Airline Leader Interview, BermudAir, CEO, Adam Scott

Transcript

Rich Maslen:So Adam, we heard from you earlier on, you're having a lot of time on stage at the moment, which is quite right really, because as an airline you've done the journey of startup stage, and in the last couple of months you've, you've taken that next step forward with a fleet order. So I think it's a really good and opportune time to actually look at the business model, look where you are with the business, look what you've learned over the last few years and where this new platform will take you with a new aircraft and a new development. So I think to start with is, how are you doing? Starting a business, it looks great, it sounds great, but from— we all know the concerns and the complexities within aviation.

Adam Scott:Yeah.

Rich Maslen:You know, how do you feel a couple of years on now into the business of running the airline?

Adam Scott:Quite a few more gray hairs, but generally, no, I feel, I feel really great. I feel, I think I feel really pumped for what we're doing. Very proud of what the team has accomplished so far. Even more excited about what the future holds for us. You know, you rightly point out a lot of lessons learned. Business has pivoted from, you know, one idea to another, but what we've taken on board is really the ability, and, and I think we've almost mastered the art of pivoting and getting things done as quickly as possible. So I really do believe our team is very, very entrepreneurial. So when we see an opportunity, you know, I tell people, put your hands up, let's make it happen. We launched our holidays platform in literally 2 weeks. When we did our— when we launched our app, we did it from, you know, soup to nuts in less than a month. You know, when we see opportunities, one of our more recent route launches to South Caicos, you know, from the minute I had the first phone call to the minute we were announcing it, You know, it was a matter of weeks. I think it was about 4 weeks. And so we're very agile. We're very creative. But I think it's that ability to move, to pivot, and then to look at opportunities in real time rather than taking ages. I think that's the secret sauce for us.

Rich Maslen:I think we'll go on in a little while to talk about the scale of the business and the size of the business and how that works. Let's just rewind a little back to the start, back to, you know, it's a busy marketplace across the area. What is it that you saw that you really thought by bringing in a new focused airline would actually deliver value where the established carriers were missing the opportunity or just, you know, couldn't offer the right service?

Adam Scott:I think for me it was always 2 critical things. It was Having the right-sized aircraft and then having the right frequency so that we're relevant for our market. Launching in Bermuda, it was— Bermuda, again, I mentioned before, it's a unique market. 40% of the traffic is outbound, but it has a really nice split between high-end leisure, business travelers. Bermuda is the center of the reinsurance industry, and then it has a very wealthy populace that They get what we call rock fever, and they need to get off the island. They need to go to Orlando, to the factory outlet malls, do whatever else. They need to go to the restaurants and get off. So, you know, our— the opportunity there was to provide year-round connectivity to the island, to provide a better experience, but also to connect the island with more point-to-point markets where, you know, historically to get to Bermuda was a complete nightmare. I You know, you had to go through a hub, you had to do this, that, the other thing. And so there was a real opportunity to bring in these point-to-point markets with the right-sized aircraft. And that's what we really see is sort of the long-term opportunity in the Caribbean. You know, to get to Anguilla now, you know, we offer a service that takes literally less than half the time of our competitor. And it all— that, that model totally makes sense for them. But our opportunity is to offer something that is drastically better for those individuals that are originating out of, you know, Boston, Newark, or Baltimore, for example. And so that's where, again, you know, we, we see the, the opportunity to scale. And, you know, in Bermuda as well, when it first— when we first launched, it was providing that experience that was, you know, that was a little step above, a little bit more boutique, a little bit more— you know, we like to say the moment you get on the aircraft, you feel like you're actually in the destination.

Rich Maslen:Let's talk a bit about that, that sort of passenger experience, because quite easily, you know, the big US majors, if they wanted to, could outprice you out of the business quite quickly. You know, they can subsidize through their wider networks if they really felt the need to do that. You know, you don't want to turn it into a price war. You need to be able to ensure that you're offering something to the passengers that is something that they really want. So, you know, how do you differentiate that, and how do you ensure in the longer term that you're building loyalty with your customers through your product?

Adam Scott:So I'm going to answer that in reverse order, because our customer loyalty is 89%. Our NPS has been in the 70s for the last 6 months. So, you know, whatever we're doing, we're doing it right. I think the, the product on board, it's relatively simple and straightforward. It is friendly staff that smile at their customers, that welcome you on board. You know, we have a pretty straightforward product, you know, in economy and business. We'll soon be introducing a premium as well. But, you know, it's, it's Just a few little things. You know, you get your Dark and Stormy, which is the national drink of Bermuda, in a glass. So a little porteresque, I guess. And that is something that people really, you know, they value that. It's more of the island experience rather than, you know, what everybody's sort of accustomed to. And they both work, but they both work for different times and for different people. I'm a big fan of what we do. And, you know, it's like when I get on one of my aircraft, one of our aircraft, I feel completely at ease even though I'm kind of working because people are watching what I'm doing. It's, it's a, it's a completely different experience.

