the ability to attract behind traffic from spokes in the US. So I'm quite confident that we'll be, one, very relevant, two, very competitive, and three – if we can get going earlier than the pack – even better.”
"We're committed to the potential of that A321neo narrowbody opportunity. Being able to fly smaller gauge aircraft with the unit cost efficiency of widebodies from places like US hubs into European spokes is certainly very exciting."
“Funnily enough, I took delivery of A321neo LRs into Aer Lingus, and we operated to Bradley; it was one of the first services across the Atlantic, so I'm very familiar with the technology. And Aer Lingus and Iberia have ordered the XNR as well, so we're committed to the potential of that narrowbody opportunity."
"But being able to fly smaller gauge aircraft with the unit cost efficiency of widebodies from places like US hubs into European spokes is certainly very exciting. And I haven't seen American's plans in detail, but that would be something that would be obvious to look at. But we were very excited about the ELR and Aer Lingus, and I think the XLR is a better range version of it and probably a bit more complete in terms of design as well."
“For me, what we see is what [the] Alliance is doing, [and that] is they just give you a lot more ways of getting people from A to B and a lot more combinations and a lot of recognition and a lot of loyalty. And you can also create real synergies for travel buyers because you're offering a bigger range of solutions on the shelf. And those levers will be as important in the future as they are in the past."
"And we do see people combine itineraries. They may fly out in the UK regions over Dublin and come back to Heathrow. And as a broader group and as an Alliance, we can enable that. And we've seen those types of itineraries really grow over the last decade as we've begun to enable customer solutions which allow that to happen in a frictionless way. But there's a lot of opportunity we will still pursue, and we're very enthusiastic about making the most of these combinations of various partner metal.”
"As you look to the East and look to Asia and expanding our footprint, having a partner like Qatar is very important because our network isn't as developed into Asia as it is into the US, and that's something that we would like to rebalance over time."
“I think Doha is a fantastic hub and the scale of network that Qatar has developed at some points over the pandemic, Qatar were the biggest airline in the world and the sheer breadth of the network they provide to places that British Airways doesn't fly to, or maybe it doesn't fly to with the same frequency, again gives us an opportunity to combine the networks and create real synergy."
"And it's a fantastic experience as well. Anybody who flies Qatar knows about the standards they set. And they're a very important partner. We've worked very closely with Qatar."
"So as you look to the East and look to Asia and expanding our footprint, having a partner like Qatar is very important because our network isn't as developed into Asia as it is into the US, and that's something that we would like to rebalance over time. But the ability to offer connections over Doha to places that maybe we don't fly to yet, or aren't significant in, and combine them with direct services in the future – again you win, because you're just creating more ways to get people there and back.”
"We always look to China because of the sheer size of the market and the potential. What could be exciting about China this time around is that the economy is maturing – that plays more to what the UK has to offer."
“We obviously always look to China because of the sheer size of the market and the potential, but we have flown back into more points in Asia over the last five or six years, like Kuala Lumpur and like Seoul, that we had pulled out of in the early two thousands. So China's big, but Southeast Asia and North Asia is very big as well. And we'd launched Osaka in Japan for instance, because we felt there was demand there."
“But what could be exciting about China this time around is the fact that the economy is maturing, obviously, and moving towards an innovation and a services-based economy. That plays more to what the UK has to offer because the UK is a very big services sector: a lot of financial services, a lot of insurance products."
"As China begins to develop, for instance, it's sort of social security nets and systems, there will be a lot more business activity between the UK and China. And obviously it's part of the economic strategy of the UK government. So I think the UK will have a lot more business to do with China in the future and we want to be part of it."
“We also need to have competitive visa arrangements as well. And that was one of the issues we saw flying from China into Europe, the transit visa arrangements that the UK had weren't competitive compared to Schengen areas. And we would be lobbying to have that change if we were to think about areas like Chengdu we flew to, but that was an issue that we had to grapple with.”
"We do fly long haul out of Gatwick still, but London City has been hit hard with the reduction in the corporate and business segment; but I would be very optimistic about London City as it’s very convenient for business travellers but an awful lot of the traffic that we fly on our operation out of there is actually not corporate, and that's been a key growth sector."
“We've consolidated our A320 operation into Heathrow for short haul and that will carry on for the foreseeable future. We do fly long haul out of Gatwick still, and we're operating out of Gatwick as we speak. And London City obviously has been hit hard with the reduction in the corporate and business segment, but I would be kind of very optimistic about London City as well, because it's got two dimensions."
