Air Canada Q&A

Transcript

Peter Harbison:Thank you, thank you very much, team, for a very comprehensive rundown of where Air Canada's at at the moment. I should say too, this isn't just the Air Canada show. We're going to do a similar thing with WestJet later on in the conference. Lucie, I'd just like to start by thanking you Thank you for your initial comments. I was sort of reluctant to say anything myself because— but in this, in our events, we are constantly being attacked for not having enough women on stage. And diversity obviously is a big issue. So thanks for coming along 2 to 1 and levelling up the numbers. It is incredibly hard. And I think from looking, if I could just sort of go into that issue because it is important. We've been banging away at it for about 10 years in CAPA, lots of studies and lots of talking to people about just why things are like they are. You seem to be at the high level, much more representative of the, what I call the other sex in aviation. Why do you think it is? Why is it, what's Air Canada doing right?

Lucie Guillemette:There's a few things. The first is, you know, we do recognize that we are an industry that has been for a long time more male-dominated, and if we genuinely want to see more women come to the airline industry, we also need to invest in the younger kids. So what we do is, in many areas of the business, and I would say that Our head of maintenance is probably the biggest champion we have. He actually is the one who created within sort of Air Canada a forum for young women to come and see what it's like to work in a maintenance environment in an airline.

Peter Harbison:Mm-hmm.

Lucie Guillemette:And, you know, because it was such a big success, it's been replicated in other areas of the business. And I think, you know, our CEO, who obviously, you know, believes in it because He also believes that this is not the kind of thing where you want to manage with quotas, you know. If we want to be a global champion, we want to be able to be successful and connect with employees and our customers, you know, everywhere around the world, we have to welcome the talent. So we don't believe in a quota system where we have to meet a target, but we'll certainly give opportunities to both men and women to come forward, you know, and show what opportunities there are at Air Canada. And I think most of the success really is in the different business units, because a lot of the work was done at the, you know, sort of grassroots, you know?

Catherine Dyer:Mm-hmm.

Lucie Guillemette:Several departments have created forums where women in their respective, you know, area of the business sort of meet together, and they look at opportunities to, you know, see how we can help and support their career growth, So it's something that we do take seriously, but I have to say it's somewhat become a little bit in our DNA, you know, we never question anymore. In fact, I think when we recruit, the one question that we do ask ourselves as hiring managers, if, you know, we post for a position and we only have male candidates, we'll at least ask the question, you know, are we certain, or have we looked at all the candidates that could potentially be available. When it's meaningful, like when you want to make some change, you take the steps to do it. But it's certainly not a top-down approach, you know, it has to be embraced by the company, and we've been fortunate. But I do give credit to Rich Steere, who, yeah, he was a real advocate within Air Canada, for sure.

Peter Harbison:Great. So just very quickly, you— so I think you mentioned you don't actually have targets. Which is one of the very controversial things that— in this discussion always.

Lucie Guillemette:Maybe a target, but we don't have quotas. So from a target point of view, you know, we say, well, where are we at today and what would be, what would be, you know, progress over the next year or 2 that we could subscribe to? But we don't aim and say, well, we need to reach this number by this time and force ourselves to hire.

Ferio Pugliese:Mm-hmm.

Lucie Guillemette:Their own talent, you know?

Peter Harbison:Sure.

Lucie Guillemette:And, you know, I'm sure I speak for all the women in the room, nobody wants to be in a position if it— they don't feel like they're qualified to do it either, you know? So—

Peter Harbison:Good. Well, as I said—

Lucie Guillemette:Our formula works for, for Canada for sure. Yeah.

Peter Harbison:Well, again, thanks for helping us with our diversity problems on stage. Staying in the sort of the bigger picture, realm. I mean, you talked about the things that Canada, and I think as very much one of the leaders, if not the leader in the environmental part of the industry, not just doing things but actually being seen to do things, which is a large part of— because a lot of the opposition to aviation is about perception rather than reality, I think. To what extent— I mean, we've seen Sort of going back to medieval ages, commuting between New York and Europe by sailing boat, which I think if we all started doing that, we'd go back to the Dark Ages. But how much is flight shaming that's now very popular in Europe likely to influence your business? I don't think it'll happen in America because they don't have anything like global warming down there, so they don't have to worry about that sort of stuff. But are you starting to feel the impact of this?

Ferio Pugliese:Well, maybe I'll jump on it, and Lucie can add, and Catherine as well. Are we starting to feel the impact, influence of that? I'd say it's early days and probably not, but that said, I don't think it should be ignored, and I don't think it's something that we should take lightly. I think it speaks to a little bit of what I had mentioned with respect to some of the headwinds we face with respect to regulations. I think sometimes the misperception about our industry being, you know, a major contributor to greenhouse gas emissions and that we are not being responsible stewards of the environment is completely false. In fact, if you look at the data and you look at the information that has been shared across multiple jurisdictions, it show quite the contrary. Aircraft manufacturers have reduced the global footprint on carbon emissions, and airlines and air, you know, aviation partners have done their part to also do that and reduce it. But unfortunately, on the topic of climate change, and it's a very controversial topic, and there may be those in the room that might disagree with me, I think that you get a level of sort of a a retail following on this topic that believe that, well, every time you see a massive piece of metal flying through the air, it must be emitting a lot of GHGs and it must be bad for the environment. And so I think that's where it's important that we fight those headwinds with facts and reality and so on, and it should not be taken lightly, because I think these sorts of things can very, very quickly turn from ideas into movements.

