Airline Leader Interview Aegean Airlines Deputy CEO & CFO Michalis Kouveliotis
Michalis Kouveliotis is a seasoned executive with over three decades of experience in the aviation and business sectors. He graduated from the Athens University of Economics and Business in 1987 and has been an integral part of the Vassilakis Group for 32 years. He has been with AEGEAN since its inception 25 years ago and he currently serves as Deputy CEO , Chief Financial Officer (CFO), and a member of the Sustainability Committee. He is also the Chairman of the Board of Directors and CEO of Olympic Air, a subsidiary of AEGEAN dedicated with the domestic network operations of the Group. Michalis has played a pivotal role in driving strategic initiatives, financial growth, and sustainability within the organizations he represents.
Transcript
Jens Flottau:People are still making their way back in, but we're going to get started here to stay roughly on time. Welcome to the stage, Michalis Kouveliotis, Deputy CEO and Chief Financial Officer of Aegean Airlines. First of all, congratulations on the award yesterday.
Michalis Kouveliotis:Thank you very much.
Jens Flottau:For the regional airline, but I was wondering, you're not really only a regional airline, right? What are you?
Michalis Kouveliotis:What does regional airline mean? Well, I'm thinking of ATRs. We're not a long-haul carrier. Yes, we fly ATRs also, so you can— I don't know why we got this award for our ATR operation. Listen, we are operating the narrowbodies and the ATRs, so we are connecting the wide circle that These aircraft can operate.
Jens Flottau:But your model is much broader than that, right?
Michalis Kouveliotis:It is. It is.
Jens Flottau:You've been with the airline for, if I counted right, 21 years. You've been the CFO for all of that time?
Michalis Kouveliotis:Oh, yes. Trust me, it was not boring. Only one week, I remember it, August 2008, that was the only— I wouldn't say boring, but the week that it was quite quiet. All the rest years were like crazy, and this is what I like about aviation, to be honest.
Jens Flottau:So you've been, as I said, 21 years the CFO. You are now the Deputy CEO since like 3 months or so?
Jens Flottau:When are you going to be CEO?
Michalis Kouveliotis:I don't know.
Jens Flottau:Anyway, tell us about— I mean, Aegean is operating in a difficult market. It's seasonal, it's leisure-focused, you've got lots of competition from low-cost carriers, you've got a big hub airline not too far away, Turkish Airlines, but still Aegean has been a big success over the many years. Can you tell us why you were so successful? What were the factors, the main drivers?
Michalis Kouveliotis:As Mr. Ghazi said earlier, the aviation industry, being in an airline, it's one of the most, I don't know, difficult or bad or whatever investments. Anyway, we are in a position that we can operate and grow and actually generate profits. We feel comfortable with that and we continue that growth. Now, our market is mainly a leisure market. We are growing, we are investing a lot on that. In parallel, we are focusing on our hub in Athens and we have a lot of connecting passengers. You mentioned earlier about Istanbul. We consider Istanbul or Athens actually, our hub in Athens as alternative smaller, of course, option for passengers to avoid the huge mega hubs and have a different experience if they want to connect from east to west or from north to south or whatever. This is working. We have invested on that for many years and it's going well. More than 25% of our passengers are connecting passengers.
Jens Flottau:Why is it working? Is it because you've been cautious? A lot of airlines have expanded. Rapidly and have paid a big price for it.
Michalis Kouveliotis:I wouldn't say we have expanded rapidly because—
Jens Flottau:No, you haven't, but many others have made that mistake.
Michalis Kouveliotis:Exactly. We, in our DNA, we are a relatively conservative organization. We don't want huge expansion plans. We want to grow organically at a pace that we can control. We can feel comfortable that there will not be any problems, hiccups, bumps that we cannot really do something with that. This is the way we're going. We compete with everyone, from ultra-low-cost carriers to full-service carriers. We compete successfully with them for all of these years. One of the— I wouldn't say secrets because it's The reality for us. Our team, our people are a key factor for our success. I am with Aegean for 21 years and I am one of the newbies as an executive in the airline. We have an excellent method of communicating and we resolve things very easily and very effectively. All of these years. Really, this is one of our— what I see our pluses as an airline.