"One is it's a very convenient airport for business travellers, but if you look at the East of London, the sheer growth in population, the demand actually for the leisure network out of London City, it has been something which I think people don't appreciate. So an awful lot of the traffic that we fly on our operation out of there is actually not corporate, and that's been a key growth sector. You just get the train out of London City and you see the amount of residential development going on in the East. It's very exciting, and I think we've got a great footprint, a leadership position on that airport to capitalise on."
“The type of operation we have is dictated by the airport, the sort of runway limitations mean we're on an Embraer operation there. And it's kind of opening limitations that we have to work with as well. But London City has built itself as a reputation for convenience. It's got to be cost competitive as well, and we always emphasise that to the airport. But for travellers in East of London, they appreciate that convenience and the ease of using that airport.”
On reopening the UK for air travel: “I suppose we had two communications last week, one from the Prime Minister and then a subsequent communication from the Secretary of State, the first thing to say is it does represent a step in the right direction in that it's the commitment to reopen travel and it's a commitment to create a framework by which travel can reopen"
"And that's an acknowledgement that the industry is important and that the industry is a key lever in getting the economy up and running again.
"But I think we need to be more ambitious. The framework could be simpler. It could be more affordable. It could be more easily understood. And it doesn't need to be as onerous as it is to manage the risks that we're dealing with. And the other thing the framework misses out on is the ability for vaccinated travellers to travel and be a lot less risk in terms of vaccinated travellers travelling than they would have been this time last year [in 2020], and that's not really referenced in the framework."
“So I would hope that it gets better as we get closer to the summer, but we won't really know exactly what that framework looks like until early May, both in terms of what countries are really [by] category and what it might evolve to."
"But our plea would be it can evolve to something a lot more straightforward that can still make sure the travel can be reinstated more safely."
"So things like PCR for green corridor travel, we think that should be lateral flow. And also, we've done some work with Oxford/AstraZeneca here, which shows that two tests, a pre-departure test and an arrival test, is about 88% effective in reducing infectious days. And that tells you that the protocols for amber are overengineered compared to the risks that we're dealing with. So it could be better and it could be clearer and we're making those points to government."
“And then we need to make sure that we have reciprocal, understandable frameworks at the other end of route."
"What is encouraging is the advice the CDC gave a couple of weeks ago for vaccinated travellers. One, they consider travels [to] be low risk for people who've been vaccinated. And two, international travel protocols for vaccinated travellers are much simpler for when they return into the US. Now that's for US citizens, but it is a simpler, [more] pragmatic solution that they've communicated than the one that we saw in the framework here.”
"Looking to Europe, my expectation is that when you get to the end of Q2, Europe is in a very different place. If the policy and the framework anticipates that properly, we will see significant travel recover. The government are looking about enabling lateral flow testing from the NHS to make travel more affordable, and we are announcing a partnership which will have PCR testing available for £60."
“My expectation is that when you get to the end of Q2, Europe is in a very different place. You will have seen Germany administered 710,000 vaccines over the weekend. They're really beginning to scale up their vaccine programme. And you do see a lot more supply come into the marketplace from various providers over the coming months. So Europe will get the kind of traction, and see the benefits, that places like the UK and Israel have been seeing in the coming months."
"So what government policy has to do is look forward to where we will be, rather than anchored in where we are today. We will be in a much better place. And if the policy and the framework anticipates that properly, we will see significant travel recovery. But that would be my read of the situation as we're sitting here today. The progress in the vaccination programme here has been remarkable. And if you look at the data and the effect it's having, it does give us room for optimism."
“The lateral flow testing is very affordable and we have a range of options there. And I think the government are looking about enabling lateral flow testing from the NHS to make travel more affordable because the prime minister did respond rightly to the challenge that you['ve] got to make sure that if travel is enabled through a framework that it's also accessible for everybody."
“The second thing is we're working with suppliers and we are announcing a partnership today, which will have PCR testing available for £60, which is a significant reduction on the cost that we would have seen over the last couple of weeks. So we think that the supply chain will become more affordable, but also, to deal with the risks we're dealing with, there could be a framework which has less tests involved."
“There's a huge amount of pent-up demand. Every time we see a travel corridor open up or the government policy alleviate the travel restrictions, people want to travel because they haven't been travelling for 12 months. So we're working on the affordability supply side with our suppliers. The framework could be simplified to deal with the risks we're dealing with. And then there is a bit more complexity and a bit more cost to travel, but there's a huge amount of demand out there for people to get away."