Rich Maslen:You know, a bit about the move to bring the premium product in now. Obviously the new aircraft you're receiving will help with that as well, but what's been the driver of that? Because You know, some airlines are fully committed to bringing premium economy, and others, it's not something that they see a real value for. How does that work for you?

Adam Scott:I think our markets are very premium markets, and the product that we have, the product that we've developed, is very well received, you know, and people, people pay more for it. And even things like, despite the fact that as of right now we don't have Wi-Fi, you we don't have certain things, IFE, that others have. The actual experience, you know, I think wins. And so, you know, that's why we have, you know, we've got great, you know, record load factors. We've got, you know, record NPS and customer loyalty. I think the opportunity for premium is really to extract some more value, to better segment, you know, what the What, what people are looking for. But what we see in our markets, especially down into the Caribbean, people are looking for that direct service. People are looking for, you know, a premium service. You know, most of these travelers are going on their holidays. They've been, you know, focused on going and staying in one of these gorgeous resorts on one of these beautiful islands. And, and people now, you know, are ready and willing to pay a little extra for, for more of a premium experience.

Rich Maslen:Hey everybody, we have got Slido there, remember. So if you do have any questions that you'd like to ask Adam, please put them through Slido and we'll try and, try and ask some of those. I want to talk a bit about technology. Technology is a— it can be a benefit and a challenge for a smaller operator. You can perhaps move more quickly, but sometimes it's harder to be able to hit the cost levels that obviously the bigger airlines can have with the scale. What's your view in bringing technology into supporting the operation of the business? Are you a big advocate for it, or are you someone that's a bit more tentative and like to see others, how they're developing and incorporated after?

Adam Scott:Great question. So I'm a huge proponent of it. I was, on a personal note, I was a bit of a late adopter for AI, and A few months ago, one of my guys came into my office and he sat down. He calls me Chief. He said, Chief, I got to talk to you. I said, okay, what are you going to tell me about? He said, AI. He said, Adam, whatever you do, stop signing up for subscriptions for this, that, and the other thing because we don't need to do that anymore. And then he went on and he said, by the end of the year, you know, we've got this beautiful, nice new office in Hamilton, and he said, by the end of the year, we don't need all these desks. And I thought, well, okay. Anyway, during the course of that conversation, he had asked me upfront, you know, what was one program that I use on a regular basis, and it was DocuSign. And by the end of the conversation, he turned his laptop around to me and he showed me Adam's personalized thing, whatever else. I own the IP for it and everything.

Rich Maslen:That's amazing.

Adam Scott:Amazing. Anyway, I've actually used that in everything we do now. And I actually had my first holiday a few weeks ago to Western Canada, and it was my first ChatGPT holiday, and literally everything worked. It was amazing. But as an airline, you know, it has, it has real consequential value to us. You know, we're, we're doubling our fleet size by the end of the year. I don't spend $100,000 on legal fees checking a lease, you know, our team puts it through AI. And now our legal fees are literally a tiny fraction of what they used to be. We had, you know, our crew scheduling, you know, all of a sudden there was, you know, 2, 3, 4 people doing this and still complaining they don't have the right software for it. And, you know, looking at another service provider for it. for it. And, um, one of my guys said, actually, we can do that ourselves. And we did it ourselves. And, um, and we have a fantastic solution that, you know, that, that we've built, um, using a lot of it using AI. Uh, so we're doing that, you know, we're, we're using that and, and, and, um, uh, and applying it. We had a— we just launched our own ground servicing. Um, uh, my dearest friends at, um, at what used to be the monopoly ground provider in Bermuda. I got a little bit frustrated with them because our first year of operation, when we only had 2 aircraft, they managed to puncture a hole in both of the aircraft, like, simultaneously. And just before we launched our ground handling the 1st of September, they did it again. They managed to shear a door, a cargo door, off of our aircraft. Anyway, all of that aside, you know, we have We've managed to put something together very quick, you know, using technology to provide, you know, real-time what's happening with the aircraft, you know, what's happening with ground services, what's happening with catering. You know, it's phenomenal. And I looked at this software on the computer, and I was like, that's amazing. Everybody's using it. And somebody— and it took a couple of days to do this.

Rich Maslen:Yeah.

