Airline 2050: Beyond the Seat - Building the Future-Ready Airline

Transcript

Michael Bell:Delighted to be with an awesome panel today. Interestingly, I found out as we were pulling the panel together, they all kind of know each other as well.

Greg Anderson:Yes.

Michael Bell:We'll be finding out about the connections between them, but let me introduce the panel to you, then we'll talk a little bit about the subject at hand, and then we'll get into the discussion with the group. So at your far right, Jörg Eberhardt. Jörg is the CEO of ITA, which is the big airline in Italy, investment of Lufthansa Group. I think soon after approvals to be majority investment from Lufthansa. He has great experience in the industry, worked actually in areas outside, in venture capital, etc., but he was with Air Dolomiti, Aerologic, which was a Lufthansa joint venture, also CityLine, which I think just unfortunately is getting shut down, right? But very, very long-standing history in the airline sector and doing some great things. And we'll talk in a few minutes, posting, I think, the first profit at Alitalia, or ITA, I should say, in a very long time. So, Jörg, thank you for joining us.

Joerg Eberhart:Thank you.

Michael Bell:Next to him, Dimitris Georgiannis, who is The very longstanding CEO of Aegean Airlines, which is a—

Dimitris Georgiannis:Longstanding.

Michael Bell:A real success story in the industry, biggest airline in Greece. We recently had the pleasure of writing a case study on Aegean where we interviewed Dimitris and put it out to a business school launching an MBA program, and it's quite an amazing story. He has worked outside of the industry as well at Daimler-Benz, in the auto sector, but really came back and with the executive chairman, Eftychios Vassilakis, basically took a very small shell of a company and formed what is Aegean today, which is a 75-plus aircraft player, key member of Star Alliance, and we'll find out here shortly, a partner to some of the carriers here. Dimitris, thank you for joining us here today as well. Next to him, Carlos Muñoz, who is, I think, a very successful serial entrepreneur in this business. Currently founder, CEO, co-founder, CEO of Volotea, which is a very cool niche airline, if I might call it that, focused on connecting mid-sized markets in Europe, but has a long history in the business, was also co-founder of of Vueling, which goes on today as a key part of the IAG portfolio, and clearly demonstrated expertise in finding interesting niches in the business, growing airlines, and ultimately monetising them. Carlos, thank you for joining us here today. Then immediately next to him, Mr. Greg Anderson, who is the CEO of Allegiant Travel Company. Allegiant is one of the more quieter success stories. A lot of people outside the US maybe not familiar with it. Those of us in the US certainly are. It's been around for quite some time, but also similar to Volotea, has a differentiated market where the primary focus is bringing travellers from secondary, tertiary cities to big leisure destinations in the United States and also selling them other things, which is germane to the topic at hand here. 120-plus airplanes, highly successful, one of the highest profit margins in US business, and has announced and will hopefully soon close on the acquisition of Sun Country Airlines, further consolidating the US industry. So welcome, Greg, as well.

Greg Anderson:Thank you. Good to be here.

Michael Bell:So the topic is Beyond the Seat. Let me maybe just take a couple of minutes and set the discussion up, and then we'll get into it with, with the group. We wrote a white paper at Korn Ferry on this topic. Basically, the thesis goes something like this. The historical battleground going back 30 years in airlines was operations, and then it shifted to network, the expertise being in network planning, revenue management, filling out your alliance partnerships, and filling in the white spaces in that. Our belief is that it has progressed from that where all those still matter, but they're more table stakes. They're things you have to be good at just to be in the business. But the real competitive dynamic has shifted to the customer side, which is around customer relationship management, the monetization of that customer relationship, often through partnerships. We see what Delta's doing with their Amex relationship. selling more non-seat revenue products to that customer base, so merchandising ancillary revenues. That whole world is the new competitive battleground. The other key areas we think are places airlines will need to excel and be really good at internally is that everyone's talked about the income statement and low cost, etc., with the historical differentiator. Well, how about the balance sheet? How about financial resiliency? How about the ability to use that balance sheet to act proactively when others are unable. We think about what's going on right now with the war, and we know there's another crisis to follow after that. The strength of the balance sheet is critical. The third topic we said is going to be central in the future airline organisation is partnerships, both inside and outside the industry, and there's some of them operative here. We sent you all the white paper. We had a discussion a little bit about it in our prep call, I just want to start off with your general views on that. Greg, let me start with you. Allegiant Travel Company was founded almost on the premise of our thesis, if you will, but how does this thesis of the shifting battleground resonate with what you guys are doing at Allegiant, if you will?