Jens Flottau:The top team has been around for a long, long time.
Michalis Kouveliotis:Oh, yes. Okay. We have, as I said yesterday, today, this year, we are celebrating our 25th anniversary. One of our targets is to prepare the new generation, the next team that can really continue that successful path.
Jens Flottau:Do you remember how many aircraft you had when you started 21 years ago?
Michalis Kouveliotis:There were 2 Avro RJ100s when we started.
Michalis Kouveliotis:Yes. The wrong type or whatever in the wrong market, but we have coped with that. We have increased our Avros to 6, and then we have added some 737 Classics and some ATRs, and then we switched Airbus, and here we are now. We have some 83 aircraft in our fleet.
Jens Flottau:You stepped into the role of being de facto the national carrier of Greece after Olympic collapsed. You've taken up the regional operation.
Michalis Kouveliotis:Of Olympic. Olympic was a state-owned problematic airline. They were privatized in 2009. At the very, very wrong timing. They tried to do something, but they have failed. We have acquired Olympic back in 2013. Among other hats I wear, I'm the CEO of Olympic, but whatever that means. Olympic, yes, we are utilizing the brand and subsidiary as a regional turboprop carrier for the Aegean Group.
Jens Flottau:You said you compete with everyone. What does it mean for your cabin? Do you have ultra-low cost or low cost in the back and then you've premium in the front? Can you tell us about how that model works in one aircraft cabin?
Michalis Kouveliotis:Of course, we compete with everyone, especially in each and every route that we fly. There are at least 2 other carriers, at least. I mean, some routes are 3 or 4 other carriers, but the way I see it is, We try and we focus to be successful. We are a full-service carrier, so we differentiate our product and our offering to the customer. We cannot— we're not competing directly. They're very, very, very price-sensitive customers and the low-cost carriers. In parallel, we are proud and we are focusing— we're proud of our cost base and unit costs, and we really want to continue that, and this is one of our top, top efforts. It's a continuous effort, actually.
Jens Flottau:What's your cost level? Can you compare— with whom can you compare yourself?
Michalis Kouveliotis:We are very close with EasyJet.
Jens Flottau:Very close to EasyJet.
Michalis Kouveliotis:That's not an easy thing to—
Jens Flottau:You mentioned obviously your traffic is a lot of— there's a lot of leisure traffic, a high share of leisure traffic. What's the share? Can you tell what the business the share of the business traffic is for you?
Michalis Kouveliotis:Business traffic, business class traffic or business?
Jens Flottau:Business.
Michalis Kouveliotis:Business traffic, I can say that it's not that much because— but it could be around 15% to 20%. It's growing, but it's not the core of our activity.
Jens Flottau:A lot of airlines are saying it hasn't come back since COVID You're less affected by that problem?
Michalis Kouveliotis:Yes, exactly, because Greece as a destination is a leisure market. That's why we have recovered earlier. Greece as a destination, again, it was very attractive and we were very happy that we jumped back to our 2019 figures and passengers and capacity and everything. We continue growing. I also like that we are higher in growth in capacity and passengers and yields and everything. In parallel, the bottom line is also better, significantly better than 2019 levels.
Jens Flottau:How about local demand in general? We all remember the days of the big economic crisis of Greece. Obviously, that's long ago and Greece has recovered, but what has that meant for you as the airline-based That was an issue because Greece was within a financial crisis for 10 years actually.
Michalis Kouveliotis:The local demand, Greeks were not able to travel abroad as they were used to travel in the past. We need to reschedule, reconfigure our target group, and that's why we're a little bit more extroverted offering capacity and offering seats to— and speaking more to our international passengers, and that worked. Now, since 2023, the Greeks have come back and they are still traveling more, and they are reaching back to the pre-crisis levels. This is an add-on for us in order to really see some additional benefits from that too.
