Boardroom Conversation - The end of cyclicality? Managing downturns, acting rationally and not waiting for recovery

Transcript

Alex de Gunten:Thank you to CAPA and to Air Transport World for the invitation. It's great to be here again after actually a number of years that I haven't been to the European event and the world event. And we have a great panel today. Actually, it's a panel that was upgraded since yesterday. As we now have an Air Transport World Champion on the panel, so congratulations for your award.

Martin Gauss:Thank you.

Alex de Gunten:And before we start, I was just curious, with everything that's happened with the strike, the general strike, how many flew into Portugal to be here? How many of the attendees right now had to fly in to come in? If you can raise your hands. So the vast majority. How many had to change their travel plans because of the strike?

Commentator:None?

Alex de Gunten:Okay, well, that invalidates my next question, which was going to be how well did the industry do at managing, I guess, The challenge and the uncertainty. So good to hear. Well, I obviously— this doesn't count the ones that were not able to make it and, and are not here to vote, of course. Um, we've since, you know, we have a great panel. I'm not going to go into all the, the CVs. You have them on the app. You can look at it. All very accomplished individuals. But we thought that just to try to make it a little bit more personal with the audience, I would ask— I'm going to ask each of them something about themselves that is not on the CVs, that you're not going to find if you just search. So some qualities that they do maybe after work. I've, you know, maybe somebody moonlights as a firefighter. I had a CEO in a conversation with a CEO, an airline CEO recently, that he mentioned he was a nighttime mixologist, so he liked to prepare drinks, which in this industry with all the crisis is probably a good profession too. Alcohol does help a lot. Starting with that, I'll go from left to right. Martin, anything you want to share?

Martin Gauss:It's not alcohol. In my free time, in COVID actually, started, where I was isolated for quite a while, to look into NFTs, digital art. And then to— I bought it, and then I exchanged in Discord with like-minded people, and I established myself with an anonymous profile as somebody who is discussing and collecting digital NFTs. And it hasn't stopped while the hype has disappeared. But I still feel that this is a nice thing I can do, which is completely off what I normally do.

Alex de Gunten:Interesting. Did you make any money at NFTs?

Martin Gauss:I lost a lot. But there's— it's like I do this outside of work.

Jiri Marek:Absolutely. Great.

Alex de Gunten:Alex?

Alexandre Lefèvre:I'm going to stay on sports. I keep spending more and more time reading about soccer. I've got like a huge— football, sorry. I'm in Europe now. I can say football. I've got a huge passion for Olympique de Marseille, my team. And, you know, like, I'm aging, I'm more busy, I've got kids. But, you know, like, I think on an average day I will spend 1 hour reading about football. And it's getting, it's getting completely out of control, to be honest. But, you know, I'm working on it.

Alex de Gunten:Excellent. Sandy?

Sandy Benoiton:For me, it's sports as well, especially with the kids. I spend most of my time that I get with the kids because every morning, nearly every morning, the only time I get to see them is to bring them for swimming. That's at 5:30 in the morning. Then it's either I'm cycling, running, always doing something during the early mornings. My favorite sport, obviously, is Formula 1. My kids, everything that my kids basically do when I just generally get to drop them off, I sort of get in. get involved in it as well. When they swim, I swim. If they're running, I'm running. We do that together. They also started karting a few years ago, and they also got me into karting as well. When they race, I race. It's become a passion now, but Formula 1 is my absolute favorite sport.

Alex de Gunten:I was going to say, for the swimming, you live in the right place to do it year-round. You have an advantage over some of your neighbors. On both sides, and Jerry.

Jiri Marek:Look, I have to improvise because it was not prepared, and I wanted to talk about my sport as well. But since everybody talk about sport, so I will do something different. So I will put it this way.

Alex de Gunten:Oh please, are you gonna?

Jiri Marek:Minasan konnichiwa. Marikuchi tomo shimasu. Hajimashite, roshimashimasu.