Greg Anderson:Thanks for the question. The white paper was really good, so I appreciate the opportunity to go through it. At Allegiant, I guess what I would say is we're founded as a travel company, but we are an airline. I view everything at an airline begins and ends by running a really good operation. That's job number one. We focus at Allegiant on the leisure customer. The value proposition that we provide our price-sensitive customers is really 2, 3 items. One, it's affordable fares. Two, it's convenience. Everything nonstop, pretty similar to Carlos at Volotea, and reliability. I mentioned that because we got to get that right first. Then for 20-plus years, Michael, we've been focusing on driving revenues outside of the tube, which would be third party, which would be co-branded credit card revenues for other type hotel, car rentals. You got to get—

Michael Bell:What does that represent on a per passenger? What's your average non-airfare revenue per passenger today?

Greg Anderson:In total revenue, it's about 6% of our total revenue.

Joerg Eberhart:60?

Greg Anderson:6%. 6%. But it's high margin revenue. So to the bottom line, it really drops in there.

Joerg Eberhart:Cool.

Michael Bell:You know, I want to pivot a little bit to Dimitris. We, when in our prep call on this, that's clearly a part of the, of the story at Aegean, but you made a point about, well, you need to kind of earn the right to, to build the customer, to leverage the customer relationships. Talk a little bit about what Aegean's philosophy is around this topic, if you will.

Dimitris Georgiannis:I mean, Aegean, since the beginning, we, we, our product or service proposition was good quality, good service to the customer. We have been consistently pursuing that for the past 27 years. There is obviously with ancillaries and air, non-air ancillaries and so on, there are a lot of tangible assets that come from the ancillary revenue that the low-cost airlines pioneered 20 years back, and by now they are, they are pretty much the daily bread and butter also of the full-service carriers and ancillary services. This is, however, is the tangible, the monetised part of, of, of selling additional service to the customer. Uh, we believe there is a, a strong intangible asset in, in our service to the customer, which is the way we build our relationship with the customer. Let's not forget, travelling is not only buying a ticket and deciding whether I will buy an insurance and I will get a better seat or not. It's all about the travel experience. Travel experience is a lot more than the seat or the catering. It's how the passenger, for about— for an intra-European sector, average flight time is 2 hours. There is another couple of hours that the passenger spends at the airport. Either before or after. So for 4 hours, the customer is in contact with the airline. Therefore, you have a, a really long time to capitalise the, the, the, the relation with the customer. And this is what we have been doing. Um, we, we spend a lot of time with our people trying to, to work on their attitudes towards, towards customer service, on the way they serve the customer when, when things go wrong. And things do go wrong. in an airline, in the airline business. Things increasingly go wrong in the airline business. Why? Because we have all this congestion, facilities, airports, security, air traffic, airspace. And who is sorting out all these problems? The airline. We are sorting out all the problems that other providers create, and the customers hold us accountable for all this trouble. And we have to sort the problems. But it's not me who will sort the problems. It's not Jörg who is going to sort the problems, not Carlos. It's our people who sort out the problems. So I believe this is an important intangible, intangible part of—

Michael Bell:Making sure that the people who are actually dealing with the customer are building the relationship.

Dimitris Georgiannis:They do it right and they build the relationship, obviously not personally with every customer, but they convey something which is care for the passenger, care for solving the problem of the customer. This is intangible. However, we know applying it consistently for 25 years that it translates to really tangible benefits.