Jens Flottau:You talked about the connecting traffic and it being about 25%. Is that right? What are the flows that you're connecting?
Michalis Kouveliotis:As I said, it's from domestic to international or the other way around, and from international to international.
Jens Flottau:The international to international, what's that? Is that Europe to—
Michalis Kouveliotis:For example, from Tel Aviv to the west or from Lebanon to to the West.
Jens Flottau:That's not happening right now, obviously, right?
Michalis Kouveliotis:Yes, actually, it's not happening. That's why I mentioned that. That's because in 2024, we missed that kind of traffic. Israel was one of our best markets, and due to the current situation there, we had a hit on our Revenues from that, but okay, we have managed to replace that traffic with other places.
Jens Flottau:Where did you move capacity?
Michalis Kouveliotis:To the places that we actually focused on in our hub bases, and we have increased frequencies from Athens to other destinations because this year is a— I wouldn't say different year, but we focused on really in routes that have a meaningful bottom line for us. We're not having our regional bases. We have reduced the flights from our regional bases and focus on Athens and Thessaloniki.
Jens Flottau:In Europe, what are your biggest markets? Western Europe, I mean.
Michalis Kouveliotis:France, Germany, UK, Spain, Italy. Of course, Cyprus, we consider Cyprus as our home base. We are the national carrier of Cyprus. These are the key markets.
Jens Flottau:You have a relatively new low-cost carrier in Greece, Sky Express, which has been growing fast. I think they have 27 aircraft right now, so you're not insignificant. How do they affect you?
Michalis Kouveliotis:As I said earlier, we are competing with everyone from BA to Ryanair to whoever. Sky Express is a local player. Yes, they are growing fast. To be honest, I prefer having Sky Express as a competitor versus Ryanair.
Jens Flottau:Why is that? Higher fares?
Michalis Kouveliotis:It's not higher fares. They are speaking, as you mentioned, they have a low low-cost profile, but they are rational in what they're doing, and I believe that there is space and room in the market for 2 local players.
Jens Flottau:I want to talk about your fleet a little bit for a few minutes. You've got a significant number of A321neos coming in, still A320neos. Are they— I assume they're not on time, right?
Michalis Kouveliotis:I cannot complain that much about the delays. I have seen even worse things in the markets, but yes, you're right. Out of the remaining 18 aircraft that we are about to deliver from Airbus, 16 of them are A321s. 4 of them are A321LR version, which are scheduled to be delivered from late '26, '27. 737 onwards, which are about to open new markets for us from Central Africa to India to wherever these aircraft can operate. This is a natural next step for our operations in order to grow our reach.
Jens Flottau:Any engine issues?
Michalis Kouveliotis:Engines. The engines are the engines. Currently, we have some 8 aircraft grounded. Are we happy? Of course not. On the other hand, we are dealing with that. We have taken the measures that we should in order to have the capacity that we needed. We are obviously in very close discussions and negotiations with Pratt to address the problem. I believe that this is an issue that will— because the market in Greece is growing and the competition is growing. Meaning that the capacity they are putting in Greece overall is higher than the one that we could or should place. Why? Because we are missing these aircraft in order to grow at the same pace as the market is growing. We're doing things in that direction too, so I believe you can do too many things. With the GTF issue, I was not expecting, to be honest, for that to last that long. It will take another 1, 2 years at least to normalize, not to be off completely, but it is what it is. We are in the aviation industry and you know.
Jens Flottau:How have you been able to backfill this? Have you taken in more wet leasing or?
Michalis Kouveliotis:A combination of things, extending leases that were expiring. We had 2 ACMI aircraft for the previous summer and rearranging actually some capacity from regional destinations that we're having, brought them back to our core bases and hub in Athens.
Jens Flottau:The share of A321neos versus A321s 20 neos, it's going to increase, as you say, I mean, 16 of the 18 are the larger version of the aircraft. How is that going to change your network? Are you just putting them on existing routes, or are you going into— are you focusing on the largest catchments?