Peter Harbison:And, and—

Ferio Pugliese:Our industry is hyper, hypersensitive, as you know, Peter, and everybody in the room, to any sort of movements, geopolitical movements, you know, social movements, anything of that nature can have a dramatic impact on demand. So I think we should stay ahead of that.

Peter Harbison:So, but there's a lot of criticism both internally and externally of the industry for not getting its message across very well.

Ferio Pugliese:Yeah.

Peter Harbison:Why is it and what needs to change?

Ferio Pugliese:Well, I think we as an industry can do a better job of getting the message across. You know, I think on a variety of fronts, and not to speak tactically, but, you know, we're an industry that moves passengers across long journeys, and we have captive audience for hours at a time at 40,000 feet. There's not many places they can go when that's happening. So what a wonderful place to provide information and educate. I mean, you look at things that, you know, Lucie shared items that we've done with respect to do more and conservation and try to— and leave less. And we're not the only ones doing that. So I think there's an opportunity for us as an industry to continue to do that and put that information out in the forefront and using the same means of communication that are being used with some of these movements, which is social media and other mechanisms.

Peter Harbison:Okay, well, jumping wildly to the other end of the couch. Catherine, as I think I said at the beginning of my introduction today, the area that really fascinates me now is pretty much where you're at. I mean, you've moved back into having your own, or getting back your own frequent flyer program, loyalty program, and I'd just throw into that mix Alan Joyce, CEO of Qantas, has directed his— again, unfortunately a woman heading up their loyalty program, Olivia— to generate— and this is an airline that makes about $1 billion profit, Australian dollars profit a year— to generate $500 billion— sorry, $500 million in EBIT within the next 2 years. In other words, drastically shifting the revenue stream of the airline. Is that the sort of thing that you see possible in Air Canada, or necessary, or desirable?

Catherine Dyer:Well, I'll take a snap at that and then maybe have Lucie add comments. And just to sort of build on your diversity question earlier, the CIO at Qantas is also a Canadian gal. So there is a bunch of us kicking around. In fact, Alaska, United, American, and Southwest all have female CIOs, so we're maybe quietly Taking over through the tech channels.

Peter Harbison:Get the antitrust authorities on this.

Catherine Dyer:There you go. You know, I think absolutely there's a shifting in the revenue side, and what my role is within Air Canada and, you know, other tech leaders' roles is to make sure that we have technology not be a barrier to that. So as you can imagine, in this industry we have systems that are 25, 25, 30 years old, and a lot of the focus that we've had has been in replacing those underpinning systems and then building out utility so that things are easy to swap in and out, so that as the business decides to shift their revenues, that IT's not in the way.

Lucie Guillemette:Mm-hmm.

Catherine Dyer:That's probably what good would look like from my perspective. In terms of revenue, I think, Lucie, I'll pass that over to you. I'll leave it to you to answer that question.

Lucie Guillemette:Sure. So there's no doubt that, you know, what we hope to do obviously is to, you know, bring in incremental revenue as a result, but I think the real thing that excites us about bringing the loyalty program back in-house is, you know, if I go back a few years and sort of in there with the transformation at Air Canada and maybe Much of it was by necessity, but we, you know, took some risk when it came to distribution and fare content and type of offers that we would, you know, provide to customers. So, you know, we came out with branded fares, some good, some not so good. There was learning in all that. But now when you look at sort of what's the next step in terms of how we want to interact with customers and how we want to bring in extra revenue from ancillary, the fact that we will have our own loyalty program in-house is really one area which it will definitely be very beneficial. Now, of course, we had a good relationship with Aimia, but the fact that we can design our own products real-time and that we can really look to take sort of personalization and customization to the next level without introducing complexity and all that for customers, It's pretty exciting for us, and that in and of itself will translate into revenue improvement.

Peter Harbison:Is— but I mean, when I talk about a loyalty program generating perhaps half of the profit of the airline, is that the sort of thing you see as something others in the industry— I mean, Qantas has got a very advanced frequent flyer program, there's no doubt about that. Is that something that is potentially transferable?

Lucie Guillemette:Perhaps we'll be able to take it there, but for the— we'll start with launching it.

Ferio Pugliese:Go launch. Yeah.

Lucie Guillemette:And then—

Peter Harbison:well, you did launch it, didn't you?

Lucie Guillemette:Yes.

Peter Harbison:I mean, 20 years ago, nearly.

Lucie Guillemette:Yeah, we did. But I think what we have in mind for the future is—

Peter Harbison:Yeah, it's a very different product.

Lucie Guillemette:Quite different than, you know, what we had. There's no doubt that, you know, I said earlier when I started with Air Canada, I was a call center agent for Aeroplan, and I often used I used to drive home and say how fascinating it was that, you know, customers were actually more concerned about their Aeroplan points than they were about their bank accounts, you know. It is probably the second most important currency in Canada, so there's no doubt that from a commercial perspective, this is going to be very good for us. We look forward to it.