Michael Bell:Carlos, can you build on that a little bit? I think about Ryanair, although they made a pivot, whatever it was, 8, 9 years ago to be a kinder, gentler airline, they were built differently than that. It was like, well, who cares what they think? They're coming because it's cheap. You have been successful in building a couple of low-fare carriers. They're doing it today. What is your philosophy around this? How do you build that relationship to be able to sell them more and monetise that?

Carlos Muñoz:Well, good morning first. I was actually listening to both, but especially, you know, Greg is like my twin brother on the other side of the Atlantic. Everything he said—

Michael Bell:You look very similar.

Carlos Muñoz:Totally. As companies, really, we were actually very inspired by Allegiant back in the day. And we have a lot of people from Allegiant, from the old Allegiant leadership. So anyway, a lot of tribute and recognition to Allegiant. It is— so you're saying, you know, strong operational excellence for sure at the beginning. This differentiating factor at the risk— I don't want to digress too much, Michael, but in our case, what we see, which hopefully doesn't sound unexciting to people, it is certainly very exciting to us, is that in small mid-cities, it's very different to big cities. Big cities, you can fly anywhere you want. In small mid-cities, you cannot. The excitement is, in a sense, much more basic. We work with places like, I don't know, Brest in the top of Brittany, which is the end of the world. They call it Finistère. They call it actually also the beginning of the world. It's however you want to look at it. When you work with the folks there in terms of connecting to new places, that excitement, that possibility, it's almost more basic than, where do I go? I know your white paper was more—

Greg Anderson:Yes.

Carlos Muñoz:more about the beyond and the digital retail experience on board, etc. That's all very exciting. I think I actually— I mean, not buy, I agree with you. I think we will keep on using more technology, we'll make the client closer. Certainly in Europe, in contrast to America, we don't do, in my humble opinion, I don't know if a good enough job. We don't just look at the loyalty programmes and the credit card deals that they have. We certainly do not have that. Maybe we'll learn how to do it, or maybe there consumer is different. I'm not sure. But, you know, in our case, it's a bit more basic. It's providing a very, you know, a good experience at very good price. And on top of that, really hitting that people like it a lot. To Dimitris' point, you know, that, you know, our frontline people are working with them, that it works well. But it's, it's a more basic—

Michael Bell:You guys also have an opportunity serving these small markets to become their hometown airline. Totally right. When you're serving Lincoln, Nebraska, and that airline or the thing being ignored by the majors, you can come and say, hey, you know, and I think there's an opportunity maybe in Europe. Maybe you can comment on that, Jörg, is like you were at CityLine, and now we're hearing about cutbacks on to these secondary markets. I know ITA is not focused on that per se, but pick up on this a little bit and tell us your approach to this topic. First of all, do you buy into the thesis? And how are you deploying it in your transformation of ITA, if you will?

Joerg Eberhart:I would say in general, we as airlines are quite limited in cost management. There's only a small part of the cost we can really manage. It's maybe 30% because we are facing monopolistic structures, we are facing regulatory limitations. So when we have to be successful, it's more on the revenue side where we concentrate on. So the thesis is very interesting, a bit provoking. They say 100% of the cost of a flight could be covered by ancillary revenues, which is currently— we are around 10%, maybe similar to you. Low-cost models are already about 50% on ancillary revenue, so there's still a lot of potential. But I don't think it will happen as we see in other business models where people go on a bus or a boat tour and have to buy some carpets, and this is financing the whole trip. Will not happen in the airline industry because the cost is simply too high. But I agree on that there's a lot of potential we did not tackle so far. So talking about 6-10% is not enough. If you look into the frequent flyer programmes where ITA's frequent flyer programme Volare has had 4 million members, and we were able to have an interaction with less than 3% of these 4 million. So all the other potential is untackled. So there is no interaction happening. We don't know yet how to approach this, but there's, there are some ideas in order to make use of the potential.

