Airline CEO Interview: Gulf Air, Acting CEO, Captain Waleed Abdulhameed Al Alawi

Transcript

John Strickland:

(silence) Welcome everybody to another of the sessions of this CAPALive on the theme of airlines in transition. Well, of course, airlines worldwide have faced transition in the last year in a way none of us would have imagined or would have wished. And our guest in this session comes from the Middle Eastern region. He is acting CEO of Gulf Air. An airline which has got notable history running right back to the 1950s. It's seen much change in its own life, both in terms of its own structure and operation of a landscape in which it has to serve the public. But today, of course, like all airlines, it's faced with particular challenges. The acting CEO is Captain Waleed Al Alawi. So what better than to have the cool hands of a pilot running this airline at this challenging time. So, Waleed, welcome.

Captain Waleed:

Thank you very much for hosting me.

John Strickland:

Great. Looking forward to having a chat with you. Let's focus, first of all, on the last year. I mean, it goes without saying it's been a challenge, but how have you been navigating it and where have you got to right in the moment? I know, of course, like all airlines, you've had to ground a substantial part of your operations; sadly being a large number of job losses as with every airline, but give us a bit more of the local flavor and some of the specifics about handling this COVID pandemic at Gulf Air.

Captain Waleed:

That's a good question. I think all airlines and the whole aviation world has changed with this pandemic. So we started feeling the effect of the pandemic in about March, 2020. And there were lots of decisions to be made. At that stage some of the airlines started grounding their fleets. We decided to continue flying. So we actually never stopped flying, but as the pandemic hit the world harder and harder, we had to ground some of our fleet. So we continued flying and I think the world changed all around us. And we were flying the small route structure that we were left with a lot of the restrictions being implemented at the different airports in different countries, but an interesting thing popped up at us which was the repatriation flights. So we had lots of Bahrainis all around the world getting on with their own business when the pandemic hit and they all obviously needed to fly home.

So we actually did a lot of repatriation flights. In fact, we continued with some of the Far East destinations and European destinations and we were able to participate in repatriation flights worldwide really because we carried a lot of business, holiday-makers from the Far East, and we were able to take them back through Bahrain as a hub and back to, for example, the UK or France or any part of the Western countries.

So Gulf Air participated not only in the repatriation flights for the nationals, but internationally. I do recall lots of school kids going to universities, for example, in the U.S. were stuck out there and they wanted to get home and with the restrictions being so difficult and so tight in a lot of countries, Bahrain played an important role and Gulf Air participate in that because some of these students who were attending back to the Middle East would start their journey in the U.S. end up, for example, in the UK and Gulf Air would pick them up, bring them to Bahrain and then from Bahrain throughout the region and so forth. So just shows you these are just small flavors of how important it was to keep on flying and to support the nation. And we played an important worldwide role realistically in serving the passengers and taking them back home during the pandemic.

John Strickland:

Sorry, Waleed. What level of operation have you got back to the moment? As you said, it's very fluid because of all the different government restrictions, but have you got an approximate level of operation where you're at today?

Captain Waleed:

Yeah. Today we are operating between ... It depends. The restrictions are actually not permanent and they keep changing all the time, but I would say we're averaging perhaps 50 to 60% depending on what's happening in certain parts of the world. As you know, the pandemic hit some countries harder than the others. So they shut down and you have to readjust your network to do whatever is needed to keep the network going; accepting the rules and regulations and respecting them.

John Strickland:

Absolutely. Now, your fleet includes 787s. One thing that has been very interesting in the last year is that cargo capacity has been short in supply because, of course, most of it or a large amount of it normally does go barely onward on scheduled services. A lot of airlines have adapted and tried to get some revenue by flying their normal passenger aircraft purely for cargo. Have you also been able to participate in that particularly with the 787s at all?