Peter Harbison:We used to have a wonderful story. There was a very quirky businessman in Australia a few years ago when the frequent flyer program started up. and he liked to fly first class and he would always keep a seat next to him, so he'd pay for a seat next to him. And it came to the end of the year and he claimed from Qantas the frequent flyer points for that extra seat and Qantas said, no, there's nobody sitting there so you don't get the points, which is pretty stupid anyway. But so anyway, he used to buy the seat in the name of his bag after that so he would get the frequent flyer points. If you can buy 2 first class fares, do you really need points? But yes, I mean, it It's very distorted, particularly when it comes to corporate travel. That's, that's an issue that, that is very much— before, we haven't got a whole lot of time, but Ferio, I wanted to come back to you. You made a bit of a shout-out in your, in your presentation about the whole issue of things like bills of rights for passengers. It seems like on every continent, every politician sees a great advantage in coming forward as the benefactor of his electorate by hitting rules on airlines. And we've seen in the US probably a lot more cancellations of flights rather than risk delays and penalties for them, which is very negative from the consumer's point of view. It's pretty bad in Canada in that respect. A lot of it's unnecessary. Where does that head in future? I mean, what can you do about it?

Ferio Pugliese:Well, look, I mean, you know, I think these regulations to begin with I think that they all start with the right intention, which is to look after the customer. I think our perspective, and when we talk to other partners globally, is that, you know, it also operates on the premise that the airlines are not, and airports, and whomever is part of the chain of custody with the customer, are not doing their part to care for the customer, which again is false. I mean, we wouldn't have a business if we weren't looking after customers.

Catherine Dyer:Right.

Ferio Pugliese:In fact, when you peel the onion back, in many of these cases, airlines already have policies in place that address these. So when we look at, you know, the APPR, the Air Passenger Protection Regulations here in Canada, and you look at what was recently rolled out, many airlines— and I can speak on our part— I would say 3 out of the 5 pieces of regulation that rolled out was policies that we already had in place. So there is— You know, I don't think we can hide behind— there is a political element attached to that, that whenever there's a tarmac delay or there's something that goes on within our industry, be it weather or so on, it gets a lot of attention. And I think that, you know, the political realm has looked at that and said that is a way to garner support of the electorate, to say we're looking after you because the industry isn't. And that's my point about being thoughtful with these things, is that we— I think we are all looking out for the best interests of customers. That's the business we are all in, politicians and the airlines. And when we sit down to draft and craft these regulations, it should be done thoughtfully, because at the end of the day, when you look— our concern is when you look at the exorbitant costs that this adds to an already price-sensitive business, it is making cost of air travel starting to become out of reach, and the airlines just simply can't absorb all of that cost. And we've, you know, we've gone to the extent where We've communicated that. So, you know, where is it headed in Canada? I think you've got right now a baseline of a set of regulations that we're able to manage to. It's, you know, you used the point in your presentation about competition makes you sharpen your pencil and get sharper. This will too, which, you know, is not always a bad thing. And then I think what will happen over the course of the next 18 months is I think we'll see this evolve as the CTO manages, you know, a process where they're hearing from customers and as they start to evaluate the data that's coming in on a monthly basis. So more to come.

Peter Harbison:Good, good. I'd like to finish with you, Catherine. Now, one of the magic boxes out there floating around in the IT world, of course, is blockchain, which probably 1.5% of us in this room understand, and I'm probably in the other half percent. To what extent is that going to have an impact in the aviation, in the airline business? Is it going to be transformational? Is it going to be important? Is it going to have value for the airline itself? Is it going to have value for the customer?

Catherine Dyer:Yeah, I mean, it's a very interesting technology, and I think that right now there's use cases starting to emerge across a number of industries on where this can create advantage. I think in our cargo business, We're thinking that this is interesting. I think in our loyalty business, we're thinking this is interesting. But, you know, we are, we are being thoughtful around, you know, the amount of time that we spend on that right now, just given the other priorities that we have as an organization. But certainly it is part of how we're considering evolution of technology at Air Canada. But I wouldn't expect anything in the very short term. around that. We are really focused on evolving the practices around data, AI, and how we can actually use that to improve bottom-line results for the company and to improve customer experience, just to go back to Ferio's question. So it's one of those technologies that I think is incredibly sexy, if I could say that word on a stage, is very interesting, but we need to be very thoughtful about the amount of time we spend on it and how—

Peter Harbison:So in 5 years' time, are we likely to be buying our travel with cyber currency? Is that a prospect?

Catherine Dyer:I hope you're buying it on your Air Canada credit card. I think that would be a really good way to buy it. So I would say in the next 5 years, that's probably not top of my list. Yeah, not top of my list.

Peter Harbison:Cool. Unfortunately, time is the enemy. We've run out of time. Thanks very much for really interesting presentations, and thanks for being with us.

Ferio Pugliese:Thank you.

Peter Harbison:Ladies and gentlemen.

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