“I was looking at the VFR market alone, a lot of people have not seen relatives or elderly parents for over a year. And that is one of the big emotional tolls this pandemic is taking. And I know when I get the chance to go back and see my family in Ireland, I'll be on a plane, I'll be taking a test and I'll be going.”
"If we want to grow to places like Asia, we need to be competitive, and APD [Air Passenger Duty] makes the UK industry uncompetitive. APD is a punitive tax, and it's gone one way over the last 10 years. And it's about time, I think it moved in the opposite direction."
“I know there's a review planned, but I think we had a minor increase in APD, which was disappointing."
"People have got to realise that aviation networks are probably the key enabler of economic activity. And if we want to grow to places like Asia, we need to be competitive and APD makes the UK industry uncompetitive. So we'll be making the case that that needs to be part of a review if we want to have a strategic commitment to aviation and could see aviation as part of global Britain. And the government says it does, but it's got to follow up that commitment with real action. And APD is a punitive tax and it's gone one way over the last 10 years. And it's about time it moved in the opposite direction.”
We've been clear that it's a combination of pre-departure testing, which gives people reassurance that when they're flying. [What] we're focusing on as a solution is to enable the verification of whatever you need to travel.
“We’ve been clear that it's a combination of pre-departure testing, which gives people reassurance that when they're flying that it's very safe and we know that it is very safe, based on the data that we have, are also evidence of vaccination. The policy about how people can cross a border – we leave to governments."
"What we're focusing on as a solution is to enable the verification of whatever you need to travel. So we've got three streams up and running. One is, as I said, we've been trialling a VeriFLY solution with American Airlines, which enables the digital verification of travel requirements."
“Secondly, we've got our own document verification portal on our app. And thirdly, we're working with IATA, and I think the IATA Travel Pass solution is exciting because you will get both the rules engine integrated with Timatic, which we already use as an industry, but also you will get a verification portal up and running that the industry can tap into."
“So I think the solutions to meet the requirements of whatever the government will require for people to travel can be automated and made frictionless."
"But our job is to ensure compliance with the regulations, not necessarily from a British Airways perspective to dictate them. But we know that travel is very safe. We know the data from IATA shows very, very low incidents with people travelling. And all of those incidents happened even before the ICAO or the insurance framework was adopted by the industry in August. But that would be our position. And we've been consistent with that all along.”
"What we will focus on is being able to integrate APIs into our core airport processes and also being able to transmit that verification to various authorities in a way that's automated. The app development in a way is the more straightforward part of it."
“The more people innovating in this space in a way the better, because it means that we have got a competitive dynamic going on in terms of creating this capability. And actually, the more suppliers, the more solutions that various carriers can adopt."
"So having people who can perform verification and create apps that people can use is a healthy dynamic. What we will focus on is being able to integrate those APIs into our core airport processes, and also being able to transmit that verification to various authorities in a way that's automated. So the plumbing or the integration is actually very important. The app development in a way is the more straightforward part of it."
“I've seen from IATA [that] onboard transmission has been 42 cases across 1.2 billion journeys. And most of those cases happened before we implemented things like social distancing at airports and the use of masks on board. And we do see that trend of actually minimal transmission onboard an aircraft continue. An aircraft is a safer environment than many other places with the way the HEPA filters filtrate air, and the other measures that we have taken. So we're not hearing any concerns about people travelling and the risk of transmission when people are travelling. And I think that's been more than supported by the evidence."
"...governments could enable a quicker, more coordinated return to safe air travel if they basically cross[ed] boundaries and align[ed] them on an international framework."
“In the EU you've seen the tourism reliant economies move quickly. So countries like Portugal and Spain are keen to get sort of an aligned process up and running. The green certificate process that the EU were looking at, I think is a representative of an understanding of the economic impact of not getting aviation back on its feet."
"And what I would say is the UK and the US have an opportunity to create a framework that others could adopt because when there are rules of the game for opening up travel to the US, people will kind of converge on that because it's such an important market. And Britain's got leadership of the G7 this year, and that's a great opportunity to coalesce on policies that could be adopted. And I do think we'll be much better if there's a coordinated approach than if there is an uncoordinated approach."