Michael Bell:Talk a little bit about how you are building the customer relationship or rebuilding it, maybe at ITA would be the fairer way to do it, considering that maybe Alitalia over the years had lost its way. You were mentioning before that it was actually bigger than Lufthansa going back to the '60s, but had massive erosion in its customer base due to Lufthansa and others coming in. How are you going about building that customer relationship at ITA?

Joerg Eberhart:Oh, as the colleagues mentioned, the basics have to be right. So we have to fly on a regular— regularly, we have to be punctual, we have to, especially in the feeding, hub feeding model, we need this kind of operations performance. Operations performance is the base of everything. And then, of course, in Italy, it might be a bit easier as a country that has to offer so much, take all the food, take fashion. And so Italy as a country is very attractive. So we try to play on this strength of Italy in order to convince, convince our passengers, in order to train our cabin staff. People who enter our aircraft, especially in the US, which is the most important market for us besides domestic market, have to feel if they enter into an aircraft of ITA to be already in Italy. What they are looking for is this Italian atmosphere. we try to create on board when they enter our aircraft.

Michael Bell:Cool. What can we look forward to in that regard? Special new offerings that way that are more Italian in nature, or what are we seeing that way, Jörg?

Joerg Eberhart:Yeah, we can, we can do much more. Let's say we're just already offering some pizza on board. There are a lot of ideas we can, we can play on this Italian strengths in a sympathetic way. Maybe we don't have the same money as the player from, from the Gulf Airlines who can offer Dom Pérignon of '92. But we offer real good Italian wine, oil, bread. So real things, good quality, maybe a bit less fancy.

Michael Bell:Let me maybe piggyback on what I'm hearing from you guys and ask this question in a provocative way. How much of this customer relationship and monetisation has to do with trust? Trust between the airline and the customer, to the people question, right? So, and I won't mention which airlines, but, you know, we get a lot of solicitations from our airlines in the US, and there's some of them I just ignore, and others I will click through. And why? Because I don't trust the brand to do what's in my interest, right? I see that that solicitation is about their interest. So do you buy into that? And how central is that to be able to monetise a relationship? Maybe Dimitris?

Joerg Eberhart:Absolutely.

Dimitris Georgiannis:I mean, it's the most important thing is that to deliver what you claim you deliver, to really deliver it to the, to the customer. Um, so in other words, do, do what you preach. And we have been consistent. We never, we never, we never promise more than what we can deliver. And when we underdeliver, we recognise our, our, our wrongdoing and we compensate the passenger. Aegean, since, since the first flight in 1999, offered one free ticket to to every passenger if his flight was delayed more than 1 hour, I think. Back then, there was no 261, there were no compensation for passengers and so on. It was our commitment to show to the passengers when you suffer from our problem, from a problem that we created, we are willing to take the cost and compensate you. So this is the foundation on which trust will be built. If people will be— passengers realise that when you do something wrong, are taking responsibility and you, you, you compensate in different ways. It's not only monetary compensation. It's, it's the basic. And this is, this is what we have been, we have been consistently trying to convey and, and, and, and train, train our people. We want our people to be able to, to sort problems on the spot as they happen. We empower our cabin crew to sort problems with passengers on the spot.

Michael Bell:We empower our ground service to sort passengers with missed connections or Part of it is, let's say, resolving one issue, but how about the promise? I mean, one of my concerns about airlines is that they set themselves up for failure when they overpromise. There's some airlines that underpromise and try to overdeliver. Think about Southwest that never tells you you're going to have a gourmet experience, but then they treat you well when you get on board. I don't know, what's your philosophy around that?