Captain Waleed:

We did actually. And I have a story to share with you. When the pandemic hits us, the government of Bahrain decided to make sure that we have food supply of six months. So Gulf Air had played an important part in bringing in the food supplies. We used to, obviously, as an airline sell the space that is available in the cargo bays [inaudible 00:06:46] space, but during the pandemic, we did much more than that. For example, when the PPEs and the medical supplies were ... There was shortage of them, we actually utilized the 787 and we did quite a few flights, long-haul or ultra-long-haul. For example we did China. And these flights, for example, to China we actually utilized the whole cabin.

So we did follow the rules and regulations and applied whatever is necessary to protect the cabins but we did actually utilize full airplane fully loaded with cargo. So yeah, that's something we have done and we have done it actually on the narrow-body as well within the region that we fly to as well. So yeah, we played an important part and cargo actually was very important to keep us going for Bahrain and for the rest of the world. We carried cargo East to West as well not just to Bahrain obviously. So yeah, the answer to that, yes. We continue to utilize cargo space and we still till today utilize some of the cabin space for cargo as well.

John Strickland:

And, of course, as you said, you've flown pretty well right away through the crisis, but at a lower level of operation. Looking ahead you've been in discussion with your Echo suppliers Boeing and Airbus about some order delays and possibly some cancellations. Do you have a feeling about how far back you might wish to push aircraft or what that may mean for the fleet?

Captain Waleed:

Yeah. We in Gulf air have the same issue as the rest of the world. Obviously all airlines have signed agreements and they had delivery schedule to fit in with their network requirements, but with this pandemic everything has changed. So every airline, and we're no different to any airline, we had to go and renegotiate the delivery dates. We haven't canceled anything from ... Our requirements will remain, but it's a question of when do you receive this aircraft. At the moment, no airline would be keen on the receiving aircraft or accepting delivery flights to park these airplanes because of costs and what have you. So we have actually negotiated with the main suppliers Boeing and Airbus, and we've got good progress with these two scenarios.

John Strickland:

Well, that's good to hear. Let's move on from the specifics of COVID, Waleed, and look more at where Gulf Air is today in terms of your business model, your plans for the future. As I mentioned, it's an airline with a very long heritage going back to 1950s. And certainly I recall what I would call for me as a youngster the glory days of Gulf Air with Tristars flying in and out of the UK, but the airline has changed in that time and the competitive dynamics have changed. So today we have the mega carriers like Etihad and Qatar as major global hub operators in the Gulf, but the Gulf, of course, is a very diverse market. It's not all about those global flows. I've read that Gulf Air is calling yourself now a type of a boutique airline. Could you tell us a bit more about what does that actually mean?

Captain Waleed:

Okay. Boutique airline is what we called ourselves in 2019. So we reckon that we are at the right size to provide our customers or our passengers with a unique service. And what distinguish us from the bigger airlines either worldwide or within the area around us is the size. So we are able to cater for individual needs. We try to have a relation with the frequent flyer passengers who fly with us; because of the size we're able to do that. The aircrafts we have, the service we have, the Falcon Gold that we have, all of this contributes to boutique service. So boutique is small, agile, personal that gives the customers a taste of the Arab hospitality. So that's what we mean by the boutique. And, in fact, our Bahrain Airport international have just opened the new terminal and it is a boutique terminal which compliments our boutique system that we have created and we've been successfully ... We launched it and actually the passengers feedback is good about it.

John Strickland:

I mean, that boutique approach that you've just described, how does that compliment your home market? Because you're neighboring Saudi Arabia. As I mentioned, we have maybe other Gulf carriers, particularly the low cost carriers for certain region in particular Air Arabia led by a Bahraini I note, Adel Ali. What is the kind of key driver within the Bahraini economy, the point-to-point market in and out of Bahrain and what is your expectation for future? Is it more about business traffic, leisure, bringing in more tourism or within your own network your own level of [inaudible 00:12:36]?