Adam Scott:And then somebody said, you know, it would be really cool if we could have that on our phone. Well, 3 hours later, it was optimized for people's mobile devices. You know, it's that kind of, you know, real-world application. And, you know, so everything that we do— we built an airline in 7 months. You know, right now we're able to do these things, to spin them around. And again, I think it's the— it speaks to the quality of The people that we have and their entrepreneurial spirit. But I wholeheartedly embrace it, and I say to people, I say to our team, if you can, you know, if you can find a great application of this technology or you can do something, you know, put your hand up. Don't worry about, you know, downsizing or anything else. Because going back to that conversation when that gentleman walked into my office and said that to me, I thought actually what the real opportunity there is is not to reduce headcount, but it's to keep headcount stable as we grow. And that's where you start to see the real value. And so as we're now going from 4 aircraft to 7 or 8 by the end of this year, and then we get to 20, you know, up to 20 A220s in the future, you know, we've got this, this cost base, this operational infrastructure, but now we can really scale it. And that's the opportunity.

Rich Maslen:It's quite clear you've got a good team around you that, you know, are very strong. You know, most airlines' biggest problem they have is finding the resources, finding good trained staff that they can put in place. So obviously technology will help support that rise and growth for the industry, but do you have any concerns moving forward about being able to get the same level of workforce and also maintaining that model that you have now? with all your staff when it's twice the size?

Adam Scott:I don't, I don't really— I, we don't have those issues. I mean, it is difficult sometimes to get people to, to relocate to Bermuda, for example, where we have our HQ, because it is a very, you know, it's a very high-cost environment. And especially if, you know, individuals have families and children, they want to go to private school. and everything else, it gets very costly. That being said, I think that— I think when we go out and we talk to people who want to join us, you know, we're able to— we're able to attract, you know, fantastic individuals. You know, one of them is somewhere here, John Pepper. Managed to convince him to come over from Allegiant. And I think the attractiveness of the proposition is you can come to our airline, you can make a real difference. And You're not just going to be a number. We have a very flat structure. You know, we have— I have cabin crew that, you know, walk into my office and say, Adam, I've had this idea. And, you know, a couple days later, if it's a good one, it's implemented. And so I think we're really agile on that front. And so I think, you know, as we grow, there's going to be some issues, you know, looking at maybe how we expand crew bases. You know, I think there's a real, a real opportunity for us to develop something in the States as well. But in certain— certainly in some of our island markets, there's opportunities to do things there as well. But we've been very lucky. And even in terms of cabin crew and pilots, you know, I think there's a big attractiveness for those guys and gals to be in Bermuda. And, and certainly we have very, very low attrition on, on that front. So it's— I feel very positive about it.

Rich Maslen:Let's talk now about the, the big change that's coming with the fleet. I think a few people know this year's Farnborough Airshow was a little bit quiet in terms of orders, so there was a lot of attention that you managed to create when you announced the the Airbus A220 order. You've made that step up from the Embraers now that have set you on the road. They've made you the airline you are currently. Would you say maybe you've outgrown them now and the A220-300 gives you that opportunity to now take that leap into the next area, grow the markets more? You obviously looked at the E2 at the same time as you ordered the Airbus. You know, what made the difference to go with the A220?

Adam Scott:Well, I have to start by saying Embraer have been a fantastic partner for us. And as you alluded to there, you know, we're here because of our partnership with Embraer, and that partnership will survive and carry on for a number of years still. I think that, you know, when we set out, we had a Our business model has evolved. You know, we started out with the 175s. You know, we've graduated to the 190s. You know, the next step is going to be something in that 130-odd seat space. You know, I have had the benefit of a legacy order with Airbus, so so so that that that's part of you know that that that move. But I also think. For what we're trying to do and where we're taking this, you know, the A220 is the right machine for the long-term strategy. And, you know, it's a combination of things, but one thing that's really important to me is that our staff are, you know, our staff are really pleased with what they have. And, you know, we have a differentiated level of service, you know. With the A220, we can do longer sectors, we can provide greater comfort to our staff on board as well, you know, but, but it boils down to the economics for us. And again, you know, we— I have the benefit of, of, of a legacy order. I have the benefit of what we see and where we see the opportunity to take this. And, and the A220 is the machine for us.

Rich Maslen:Is there, is there opportunity through the commonality of it to consider the smaller 100, or even if You know, Airbus does go ahead with the pressure from AirAsia to launch the 500, a stretched version of the A220-300. Are there opportunities for you to have that more, you know, varied fleet to serve more markets better?

Adam Scott:I would say, I would say that potentially, and I would never say never, because if you asked me 3 years ago what our business was going to be, You know, it would have been a lot different answer than where we are today. And again, that's us being nimble and being able to pivot. But I think that the— again, it goes back to what I said in the beginning. When we launched BermudAir, it was always about having the right-sized aircraft for the markets and being able to provide the right frequencies. And I think that what we've learned, what we've seen We want to have the right size machine, and I think the 300 is really the optimal scenario. The 100, you know, has some really unique performance characteristics, so I can see, you know, a future with that. I think in terms of a bigger machine, the 500, you know, maybe one day in the future, but I think right now, you know, where we, where we excel is where Markets exist that require 100 to 130-seat aircraft, you know, and we're, we're not competing with 180-seat aircraft. And, and so I think we've got— I think the 300 is just the right machine for where we've come from and where we're going right now.