“At the same time, countries will adopt frameworks based on the situations they're dealing with at a point in time, and that will be something that we'll just have to navigate through. But if we could get a consensus, all the better. The industry is very good at reaching frameworks and adapting to various challenges. We've shown it over the last 50 years. The way we responded to 9/11 is a classic example. But governments could enable a quicker, more coordinated return to safe air travel if they basically cross[ed] boundaries and align[ed] them on an international framework.”
"IAG was the first airline group in the world to commit to net zero [emissions] by 2050. There are near term opportunities, of which sustainable aviation fuel is very credible. We're making the existing fleet more efficient and then we're investing in innovators, and have launched a joint venture with ZeroAvia."
"The first thing which we've got to be clear about is that we're guided by the science, and IAG was the first airline group in the world to commit to net zero [emissions] by 2050. That's aligned to the UN sustainability development goals, and I think it will take till 2050 for aviation to have things like zero-carbon aviation solutions from a technical perspective. One is this will take 30 years to fix ultimately. The industry is very much aligned with the scientific objectives of the UN in terms of reducing the impact of carbon on global warming."
“But within that framework, then, you've got near term opportunities, of which sustainable aviation fuel is very credible. We've committed to a supply agreement with LanzaJet. We're committed to a joint venture to develop a SAF plant up in Humberside with Velocys. We're pushing the UK government to support that through the Jet Zero Council."
“We think you could build 14 SAF [sustainable aviation fuel] plants in the UK. That would give jobs to many remote parts of the UK and help the rebalancing agenda of the UK government."
"But also the great thing about SAF is you can just integrate it into the existing supply chains in a very efficient way. It can substitute kerosene, and airlines don't have to ship it to various airports because they can take credit for their commitment to SAF no matter who actually uses it in the ecosystem. And I think SAF is going to be very important for the next 20 to 30 years, because there are some exciting developments coming, but for longer range missions or longer sector trips, SAF will be required. That would be very expected, that it will form part to the framework."
“The second thing we're doing is obviously making the existing fleet more efficient. We're taking delivery of A320neos, 787s and A350s, and they're replacing older 747s that are retiring, and that will continue across our group over the next 10 years or so. Those aircraft are also far less noise-polluting than the older aircraft are. So the capital investment we're making already is significant."
“And then we're investing in innovators. So we've launched a joint venture with ZeroAvia."
"We've committed to their recent round of funding. ZeroAvia have flown a hydrogen-powered turboprop operation. They have ambitions to develop this technology, and we'd like to support that ambition. Hydrogen appears to be an exciting area of development that not just ZeroAvia, but other players, are looking at."
"Now, that's more radical, and it will take longer, but we've got to start placing bets right now to find a solution that will get us to net zero in terms of technology over the next 20 or 30 years. The other thing I would say is the industry is committed to Corsia, and we need a carbon accounting framework for offset, and also we think the carbon capture commitments and investments will form a part of the framework as well as we get into the next decade."
“We've got a great story that we've been telling for quite a long time. British Airways was the first airline to invest in carbon offset back in 2002, and I think we've always recognised that this is absolutely critical for the industry to take ownership of, to retain this right to operate. Let's not forget, people love travel. We have a challenge of a carbon footprint that we're dealing with. We've got a very credible story to tell."
"So I'm quite confident that we will be able to communicate and articulate what we're about, and also articulate the fact that travel is very important. It's very important to economic development. It's something that people love doing, and they can do it in a way that will be far more sustainable in the future than they have done in the past. And we shouldn't be shy about having this debate and taking it on.”
“We’re going to need many dimensions. So Corsia and the EU ETS are forms of carbon offset and carbon trading which exist today. So they're up and running. We will need more. We need more fuel efficient aircraft. We need new technologies to come along, that if there is a marketplace for them in the form of carbon capture, replacing maybe carbon offset in the future, that becomes very exciting. So you've got to start the journey and it has multiple dimensions, and we will push on many boundaries here. But it is going to be a key debating point. We'll come out of the pandemic with certain changes in the political landscape as well. Sustainability is going to be a key global priority, and we're going to have to be part of this. We're going to have to be part of the solution."
“The green economy is part of the economy in the UK, and we have a good story to tell. It's got many dimensions to it. It will take a bit longer than other industries, but we will get there by 2050, but it means pushing on a number of fronts."
“Our people are ready. We're very excited to get back in the air, but hopefully we're in the final quarter of what's been the worst challenge for aviation maybe this side of World War II."
"And we'll come out the other end.”