Greg Anderson:I love what Demetrios was saying here, but I just want to add a little bit to that trust because 10 years ago in Allegiant, the network that we serve, we serve similar to Volotea, these small underserved communities where we're the only game in town. 10 years ago, it was all about low fares, low fares. But as we've evolved and we've grown and we've built that trust with our customers and we center around the customer relationship, that's why I was starting back with ops, Michael, is that we do what we say we're going to do. We went from in 2021, 2022 to one of the, in the US, Not a great operation to where today operations is number one. We were ranked by the Wall Street Journal the number 2 airline in the entire United States for operations. I say that because that consistency and that predictability—

Michael Bell:You've come a long way considering the problems you had in the press for a while around that.

Greg Anderson:Exactly. That consistency and that predictability drives that trust in those communities that we serve, which we believe they're our type of communities.

Michael Bell:You're going to get them there on time and safely.

Greg Anderson:Absolutely. And our— the one last, just, I guess, data point to help provide that is we went from about a third of our customers being repeat customers to today it's closer to 65 or 70% of our customers are repeat customers. They like our experience.

Michael Bell:They trust the brand.

Greg Anderson:And they love what we're doing. Yeah.

Carlos Muñoz:Can I build on that briefly from a European perspective? The same— I mean, you know, in small cities, reputation is everything. I'm not suggesting that, you know, in Berlin, Paris, London, or whatever, Madrid, It doesn't matter. It still matters, right? And by the way, having my 2 friends here on the left, obviously Aegean, very central to Greece, ITA to Alitalia, so not wanting to put that aside, but they face much more competition in small— I don't know if Lincoln, Nebraska, I've never been there. I know that in Brest—

Michael Bell:It's the Brest of the United States.

Carlos Muñoz:In Brest, Brittany, everybody will know Volotea and everybody will have an opinion. Good or bad. Good or bad, exactly. And by the way, with everybody, it's also the local paper called The Telegram, the mayor called Bruno, the regional president of blah, blah, blah, blah. So back to your question, and we're saying again, at the risk of repeating one more time what Greg is saying, operational excellence key in small cities. Our completion rate— sorry, not to brag, we're the smallest airline here, but it's the highest in Europe. We never cancel. Second, by the way, I think the last ranking is always Aegean. So we like never cancel. flights, you need to have a very good OTP. It starts with that. The rest, I don't want to say is poetry, but without that, the rest doesn't really, really go anywhere. Yeah. And then that's it to your client connection thing. In our case, actually, and I think it's similar to some other carriers, it's subscription-based. And what we see— Let me put it together. So you're saying it's trust initially? Yeah. So it's subscription program. What we are seeing is that, you know, if people become We have around a million or so. They are like 35 to 40% of our passengers are mega, it's called. Yeah, you pay an annual amount, either €70 or €160 per year, and you have a lot of benefits. And it creates— if you treat them well, and like you say, if the client knows, if he opens your email because he knows you're going to propose something good to him, not to you— I mean, hopefully good to both.

Michael Bell:Yeah.

Carlos Muñoz:I want to pick up on that one second, Ulysse. You actually get a higher share, you see much more repeat, you see You know, with you, we're on—

Michael Bell:We're not cutting you off. I want to come back to this maybe, and then I'm going to shift to the financial resilience question because it obviously relates to what's going on right now. But why not something where eventually flying is free? All right. And let me be provocative around that. Right. So, you know, you mentioned the subscription base. There are many industries that have shifted to that, right, where someone— you have a subscription, you have a relationship, you're paying something. But most of it is really being paid for by somebody else, by sponsors. And I remember we were in one of the prep calls, I think it might have been you, Dimitris, you said, you know, that's all fine, but, you know, like, internet doesn't burn fuel, right? Airplanes burn fuel. But this model seems to lend itself towards that. So when O'Leary said years ago, hey, like, my objective is zero, right? I'm going to get somebody else to pay.

Greg Anderson:Why?

Michael Bell:Why isn't that a plausible model? In this realistic framework of like there is some subscription, but somebody else is really paying the rest of the freight, is that too outlandish an idea for the airline?