Rich Maslen:Now, you joined us in Charleston for our event there, and we were fortunate enough to have a little tour around the Dreamliner line there. Is that something one day, when you've sort of seen an aircraft like that, do you think one day we could be there for a few little niche routes into, into Europe and, you know, across the Pacific maybe?

Adam Scott:Not a chance. I mean, I say that humbly. If, if, if one day the airline gets to the point where we have Dreamliners, fantastic, but I want to be on a boat by that point.

Rich Maslen:I don't think— I don't blame her in that situation. What does the A220— seriously, what does the A220 in simple form offer that the Embraer 190 doesn't for you?

Adam Scott:Again, I think it's— I think for us, and we've got a unique set of markets, we've got a unique set of future markets, you know, that we've identified. We've got a few very unique opportunities. which I won't go into too much detail on, but the A220 really is, for us, it's the performance machine that we need. And I say that, you know, there's a lot of markets where the E2 is fantastic. And again, Embraer has been a fantastic partner for us, but for our— where we're going, I'm confident that the A220 is the right decision for us.

Rich Maslen:I guess the next step forward for you now as you sort of build more scale is where you, you put the airline in the future. And in some parts that means working more closely with other airlines to be able to deliver a, a more varied product, maybe providing feed to, to others to, to fly a longer haul. Um, when do you start making those decisions of partners and perhaps losing the control of the customer differentiation of products? that it perhaps causes a little bit of damage to the brand you're creating?

Adam Scott:Good question. I think we want to— we're out there talking with our first real potential partners now, and we've been doing it for the last year. But I think as Mercedes, you know, said with Arajet, it was, you know, they're in their 4th year now. We're a year behind them, so I was kind of reassured that we're not too late at this. Nor are we too early. I think that— I believe that, you know, eventually it would make a lot of sense for us to have a big network partner because again, you know, our home community Bermuda, people want to connect onwards and beyond. So, you know, that would be really helpful. But I think there's also a lot of smaller airlines that I'd like to see us partner with as well. connectivity intra-Caribbean. You know, again, talking with Trevor, talking with, you know, smaller airlines, you know, that are connecting, you know, onward from Anguilla to St. Barts, for example, and, and places like that. But, but certainly there's no end, I think, to the opportunities that exist. And I think that, again, you know, one of the, one of the discussions on the earlier panel was There's, you know, low-cost, there's the hybrid guys, there's the legacy guys. I've never thought of or been asked what we are. I'm just thinking about it out loud now, but I think we can fit in very nicely. I think we, you know, we've built a really great brand, which leads to this question of, you know, are we gonna always be BermudAir, or, you know, You know, is there— is there— are there other things that we need to think about as we continue to grow? But I think, you know, as long as we have— as long as— I just think there's a lot of opportunity for partnerships and certainly for alliances and providing a better connection and a better, you know, end-to-end product.

Rich Maslen:As we said before, you're on an early stage still of the story of the airline. It's still young. Compared with most others in the marketplace. Just to finish off, if you were to go back to the month ahead of launching the airline, what would you perhaps do differently, or what would you perhaps tell that, you know, that version of you to help them through that process?

Adam Scott:Look, I, I had an immediate response. Which may have solicited some laughter, but I chose not to say it. What I would have done differently, I would have had, you know, I would have, I would have definitely not launched with 2 aircraft. I would have launched with, with, with a hot spare. I know that sounds egregious for a little airline, but when you're operating in places like Bermuda, you know, it's important. And when you're operating, when you don't control your whole destiny, you know, ground operating, ground handling, etc., These things are really, you know, they're important. It also means that we can do other things. You know, we can do charters, we can do this and the other thing. And, you know, we do our own cargo now. We're, we're really masters of our own destiny in Bermuda. And so I think we'll, we'll see that going forward. But I think, you know, back in the day, I don't really regret anything that we've done. I— we, we've learned a lot. You know, we made some mistakes along the way, but the team sort of, you know, got together, identified the issue, made the little pivot, and made it happen really quickly. So again, as long as we retain that agility and we retain that entrepreneurial, like, drive, and if we can, if we can maintain the pride that our team has to throughout the organization, I'm very confident about where the future is going to take us.

Rich Maslen:Adam, you've come a long way with the business, and hopefully in 4 or 5 years' time, the airline will emerge and grow and carry on. So we wish you every success with that and hope this transition stage with the new aircraft coming in will, will be the successful platform to push the airline further. So please, everybody, thank you. Can you thank Adam?

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