Michalis Kouveliotis:You know, the A321 is a very, very successful aircraft that offers economical, very, very, very good and competitive cost unit cost per seat. In parallel, there are some slot constraints, not some, a lot of slot constraints around Europe. How you can grow your capacity in this—
Jens Flottau:It's your way to grow.
Jens Flottau:How many seats do you have on the aircraft?
Jens Flottau:220.
Michalis Kouveliotis:On the aircraft there.
Jens Flottau:On the A320neo?
Jens Flottau:180.
Jens Flottau:You mentioned the LRs. I was wondering before, preparing for this, whether you would be interested in the XLRs and go true long-haul. Some others are doing it. Air Serbia, for example, they even have A330s.
Michalis Kouveliotis:The XLR, geographically, we are positioned in the southeast of Europe, so the XLR, to be honest, doesn't open new routes and new destinations for us. If the XLR could reach east coast of the US, then it could be an issue. It could be something that we could consider, cannot.
Jens Flottau:It's too far, right?
Jens Flottau:Looking east, are there opportunities? Or south?
Michalis Kouveliotis:As long as it cannot really have a long range, real long range for us, no is the answer. I mean, the XLR is not for us. It's for others. Others, it can work perfectly in their network and their schedules.
Jens Flottau:Is this also company culture that you said you're cautious, you don't want to grow too fast, and many other airlines have been burnt by going into long-haul, having focused on short-haul initially. Is that it, or is it just purely range considerations?
Michalis Kouveliotis:We are considering things, obviously. I mean, we are looking at options and alternatives for our next years, how to grow, either grow organically or through acquisitions or through check if The long-haul market is the one that we could really consider. Obviously, this is something that it's an ongoing thing. On the other hand, decision-taking, it's a completely different thing, which is not yet— we're not yet there.
Jens Flottau:It's something you look at for—
Michalis Kouveliotis:Yes, of course.
Jens Flottau:How about the ATRs? Are they steady? Are you looking at replacing them at some point?
Michalis Kouveliotis:The ATRs are the workhorse of our operations for our regional smaller islands that we operate. They are staying. To be honest, there is no very something alternative that you could really consider. The ATRs are here to stay.
Jens Flottau:I looked it up. They're not that old anyway, right?
Michalis Kouveliotis:They're not?
Jens Flottau:They are not that old.
Michalis Kouveliotis:Anyway, we are adding some brand new aircraft. We are trying to have a mix of older and, you know, newer aircraft in our fleet.
Jens Flottau:So one completely different topic, and you really have to explain this to me. You invested into Volotea, and that didn't seem to be a very obvious move to me because, you know, you're here in Greece. They're a Spanish low-cost carrier. Can you explain why you did it?
Michalis Kouveliotis:First of all, we as Aegean are one of the very few independent and healthy parallel airlines in Europe, where the European market is very highly fragmented and the consolidation is ongoing but not running at the pace as in the US and stuff. Now, Volotea, its investment is a minority investment that for us, we see it as an opportunity to expand our reach in the market. They are not competing with us. They have a different, completely different business model, and we can learn from their model and we can take advantages from their model. We are cooperating with Volotea for quite some time. We have a codeshare agreement with them, and this is going to grow even further. They can really be assisting to our operations, especially in the regional bases in Athens, in Greece, sorry, where really there is a lot of traffic out there and our market share is very low. This investment could work under circumstances and could really— we expect some synergies from all this situation and investment.
Jens Flottau:Do you think that in a few years, if consolidation continues, Aegean itself has to become part of a bigger group, or are you confident that you can continue your success as an independent airline?
Michalis Kouveliotis:We have our eyes and ears open. We are monitoring the market and we are considering whatever alternative and option is out there.
Jens Flottau:That means what exactly?
Michalis Kouveliotis:A lot and nothing in parallel.
Jens Flottau:Michalis, thank you very much. We both have to catch a flight, so I'm going to cut it off here. Thank you very much for the presentation. Thank you for being on the stage with me, and thank you for listening.
Michalis Kouveliotis:Thank you.
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