airBaltic, CEO and chairman of the Board, Martin Gauss at CAPA’s Airlines in Transition 2022 summit

Transcript

Martin Gauss:Definitely seeing light at the end of the tunnel. Let me say, to be here in person at a CAPA event again after these 2 years is really great. So we see light at the end of the tunnel despite the war now we have in Ukraine, but we see strong bookings coming in for this summer. So that's the first time Where we would say we're really getting out of this crisis will not happen this year totally, as everybody says, but next year, if we continue on that path, we'll be out of that crisis. And that means there's definitely light at the end of the tunnel. It is, for me personally, I'm 30 years now in this industry, it's the largest crisis. And I think historically it is the largest, but it is a crisis and every crisis has an end. I said that from the very beginning. And what I learned is if you stick to that and you focus on what we did here, that you survive first of all and keep yourself alive, then you need to modify, which I think all of us had to do and still doing, and then you grow out of this. And I think that worked very well in these last 2 years. What I learned is to stick with your team, and what worked well before the crisis will also work well afterwards. What didn't work, you should get rid of. And that's actually what we did. We are at 94% this summer for the seats we offer. So that's pretty high, but we're only at 80% of the passengers we expect to carry. So we are 20% low on the passenger side, but we are offering more capacity already now, which of course will then not be as successful as we were before the crisis. We actually— one of the major decisions we took in the crisis to accelerate the retiring of our other aircraft. We are today a sole A220-300 operator. We took on the aircraft even in the crisis, also taking on aircraft now to bridge the time while we couldn't use the capacity. We wet leased the aircraft temporary to other operators also this year. So we have quite a big fleet already going forward. Delivery issues we did not really have. We postponed them by a couple of months. Where we have very big issues is Spare part deliveries. So when an aircraft goes into long-term maintenance heavy checks, there you have the issues of not getting the required spare parts. That is a supply chain issue the whole industry has. But the actual delivery of the airbuses from the factory in Montreal is not an issue. I think it was very important in the beginning we had a COVID five-star rating to make sure that people would feel safe on board. It's now changing. We just recently changed the mask mandate into strongly recommended rather than. Forcing it on. This is, with a few exceptions, passengers now can choose whether they wear a mask or not. That's a big relief. But what has changed is the passengers want to have space. The passengers' behavior has changed. And we see this reflected in a significant up in the business class bookings, while the guests which are traveling are not the corporates yet. This is more now the individual travelers, but they're booking themselves more space business class. So that's a trend which seems to stay. I hear this also from the long-haul carriers. That is one of the trends. And another trend is that we have much more point-to-point leisure destinations this year than we have flying into the big hubs where you connect. And I think that will also continue not only this year, next year, before we maybe come then back that the corporates return flying. No, we have— we had the seats in there, but we can unblock them now. So The configuration of the aircraft stayed the same, but from the certification point of view, the aircraft was only now certified for the 149 seats. Otherwise, it stays the same, and we have the middle seat free policy for the business class, and nothing is changing in the way how the passenger sits on the aircraft. Everything around the passenger before flight is a big thing, so to make it as easy as possible Whether it's your app, whether it's how you inform the passenger what is happening in the phase before the flight. The flight itself is pretty fine, not a lot has changed. After the flight, the same. If something has happened with your bags, with your connection, you want to be informed. And with the technologies available today, you can do a lot there, and there we are constantly improving. Another one which is pretty new, new is the NFT technology, blockchain. We have invested there since 2014. Learning about accepting Bitcoin and other cryptocurrencies. We are working for one year now. We have issued an NFT, which is very discussed, very controversial because it's so new, but more and more companies doing this. As an airline, we started there. We want to transform our frequent flyer program and the points you get into tokenization so that that's going to be part of the blockchain. It's very interesting. I think many airlines, I think Qantas now also announced something, Many airlines will use the blockchain technology for a lot of fields, and I think we will see that coming. But focus, I would say, for the next years is going to be on the passenger and on seamless travel and on the need to inform the passengers at any time about what is happening to them. While when they're on the flight, all is fine, but the time before your flight is, I think, still not as it could be if we ask our travelers all around the world. So we said when the COVID crisis is over, that is going to be the one and only subject for our industry. I was right until the war started. Now the war took a little bit over, but when that is hopefully over soon, sustainability is going to be the driving factor for the next 30 years. And we as airBaltic said that before. We have the youngest and most modern fleet in the world now with the greenest aircraft in that category. So we've done a big push part there. We do the sustainable aviation fuel, but unfortunately that debate we cannot win at the moment because we don't have a future technology available yet. It will be 2035 earliest and then all airlines will have to change. I'm a strong believer that this industry will go for net zero in 2050 as we agreed at IATA as airlines, but there is a way and on that way we also have to tell the public that there is time needed. We are consuming fuel, even if it's sustainable aviation fuel. Before we have a hydrogen aircraft or an electric aircraft available to do what we do today, it will take a couple of years. And the challenge for us on sustainability is not that we are not doing it, but to bring it over to the customers, to the public. What are airlines doing on that way? The end target of it is— will be— will be a leading industry in that respect. And I think we are already. Unfortunately, we have that sticker on us that we are consuming so much fuel. But it's actually unfair because there's a lot of industries which are not even touched, which consume much more and do much more of a footprint. But we're not looking at others. We're going to do it as an industry. And it is the number one topic once we have come out of the crisis and when that war is over. For us in Europe, that war is still a big impact if we talk about what are we doing as airlines. I still think it's very challenging because at the end of the day, even if you have a clean balance sheet and everything is new and you can copy the best, you will still have to have the people. It's a lot about people in our industry. You will have to have the right equipment. It's not so easy to get today. And then you will have to set up an operation unless you're doing it under the umbrella of a large airline group where you get all that support. But then you have also the cost of that larger group. So we are not worried about any new entrant. We've seen this. We are 26 years around now and we are competing with the best in the low-cost sector. Ryanair, Wizz Air, our main competitors. We had Norwegian. We saw what they went through, restructuring. Whoever new comes on, of course, welcome new concepts. There might be concepts coming. But at the end of the day, an airline has a certain cost structure driven very heavily by the fuel costs, by the aircraft costs. That you cannot change whatever white piece of paper you have. So yes, I hope there's new ideas coming. I work for an airline, airBaltic, which is very innovative, which is very looking forward. So therefore, we are not too worried about new entrants coming because we have done for 26 years a good job, especially now getting out of— getting through the crisis and coming out of it. I'm very positive on that. Thank you.

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