Alex de Gunten:25年前日本で留学しただからちょっとだけ日本語話すことできますからでもまだ下手です忘れてしまいました失礼します。 Wow, wow, that was definitely unexpected.

Sandy Benoiton:Congratulations, congratulations.

Alex de Gunten:Well, now that we know them a little bit better, I mean, you can have drinks with them and talk about all this, all, all their expertise. Um, CAPA did a great summary yesterday of what's happening in the industry, and a lot was said about the change challenges, cyclicality, And so we want— I want to try to focus the conversation a little bit more on the crisis side. And yesterday they also mentioned some eye-opening numbers, at least for me, in terms of that the crisis, the last crisis erased 4 years of growth. That's huge for any industry. That we had 9 years of aircraft deliveries lost. And that 50% more— we have 50% more inactive aircraft today than we had before the pandemic. All of this shows that we are always in a crisis situation, unfortunately, in this industry. We heard yesterday also from Alex Cruz mention the unknown. I think it was in your panel, Martin, talking about The unknown line in the budget. You've gone through a lot in your previous jobs. You just started with Gulf Air. How do you manage? How do you prepare an airline for this uncertainty?

Martin Gauss:I always worked with something which is far in the future, the vision, where you want to get to. If I look at the last 2 jobs, like when I started, This helps because then each year you can do a budget, but I think nobody here has done in the last 5 years a budget which then came true because something happened. If you at least have, and I think all airlines somehow have a vision where they want to go to, it helps to overcome it. You're right, each of us in this industry is faced with challenges they don't know when the year starts. It goes already now for a while if we go through COVID and then the spare parts, the engines, the— and then growth there which you can't take because you don't have the aircraft. Then suddenly competition comes in you probably didn't expect. All of us have that, but I think all of us also know where we want to get to. Nobody's just doing it. That helps also to align with the teams again to say we want to get there in 2030 or in 2035. Let's go through it. It helped in COVID to say we want to get out of COVID and now it helps to say we will overcome engine issues, we'll overcome sustainability issues. I agree, it's very difficult now. You do a budget and then you're 3 months into it and it completely changes and you have to adjust.

Alex de Gunten:How much pressure do you have when you're doing, especially during a crisis, there's a tendency to shut down, to read— at least during COVID there was a tendency to shut down, to cut, to cut costs, to, to, you know, survive during the period. Is this—

Jiri Marek:is—

Alex de Gunten:do you feel looking backwards, would you have done something different in that perspective?

Martin Gauss:I think everybody, when he looks back, says, was that done right? And you would always be able to adjust, but you can't change yesterday, but you can do everything about tomorrow. So take it Take it as a learning. In our industry crisis, I mean, we all live every day, we have, while we speak here, all of us, we have thousands of people in the air. All of us have phones and they might ring and there is something which is then a crisis. Therefore, we are, as airliners, always wired, right? Different to other industries. Therefore, the crisis, which means you have a supply chain crisis or whatever, It's different, and I think if you are in this industry and you grow in this industry, then you learn to live with it, with this constant demand that you have to fix something which is—

Alex de Gunten:Knowing that something's going to go wrong sometime.

Martin Gauss:And then therefore, I think looking at all the airliners on stage over the years, they're all pretty calm. You could have other industries where people would freak out if they would have to deal with one of the problems, right? But we are all calm people and we deal with it. This makes our industry coming out of crisis like the COVID crisis so strong because we are basically in an industry where we deal with different kinds of crisis. Now, for the last years coming out of COVID we will go through it, but we will have other stuff coming which all of us will tackle.

Alex de Gunten:Alex, You look calm over there.

Alexandre Lefèvre:I'm calm.

Alex de Gunten:Canada is calm.