Dimitris Georgiannis:I think it is an extreme idea in the States where there is a— the credit card is a big business for the airlines. Loyalty programs are big business for the airlines. It's a completely different setup in the States versus Europe. As Jörg said, we have members, some Jörg said 3% only they can communicate. We can communicate with 70% of our miles and bonus members, which have a base also of about 3 million passengers. It is extreme to say it's going to be free. One thing I would like to say is that ancillary revenues, credit card revenues, loyalty revenues, yes, tangible, but these are commodities by now. These do not allow airlines to really differentiate. Trust with a consumer, trust with a customer is not commodity. It depends on people's attitude and on service. And this cannot be—

Michael Bell:It's the asset that you really have.

Dimitris Georgiannis:And this is not commoditised. This depends on each airline. And there, there is a differentiating factor and it does pay off. It does pay off also on the financial resilience. Repeat customers with financial resilience is to have repeat customers.

Michael Bell:I'll be interested to see though when Amazon decides to extend their extend their Prime subscription to an airline membership, and we'll see what that does. Okay, let's pivot to the second part of the thesis because we only got 10 minutes or so left, which was this view that, hey, the winners and losers, in addition to being able to monetise that customer relationship, really need to be financially resilient. And everyone talks about the income statement and unit cost, CASM or CASK. How about the balance sheet? And I look around at the real great airlines that through good and bad come out the other side really, really well. They seem to have very strong balance sheets— Ryanair, Copa, etc. I want to start with you, Greg. You're a finance guy, right? You probably play this right down to your— Is that an underplayed element of airline key success factors?

Greg Anderson:I think it is. It's incredibly important. One of the areas that I talk with our team and our senior leadership about the most important thing we need to get right is capital allocation. That is job number one, I feel like. You take it from there, Michael, though, on the balance sheet side. We're hyperfocused in making sure that we have a strong balance sheet. For times like we're in today where there's uncertainty, you want to have that strong balance sheet so you can play a little bit more offense if the situation so presents itself. Over the past year or so, we've been able to take our balance sheet and really improve. upon it. We went about 2 times, 2.3 times net leverage. We have one of the highest liquidity ratios in the entire US industry. We have that strong balance sheet. You mentioned earlier our acquisition of Sun Country. Part of the way we structured that deal was we issued about 75% of it in equity, 25% in cash, but it was so we could have together a strong balance sheet because in our sector of the industry, that's going to be an advantage. In the US industry, the value sector, One other thing I want to say—

Michael Bell:Which other low-cost carriers don't have in the US right now.

Greg Anderson:They don't. We have— us and Sun Country coming together have the strongest. One other element that's really important for our business model, serving the leisure customer as we do, is we own our assets. We own our aircraft. We have significant embedded equity value within our aircraft. It gives us flexibility, but it also helps us protect the balance sheet if we need to in these end times Like you've said, you're unencumbered around those things. Yeah, we have about $2 billion of embedded equity.

Michael Bell:How about ITA? I mean, for years this was an airline that struggled with this balance sheet. Now you're coming under Lufthansa Group ownership. How do you guys see that, Jörg?

Joerg Eberhart:ITA is a young company. It exists since, since 5 years. So of course the balance sheet reflects also a bit of the past, and it was a startup. So at the beginning there were a lot of investments to be done, and of course we don't have the strongest balance sheet in the industry. Of course, everybody wants to have a strong balance sheet. If you made profit in the past, you can afford a strong balance sheet. Anyhow, every now and then you have to pay dividends to your shareholders. So what happened after COVID, what in the— also in the Lufthansa Group, of course, the cash aspect was very much in the focus. So the— if you talk about what's a strong balance sheet, no, it's relationship between debt and equity. It's also cash. And the cash was much more underlined after COVID. So the cash reserves are much, much higher than before of all airlines. It's not, it's not a scope for itself. It depends on the situation. Of course, if you have a strong balance sheet, you're better off in a crisis. But it's then it's a cash game again. And I don't want to look into the future in a pessimistic way. But as we realised during COVID cash was king.