Captain Waleed:

Well, first of all, I think to answer your question I think I need to explain that Bahrain is the national carrier for the Kingdom of Bahrain. So we play an important role in the national economy and Gulf Air contributes to the transportation of passengers in and out of Bahrain to a range of 60 to 70%. So Gulf Air has an important role to support the economy and the requirements and needs of the country. As far as the passengers are concerned, yeah we have a model which is hub and spoke. So Bahrain is our main hub. Our strength is in the market around us because we have the frequency to carry passengers around our area, as well as being an international airline. So we've got that strength. The passengers we carry mainly premium, leisure. Of course, being this close to Saudi Arabia gives us an advantage because of the religious traffic which we participate.

Obviously now things have changed at the moment and slowed down, but usually the pilgrims that goes to Saudi Arabia we have a part of that market which we are very proud to serve. So we serve the millennials who do a lot of traveling. Obviously, who like to see the world. Now things have changed and things have slowed down, but we are hoping looking at the IATA data and the ICAO and how the world economy is being predicted, I think with the vaccination ramping up I think we should see the lights of the end of the tunnel soon, hopefully.

John Strickland:

And just to get all the competitive dynamics, I mean, how do you look at the different kinds of competition? I mean, you are about to [inaudible 00:14:50] just about the setup developing further your partnership with Etihad as another hub carrier in Abu Dhabi, but inevitably you face competition for a number of global flames with Qatar and Emirates, and on the other hand, regionally, as I said, with low cost carriers. How do you see those dynamics? And do you see maybe low cost in particular being a challenge because it's a very particular kind of model or do you believe that something that you are able to sustain with your own business model?

Captain Waleed:

I think we're comfortable with our business model. And I think there is different market for every carrier and the way they want to operate. We certainly have our niche markets. We are able to provide different fares to cater for different passenger requirements, but we have been in the area for more than 71 years as Gulf Air and we'll continue to exist. What we have done, you mentioned Etihad. So yeah, we are actually have a strategy nowadays of working with our neighbors and completing each other rather than flat-out competition. So we have learned, especially with the pandemic, that working with our neighbors would be the way to move forward in supporting each other on these hard and difficult times. So we have agreements with some of the airlines around us and Etihad you must have noticed it in the news that we signed an agreement with them, strategic commercial cooperation agreement. So the market will cater for different requirements and it doesn't matter which part of the world you are in.

John Strickland:

And in terms of the actual fleet to support this, I mentioned what I recalled back to the era when Gulf Air was taking delivery [inaudible 00:16:56] Lockheed Tristars, very large wide bodied aircraft. You've had 707s in the fleet. More recently, A330s, A340s, but we see many airlines change indeed. Boeing is bouncing us its strategy of development of smaller aircraft for point to point and you now have a sizeable fleet of 787s, but I think what I find very interesting is the evolution on the Airbus side from the A320 which, of course, began life really as a short-haul vehicle. It increased in size with the 321, but now with the new versions with Neo and the LR and the XLR coming, it's a much more adaptable aircraft. Tell us a bit more about your feelings about fleet and in particular, that evolution with Airbus. I mean, you've flown these aircraft yourself. You're a pilot. How do you see this evolution taking place? What would it mean for Gulf Air in your development, in your network strategy, Waleed?

Captain Waleed:

I think the evolution in aviation has given the airlines the ability to cater for their requirements and their needs. We started receiving the 787s, the Dreamliners replacing the 330s, the Airbuses, and it was the right choice for us for the long-haul and in the future hopefully long-haul and ultra-long-haul. Same goes for Airbus; the 320s and 21s are a good product. They Neos are good product. We are able to fly more clean airplanes. They reduce the carbon emission and they are very efficient in fuel. We're looking at 15 to 20% with these newer airplanes. As far as the 320s and 21s LRs, they are the right product for us. We utilize the Airbus 321LR. The first in the region to have sleeper seats. We utilize them to fly, for example, to Paris and Frankfurt. We have them fly to the Maldives.

So we fit them on the areas where we think they will do really well. The smaller version, the 320s, we use them for closer network, but we have a lot of frequencies as well all around our area. And they seems to be the right airplane efficiency wise. The 787 as well gives us good saving. And we are very happy with these airplanes. We looked at the bio fuel. I don't know how much you heard about it, but our fly past and the Formula 1 was actually done on biofuel. And that was in line with the Formula 1 being more of a green sport. So we kind of supported and contributed to that. So these new airplanes gives us much more advantage than what we had in the past. And they are atmosphere friendly, fuel friendly, and plenty of comfort, plenty of entertainment for the passengers.