Alexandre Lefèvre:No, I think it's a good point. You know, we, you know, as we started 2025, you know, like, and you heard it, you know, like some, you know, US airlines are like very vocal. We're all expecting 2025 to be the best year in the industry, to be like, you know, long-haul was looking amazing, you know, like transatlantic was looking amazing. And comes February, tariff, and we know what happened. And, you know, like overnight, you know, like US to US to Canada, you know, we saw demand, you know, like dropping by like 30 points, you know, like overnight, just because of, you know, the sentiment and the feeling of Canadians that didn't want to travel to Canada. Has that recovered a little bit? No, I think, yeah, it did recover. No, it did recover, but we see, you know, we still see like a lot of, you know, on the heavy point of sale Canada, you know, flights to the US, we still, you know, have some resistance to go back to the pre-tariff levels. So, you know, that's completely unexpected, and that's the beauty. You know, before working for Air Canada, I was in South America. I left South America thinking, you know, I'm gonna go to Canada, and it's a more like stable country. You know, I'm gonna find, you know, like, you know, a place where I'm gonna be able to do like long-term planning, and everything will be smooth and okay. My God, you know, I joined Air Canada, 2 weeks after we had the MAX, 737 MAX grounding. We had 40 of them, you know, on the ground overnight.

Commentator:Wow.

Alexandre Lefèvre:One year after, we had COVID, and it's, I guess, the beauty of the industry now. I've learned that, and being agile and just react. Just one note, I heard that yesterday and I liked it. Internally, I've stopped making scenarios because you're always wrong. I think we learned that through COVID. We did 1 million scenarios trying to predict which country will reopen first, what kind of new regulation will come, Next. And we were always wrong. So no matter what happened, you know, all the scenarios we had prepared were actually not, you know, the one we needed to implement. So now I think we're in a mode of, I really like what Martin was saying, you know, get that long-term objective, know where you want to go, and you're going to have to adapt and you're going to have to adjust. You know, trying to predict what's going to happen, you know, in our industry is, I think, not what you should be doing. You just need your financials to be ready to Resist, you know, like a crisis. You need your aircraft to be available, your crew to be available, and redirect them, you know, to one direction or the other depending on what the demand is around. So it's adding the flexibility. We have learned that through COVID and will be quite useful in many situations because it's still very volatile out there.

Alex de Gunten:Sandy, your airline, Air Seychelles, is compared to Air Canada a little bit smaller. Is that an advantage or a disadvantage?

Sandy Benoiton:Well, it depends. It depends. I mean, as a small island nation, we have big small island problem, basically. Just to go to touch a little bit on the budget. Budget is basically the document that we have internally right now when we get the approval from the board. We just actually— that was last week. It's got the most caveat. The document's got the most caveat is definitely the budget because there's so many lines explaining why something could the assumption something else could go differently. Essentially, when we are approving the budget, especially in the C-suite, the conversation is like, we're doing this, but we're definitely not going to expect this. This is the best projection that we have at the time. What we've learned, especially for me growing up in the industry, is that the crystal ball— I've thrown out the crystal ball a long time ago. We just have this massive Rubik's Cube, I'd say. if to compare it with anything. The mindset is always to be in the problem-solving mode, looking for the next thing. Basically, our conversation in our C-suite and with our team, even with the board, has turned into a full-blown ERM. Every conversation is enterprise risk management because we are trying to expect the unexpected and then having different scenarios. Again, everything could be could be completely different from what we expect. I'd like to be sitting here and say we know what's going to happen in the future, but everyone's going to hold me— I know no one's going to hold me to it, but if you were to, I'll be completely wrong. What I'll have to say is, what I can say is that we have the mindset to adapt and see what is going to happen. If I give you an example, for us particularly, being a small island state, During COVID we had a changing government, and probably this is my biggest issue because when you have a changing government, the political cycle is, uh, is it's only 5 years forward-looking. So in terms of having a long-term vision, it's completely difficult. And we had a government in power for 43 years, and all of a sudden, 2023, smacking COVID, you have a change. We had a complete transformation and a complete change in mindset. Prior to that, it was the airline, the national airline was an economic enabler. Then it changed overnight, basically, 2020, obviously with COVID We had to make it sustainable and financially sustainable. Disregard everything that was previously the previous vision. Completely restructuring, doing everything we had. Our CEO is there, always challenging me, and he always comes up with these strange challenges for me to go and explain to the government why we're going to do things. For example, I think it was about 5 months after the exit of the US in Kabul, I had to go and explain to the president that we, as a national airline, are going to be the first airline to be flying there apart from Qatar.