Michael Bell:When we were writing the case study with yourself, Dimitris, and Buddy, Gene, one of the themes that came through was fiscal prudence that you guys maybe have— when you could have ordered 50 airplanes, you thought to maybe order 30 and just take it a step at a time. How central has that been to your guys' success?

Dimitris Georgiannis:Look, Michael, we have survived in the past 27 years about, I don't know, 5, 6, 7 crises. Half of them were for all airlines crisis and the other half were Greek peculiar crisis.

Michael Bell:You guys specialize in those.

Dimitris Georgiannis:Yeah, we specialize in those because of our base being Greece and Athens. The only— the core reason why we survived was our strong balance sheet. We had cash in the bank. What Jörg said, balance sheet is strong. I mean, to make it through the crisis, to use the time of the crisis the way we did during COVID to prepare for rolling out new products and services after the crisis. You need to have the security that you will be around after the crisis, and you can invest during the crisis when nobody flies, when everybody stays at home. No, we keep people employed and we develop skills and capabilities during COVID that allowed us to be quick in the recovery, the quickest in recovery post-COVID. This is due to the strong balance sheet. we have. We are very persistent in maintaining strong balance sheet, cash, because there is always black swan around the corner in the airline industry. If this crisis goes away with the oil, something else will happen 1, 2, 3 years down the road. You have to be prepared, and balance sheet is key to the answer.

Greg Anderson:Super.

Michael Bell:There are a few Slido questions, but I don't want to miss talking briefly about The third element of the thesis, which was that you can't do it alone. It's about partnerships. I'm going to start with yourself, Carlos, around that one. We put this panel together independently, but then we quickly realised that we have your partners here. You had already struck a partnership with Aegean, and you informed me you now have a partnership with ITA as well. How do partnerships play in terms of the long-term picture for a niche airline like Volotea?

Carlos Muñoz:We're about to announce one with— I don't think— can you hear me? We're about to announce one with—

Michael Bell:that's happening right here and now, right?

Carlos Muñoz:So we announced one with ITA on Coachair, which is commercially— which is how we started also, I'll be very brief— 4 years ago. And now we're financial partners.

Greg Anderson:Got it.

Carlos Muñoz:To the earlier question, you know, if you're high growth and low cost airline, then at some point of crisis you also make, you know, maybe commercial partners into final partners. It's great. We're very happy with that. And it provides synergies of commercial operation and then synergy of thought, which I think is very, very important.

Greg Anderson:Cool.

Michael Bell:If you guys want to comment on that, any one of you on the partnership piece?

Joerg Eberhart:Of course, talking about commercial partnerships, there are a lot of win-win situations in the industry. what we realised with you also in the Star Alliance.

Greg Anderson:Yeah.

Joerg Eberhart:So, but I want to emphasise on another kind of partnership, the non-commercial partnerships, which we have many, let's say, dependencies in this industry with the guys who are doing handling, the maintenance part, with the airports. This is all more than just suppliers because you need to have a very close relationship to these kind of partners, even to the police in the airport. to the fire brigade. So these are all relevant partners for us, and I think this has been underdeveloped in the airlines, the non-commercial partners.

Michael Bell:I think you guys are leading the way for Lufthansa Group around this topic, are you not, at ITA?

Joerg Eberhart:Yeah, at ITA we now nominated a person to take care about this, about the non-commercial partners. Even if it goes down to the bus drivers in the airport, there are still people who have customer contact. It's a touchpoint, it's relevant. So we need to take care about these people. It's not purely buying Post-it as procurement, it's much more.

Michael Bell:And most passengers don't really know who's doing what, by the way. They're just traveling. They don't know the difference between the airport and a handler and the airline.

Joerg Eberhart:And they're always blaming the airline.

Dimitris Georgiannis:They always blame the airline.

Michael Bell:Yeah, you get the crap. Let me go to one of the Slido questions, which is, where are you putting the most capital right now to improve operational resilience and how do you measure if it's working. Who'd like to take that one?