I mean, I love the fact that the 787 when you do long-haul they don't obviously end up ... Some people used to get dryness that could lead to perhaps gentle or small headaches and so forth. These airplanes nowadays are so good. The pressurization is very efficient. So you don't get fatigued and tired when you reach your destination. Our airplanes have 26 sleeper seats and each seat a passenger would have his own zone and his own privacy. So, yeah it was the right thing for Gulf Air to evolve and utilize the latest technology available in the market and our passengers love the change.

John Strickland:

And just thinking again both of the technical capability of these aircraft, and you mentioned you're already flying 321LRs through to places like Paris, the technical ability of his aircraft to fly really long range and the changing world which we don't yet know the final outcome because of COVID; can you imagine you will look at maybe some different network points maybe further afield? Not just because the aircraft can physically do it, but because it's allowing you to do something with lower risk because it's a smaller capacity and a much more efficient so the cost exposure is reduced as well.

Captain Waleed:

Absolutely. I mean, if you have these three types, the 320neo and 21LR and the 787, it gives you a different range to capture the markets as far as Bahrain is concerned. It's all related to the distance that we need to fly. And, of course, when you start a new service you don't want to put the biggest aircraft on the surface. There is a period of time where you're starting to ramp up and the market recognize your services. So it's a nice way to ramp up. And to be honest with you, we have swapped both ways. We have swapped 321s when the bookings are strong. We replaced them with the 787 and we have done the opposite. So these different types with the longer range gives us the ability to evolve with the market needs at different times of the year.

So it is very important for us as Gulf Air to be able to provide the boutique service on, for example, the long-haul or the short-haul and swap these airplanes effectively. So it gives us agility in the market and the passengers like it. It gives them seamless way of traveling with these different products.

John Strickland:

Oh, certainly. Within the cabin mix, Waleed, one challenge that many airlines are going to be wrestling with right now is the question of business class travel. Of course, there's very little of it right now. Indeed there's very little long-haul operation for most airlines currently, but the big debate is how much business travel come back? I mean, my hypothesis is that maybe you are better placed to some airlines. And I think of some of the European airlines with their corporate clients from different parts of the economy, I see greater exposure, but I'm wondering, thinking about the culture of the Middle East, the Arabic culture and certain customer segments if there are enough people who, regardless of this economic shock of COVID, will always want to travel in a business class environment. Is that a reasonable hypothesis for them putting forward now, Waleed? Do you feel you have a better opportunity to protect those business flows or do you feel exposed that you're going to be scratching your head trying to find out how to fill those business class seats in future?

Captain Waleed:

Well, to be honest with you, we are unique. We have our own size and our size fits the markets we are serving. We do not fly airplanes with a hundred plus or close to that in business class. We have just the right size of business class. And our business class have been very popular throughout and it remains quite strong, but we do not face that challenge like the other airlines who have huge capacity. I mean, I flew for example, on a 380. I think it was UK to U.S. with one of the carriers and I think the business class was something like 106 seats in the upper deck. We don't have those challenges because of our right seats, so. And our 787 we've got 16 of them. And the LRs 321s we have 16. So 16 and 26 should not be really difficult to fill. So we are at the right size for this pandemic if you want to call it, but, yeah. So we're comfortable with the size we are and the number of seats we have.

John Strickland:

Waleed, I just wanted to ask you one question. It's been reported that you canceled orders for the Airbus A220. I know they were ordered when it was still the Bombardier C series. This aircraft which really started life, of course, as a regional jet has evolved into something which seems to me to offer some amazing capability. It could fly quite long range. The 300 version I believe is going to be able to handle up to 160 passengers with the same improving efficiency that we've seen on larger aircraft like the Airbus family. Do you imagine you could come back to looking at this aircraft again at some point in the future?