Jiri Marek:Qatar?

Sandy Benoiton:from Kam Air and the national airline. We are going to fly into Kabul from a contract that is going to be lucrative enough whether we fly or not with the US government. It was a program that we were— so we signed that contract to make sure that the airline was sustainable during that time.

Alex de Gunten:It sounds like— I mean, we always look at crisis as a bad thing. That was a good opportunity of a crisis in Afghanistan.

Sandy Benoiton:Exactly.

Alex de Gunten:The benefit of the airline.

Alexandre Lefèvre:Exactly.

Sandy Benoiton:Sitting in that boardroom with the president and everyone else, trying to explain to take their national aircraft, national airline, and their people into a place where people are thinking, the Americans just exited and it's a dangerous place. You're going to meet with the Taliban, and we did. To convince them ahead of time, I was like, how do I convince them? We actually flew into Kabul on a small aircraft, private aircraft. I personally went there as well with our team. We walked and took pictures and everything else to try and It took us a while, obviously, to convince the government that you're going to fly to Kabul, but eventually we managed to get this contract. What I'm saying is that we have to. We have to put in the work and we have to be resilient. At the end of the day, it's also fun. I think if I can probably speak for everyone here, and I'm sure here on the panel as well, we are sort of, I'd say, adrenaline junkies in that sense. We are basically always ready to do things to make the airline. So it's sort of something that pushes you to the— so I think if you are in aviation, you need to have this sort of what next, what can you actually do? And there's no boundaries what you need to do to make the airline work. So yeah, so we had to come up with some of these things. And obviously, the government is more interested about what happens to them. In that conversation, the first thing they said, no.

Alex de Gunten:Actually, we're going to be talking about governments a little bit later in the conversation.

Jiri Marek:I wanted to give a chance to Jiri to tell us a little bit about Air Serbia and again how it managed the last crisis of COVID Look, I strongly believe that every crisis is the opportunity because COVID actually we used to completely transformed the airline, and we are already operating 70% above pre-COVID level. We opened more than 50 destinations. I would like to comment also some of the things I heard because I completely echo with the situation in Canada because we announced we are opening Toronto next year. After opening 50 destinations in 2 years, I was believing that we know everything about opening new destinations. In the amount of bureaucracy to open destinations in Canada, honestly—

Martin Gauss:Really?

Jiri Marek:I can understand what you were mentioning about that. About the budget, I also agree with the colleagues that basically the budget is just to fulfill the corporate governance because immediately right after, what actually airlines know very well, it's explaining why the budget is not happening. I'm always comparing the budget is like a child. If you go positive, you have many mothers and fathers, but if it's negative, you cannot find any parents in the company. Airlines learn very well how to actually explain always everything on external factors. But if the budget is positive, it's always a good success of the management of the airline. That airline learned very well to explaining that. Definitely, I wouldn't only call budget because budget is for one year.

Alex de Gunten:Yes.

Jiri Marek:Even now, midterm, long-term planning is very difficult to, let's say, see ahead. I think the agility, patience, all this, it's mandatory in order to be able to quickly react on what's happening and not just hoping that there will be some stability. Just, this is the way how we lived in this dynamic world and we just need to adapt to it.

Alex de Gunten:You bring a very good point in terms of the budgeting and the planning. A lot of the airlines tend to look at short-term planning or medium and long-term, but always with the financial certain constraints. It'd be interesting, and I know, Martin, just joined Gulf Air, but in your environment, in the Middle East environment—

Commentator:sorry.