Carlos Muñoz:Greg?

Greg Anderson:I can jump in real quick. I know we're limited on time. We at Allegiant, we built our business on buying used aircraft. We're primarily an A320 operator today, but back in 2021, we placed an order with Boeing for new MAX aircraft. We have about 16 of them in service. We've also, though, invested in— you were talking about predictive maintenance, earlier in predictive maintenance to help us drive unnecessary or unplanned maintenance events out of the business to improve operations. My point is, is just with newer aircraft, with the investments in technology, we've seen our reliability back to the operational improvements I was talking about before go from, from lowest or on the low end of the industry to one of the highest. And it's important for the communities we serve because we're not a daily operator, we're a weekly operator. And so similar to Carlos, we will not cancel. Yeah, we can't. We don't cancel. And our controllable completion is 99.9%.

Michael Bell:Incredible.

Greg Anderson:Leading the industry in the US.

Michael Bell:Yeah, I'm going to— we can't end without the customer question, right? So how does direct customer feedback influence strategic decisions? Can you share a recent example where that changed something, where you did something different?

Carlos Muñoz:Happy to.

Michael Bell:Yes, please, Carlos.

Carlos Muñoz:Happy to take a quick one if you want. Literally, I learned this from my American partners, from Neelyman in particular. Always welcome people, etc., on planes, and then people come to talk to you. I'm sitting on row 2, blah, blah, and it's typically middle-aged ladies or older ladies, and they talk to you. I'm getting older, but like they're your mom. And, you know, one specific one to not—

Michael Bell:They're coming to talk to you, brother.

Carlos Muñoz:There is never space in the cabin back up here in the first 2 or 3 rows because your crews put it there. And we share it with the crews and it's like, look, and now the crews put it all— it's a simple one. I'm just saying, you know, sometimes, you know, we go fascinated with technology and sometimes it's small stuff like that. Obviously, first-class carriers, I'm sure they have that figured out much better. But in low cost, you know, that's simple. You know, it's one simple client feedback of one of my moms, one of my mom bosses.

Michael Bell:Dimitris or Jörg, you guys want to comment where you've changed something based on customer feedback?

Dimitris Georgiannis:I mean, there are many, many things that I tend to read. I read every customer comment. either complaint or a congratulation letter that comes to us because I want to sense what the customers directly say. I've been doing that for the past 25 years. There are always things that you hear from the customer and you do things. We had a couple of issues like the bin space, which is the bin space, it's not enough to fit every customer carrying a thing. So there are things that we try, since the problem cannot be solved, we try to explain explain to the people why we will take some, some of the, of the bags, of the handbags down to the belly. And, and we train again our, our cabin crews to do it politely without frustration, explaining to the people and so on. So there are, there are every, every, every— there are things that happen every, every, every year that customers tell you things from their experience that identify a corner somewhere that we can improve something. It's a complicated business. It's an amazing complexity of things happening at the same time during a trip.

Michael Bell:Very good.

Carlos Muñoz:Jörg?

Joerg Eberhart:Another example about the complaints, passenger complaints, then, and we have to then, let's say, to give some vouchers and everything. So we are trying to empower our cabin crew on this. As you mentioned before, it's important that the cabin crew has the possibility to give immediately a voucher to the passenger when they say—

Michael Bell:For a slice of pizza.

Joerg Eberhart:All flights are limited. That would be a good idea. Yeah, it would be much cheaper.

Michael Bell:Very good. Time is up. So, you know, great conversation. When we set up this panel and got this great group of panelists, you know, we said, hey, let's make this an hour and 45, not 45 minutes. We could have kept going for a long time, but hopefully we'll have another opportunity to do so. Welcome to the partnership with these 3 other gentlemen which we're announcing today. Thank you for your questions. as well. Uh, please join me in thanking our great panel for the time today.

Carlos Muñoz:Thank you.

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