Captain Waleed:

We are very comfortable with the schedule and the orders we have at the moment in our books. And the deliveries of the Airbuses will continue till 2025. So we are very comfortable with what we have. However, in the aviation world, you never say yes or no because things change all the time. But, for the moment, we are very confident that the choices we have made are the right choices to accommodate and keep us in the markets we need to be in, but the future is always out there for everyone to consider and change their mind or their position, but at the moment, we are very happy with our order. Thank you.

John Strickland:

Good to understand that. I'm sure Airbus will be keeping in close contact with you in the years ahead on that part of that portfolio.

Captain Waleed:

I'm sure we have a good relation with Airbus and with Boeing and we are in communication with them all the time. They keep updating us with the latest in their products and so on. And if we one day see that we require to alter any of our orders, everything could be reconsidered. So let's see what the future holds.

John Strickland:

We're getting close to our finishing time, unfortunately, Waleed, but just another quick couple of questions for you. Another aspect of change, which was happening already, but it's going to happen I think even more due to the pandemic is the use of digital technology both in terms of what is done with customers, what is done in terms of airline processes. And I'm thinking of your neighbor again, Saudi Arabia. I know when I've talked to people in the industry in Saudi they talk about the millennials. A large part of the Saudi population they're all very tech savvy. You mentioned that millennials are a key part of your clientele and your access to parts to the Saudi market. How do you see this role of digital and it's importancy in all aspects of your business and going forward?

Captain Waleed:

Well, digitalization is an important part of our existence and moving forward. So customer experience is an important part of our business. So we have done a lot of improvements in our digital part starting ... For example, I can use our phone app. Our phone app is very user friendly. The millenniums all are aces in using their phones and the different applications for the different businesses they come in touch with, and Gulf Air is no different. So we have just launched the chatbot, the mobile app, and we continue revolving and improving our digital part of the business. And I think that is very important to capture the millennial part of the business or the segment. So we keep improving our product, but you are absolutely right. Digital world is going to be ... There is no going back. The digital world is going full speed ahead and we either catch up and be part of it or you'll be left behind. So we respect that in Gulf Air and digitally we are getting more and more advanced as time goes on.

John Strickland:

That is good to hear. Well, Waleed, I think we're almost out of time. It's been a pleasure to talk with you today to hear where Gulf Air is at this point in time. It sounds like you're doing as well as anybody in this rather mysterious, is one way of putting it, time we find ourselves in with this COVID pandemic and how long it's going to last and hit us. So thanks very much for talking to us today. I wish you all the best in your continued development of Gulf Air. So Captain Waleed Al Alawi, Thank you very much indeed.

Captain Waleed:

Thank you very much. It's been a pleasure to see you and have this conversation with you. Hopefully we meet up soon.

John Strickland:

I hope so.

Christine Sroba:

(silence) CAPALive March took a deep dive look into restoring travel in an environmentally sustainable and responsible way. Airlines around the world have used the downtime caused by COVID-19 to reevaluate their carbon footprint with many announcing a commitment to net zero carbon emissions by 2050.

Peter Harbison:

Finding a balance between survival of the world and survival of the aviation and travel industry. Finding that balance is not an easy equation. One is an existential threat and the other one is a threat to our existence.

Eamonn Brennan:

One year beforehand in 2019, CO2 was growing at twice the rate in Europe of traffic. So if traffic is 3%, CO2 was growing 6%. This just shows you that we're really in a position in Europe to give direct routings. Because there's no traffic, you can really get CO2 down. Which just really shows we need to think [inaudible 00:32:51] European sky.

Barbara van Koppen:

The best way to move forward is to implement those measures, actions, that truly contribute to fewer CO2 emissions. So in that respect fleet renewal and the use of [SAF 00:33:07] are simply keen for our future strategy.

Christine Sroba:

If you missed any of these sessions, there'll be available for our CAPA members by the news alerts available on our CAPA TV website so keep watching and don't forget to share your thoughts on social media with the #CAPALive.

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