Martin Gauss:I would answer already, but I don't know the question.

Commentator:You're trying to find gold.

Alexandre Lefèvre:And I will.

Alex de Gunten:You'll get it out as soon as it comes out.

Commentator:Sorry.

Alex de Gunten:What I was going to ask is, do you— Do you see your role or your job as you had it in airBaltic and going now to Gulf Air, do you see that the fact that you're going to have maybe stronger financial resources backing more long-term versus more a board that can change more quickly? I don't know if I'm getting the point.

Commentator:Yes.

Alex de Gunten:They say you have a strong backing behind.

Martin Gauss:Yeah, I think the perception is that if you work in the Middle East, you have more money.

Sandy Benoiton:Yes.

Martin Gauss:But I would say today, looking at the Middle Eastern carrier, there is the same focus on making an airline operation a profitable and a good operation. Therefore, I'm taking the new job now to— with the same things I did before, trying to make it an efficient operation. It's too early to say now the details after 6 weeks in the job, but what I'm tasked to do now is to come up with something where we can say this is where we are in 10 years and then to say and this is year on year the way to get there. But I think I have the same tasks everybody else has and as I had before to deliver then on the results expected and we will see because it's too fresh, but I do not see this You might see it as an advantage if your shareholder is stronger financially, but it doesn't free you from delivering on your budget or on your business plan.

Alex de Gunten:No, I was questioning more not from the financial strength, but from the consistency. You will have the same leaders, the same 4, more likely than any of the other competitors that you have out there.

Martin Gauss:Yeah, for sure. In the previous job, I had 6 governments changing in my 14 years.

Jiri Marek:Exactly.

Martin Gauss:Now, I have in the Kingdom of Bahrain the same government since 1783, so this is very stable compared to what I had before. For sure, this is to give a direction better. We have in Europe a lot of change going on, and that means I miss a bit the vision, the long-term vision, which I can clearly see now that there is long-term visions, and that makes a big difference to achieve something. Yeah, there was the previous— let's say the previous shareholder was maybe changing too often to have a consistent vision.

Alex de Gunten:Well, let's now talk about another crisis. I guess maybe the latest crisis the industry is going through, supply chain, engines. Who wants to start on that?

Martin Gauss:You guys.

Alexandre Lefèvre:Alex? I can start. We, yeah, we do share like one aircraft type that got, you know, like a few issues, you know, from your previous life. No, I just wanted to react on one item, you know, like being a public company, you know, it's funny and not funny how it's hard, you know, sometimes to get the shareholder to see the long term, you know, like they want the quarterly results, you know, you need to deliver every quarter when you report your numbers. If you don't hit your targets, like you get penalized on the share price. So it's hard sometimes when you tell them, okay, look at my vision for 2030, as exciting as it is, you know, they come back saying, where is my money next quarter?

Commentator:Yeah.

Alexandre Lefèvre:So that's, that's for me like the difficulty you can face, you know, like in depending on, on your shareholder structure. Yeah, on the supply chain, you know, like, you know, we have had like, you know, at Air Canada, I will say like many issues that are like behind us now. You know, I will, I will name them on the Pratt Whitney engines, you know, that got us, you know, up to 10 aircraft, you know, grounded, you know, at some point. I think we have learned a lot in terms of, you know, like making sure we've got more buffers, we've got more redundancy in many, in many of the, many of the maintenance, you know, programs we've got. And also, like, we have stopped, we have stopped believing Boeing or Airbus when they tell us, you know, that your aircraft will be delivered on X date. We usually take that date, we add 6 months, or 18 months depending on the time window. If it's next year, we say 6 months should be okay. If it's in 2 years or 3 years, we add 18 months. And we have been quite right, you know, by doing that. And, you know, that, you know, helps, you know, our forecasting because, you know, up to now, like, it has been quite hectic, you know, like after COVID. So it's hard to manage. We have disappointed, you know, like going back to the market, but going back to our shareholders, we have disappointed them many times because we don't hit, you know, You know, like our capacity, we don't hit, you know, our targets, you know, on those metrics. And at Air Canada, you know, we're still not at 2019 levels. So we're still not, you know, like higher than 2019 levels because we got no support from government, we've got no support from anyone. So we ended up retiring, exiting a lot of aircraft. And, you know, yes, you know, in retrospective, maybe too much, but at that time it was the right call and the only call we could make, you know, given the financial constraints we had, you know. You know, in 2020, 2021.

Alex de Gunten:Anybody else wants to?

Jiri Marek:Well, I would say, as I mentioned, it's a lot about the patience. And I would put it this way that I grew up in communism in Czech Republic, and we get used to at that time when you've been 10, you put your name on the list hoping that once you are 20, you can get the car. What is the difference now? You wait for aircraft. We saw yesterday as well. At that time, you cannot choose a color. You get what was produced. At least with the airplane, you can choose a color. It's a bit better, I would say.

Alex de Gunten:Everything is relative, right, depending where you come from.

Jiri Marek:I think that coming a bit from Eastern Europe, we talk more direct and transparent, not so much politically correct maybe. If there will be no supply issue and if the aircraft will be delivered, it will be bad for the conference organizers. There will be not so much topics to talk about, first of all. And second of all, we are not telling openly, but, you know, the high profitability we are having last 2, 3 years, it's also because this capacity discipline which is done by supply chain is something which is helping, you know, the yields and everything. If you look before the COVID you know, everything was growing and airlines are complaining about the overcapacity and all this. So We don't tell it openly, but in a way, it's also helping to improve the bottom line.

Alex de Gunten:It's interesting. Yeah, it is helping on that side of the equation. This is an unforeseen benefit. One of the— and I've heard, I was very happy to hear, for example, Rolls-Royce, who I don't know if they're still on the event today, but they were mentioning how they wanted to get back into the narrow-body engine market. Is the fact that there's been significant consolidation in terms of OEMs, in terms of suppliers, how much of that is part of the problem versus, you know, the difficulty in planning, the main, you know, Are you worried at all about all this consolidation in the supply chain in terms of how it will affect you in the future in terms of not only capacity but cost?

Jiri Marek:Well, if I can start, I would say what we would appreciate is the OEMs, I mean, the production of the aircraft, if they will get more commitment from their suppliers for deliveries because We are not in charge to choose who are their first-tier, second-tier, third-tier suppliers. Then when the problem starts, then you start to have the finger-pointing like, who is responsible? Oh, it's not me. I'm just the aircraft. It's those guys which have the engine or this is the landing gear. You as an airline, you have no option to choose those suppliers. It's somebody making that choice on your behalf. There should come also more commitment to be having some service level agreement or something directly when they're choosing them.

Alex de Gunten:Martin, you, you actually bet on Bombardier and you made a risky bet that worked very well for airBaltic. Were you thinking of that at all when you were going through that decision process, being one of the first airlines to take the CSeries? How much? Because that really helped maintain Bombardier and then was bailed out by Airbus, but otherwise that program might have never concluded or really successfully concluded.

Martin Gauss:It was 2012 and we had a tender going on between next narrowbodies being 737-700 MAX, which wasn't built, A319neo, which wasn't built, And then Bombardier came and said, we also have one. And initial thought was, that cannot be because there's these 2, but we included them in the pitch and they were winning at the end and we signed with Bombardier CS300, today the Airbus A220, to go into the future. But then it took another 4 years before we got the first delivery. It wasn't a bet, it was a calculation based on what all of them showed at the time. Yeah, it worked out because the other 2 are not even used, at least not in quantities which are meaningful. So for that category, it turned out to be the right decision. You don't know at the time, especially if a product is not produced, what you will get. A good example is now, if I look for a premium seat for the future and an IFE solution, it will take me 4 years to get the delivery. Well, about IFE, right? I mean, what do I choose now if I say I want IFE? Because looking at Starlink at airBaltic, you don't want any IFE because everything is on your phone because you have unlimited internet access. So what is it in 4 years? You're buying the most sophisticated IFE solution for a sophisticated premium seat and you get something in 4 years from now. I don't know even how that works, but yes, we have to do it because otherwise you have no seat, which is like really bad.

Alex de Gunten:You can increase the—

Martin Gauss:The supply chain issue is becoming more and more an issue where you take a decision for 4 years into the future on something where you don't know whether that is what you actually want. So it's very limiting. I agree with Jiří. So it's a bit like it used to be in good old times. I do hope that the growth we see will enable also OEMs to invest into producing things a bit faster to go back to a normal performance. If you order something, that you get it in a reasonable time.

Alex de Gunten:And I guess that's where regulators— Alex, I see you nodding your head. You want to—

Alexandre Lefèvre:No, I'm just thinking, you know, like on IFE. So, you know, we've got screens on, you know, 90% of our aircraft. And, you know, like sometimes, you know, you spend like 2 years to decide on a provider. You've got 3 years before you get your first screen. You get them installed, and, you know, like 4 or 5 years after, so still, you know, your cabin still, you know, like should be like prime lifetime, you know, like there is obsolescence issues and the screens are not getting built, you know, like anymore, and you have to change them again. So it's kind of crazy, you know, how, you know, now, you know, some suppliers, you know, like you don't get a product like before 4 years, as you said, and as the product, you know, starts like hitting the Midlife, you know, like they start telling you, oh, we're going to have to start thinking about replacing them because we will not maintain them anymore. And you say like, how so? Like, how is that even possible? And you end up spending a lot of money in those programs and it's getting a bit out of control. So that's why, you know, like all those solutions, just, you know, you know what, you know, get Starlink and have like a good Wi-Fi solution. You know, at the end, you know, for some airlines, like it's, I think it will be the solution because it's kind of, you know, out of control.

Alex de Gunten:Yeah, I mean, supposedly the technology is out there already that you can use your iPhone on an airplane. I mean, with low-level satellites, it just has to be opened up and there's all kinds of regulatory issues with it.

Alexandre Lefèvre:But now you see it, you know, like, sorry, just on NPS, on Net Promoter Score, you know, like you have like a bad seat, you've got like small pitch, you know, if they have a screen in front of them, I can tell you the NPS is good. You know, the same aircraft, same pitch with no screen, NPS is So internet, no internet, you know, somehow that screen is just like, you know, shielding, you know, all the bad stuff that they feel, you know, about the product, about the soft, about the hard, everything else.

Alex de Gunten:So, well, it's funny you mentioned that. I don't know if you tried the Meta goggles outside. Yeah, you put that in front and you think you have a lot of space everywhere. You're the only person on the airplane. So it's a new reality out there. Absolutely. You mentioned governments. Are they helping? Do they— are they in terms of— especially let's think of it from the perspective of the crisis. Do they— are they part of the solution or are they part of the problem?

Sandy Benoiton:For me?

Jiri Marek:Sandy?

Alexandre Lefèvre:Yeah.

Alex de Gunten:And I know you're a gov— you know, I don't want to get fired.

Alexandre Lefèvre:I think you have to put yes.

Alex de Gunten:So the answer is yes.

Sandy Benoiton:No, actually, I'll say no, obviously. Sometimes, obviously, when you are in difficulties, I know government previously bailed out national airlines and things like that, so that can be of help, but also it can be a hindrance because of the— like I said, every government that comes in, they want to show something better than the previous one. So it's a game of who's— everything that you did is wrong and we have to do something different. So this is where sometimes it gets a little bit messy. Like I was previously saying, we had a government 43 years with one very unique principle based on more of a socialism type of system. Then you had the other government who actually— my first role as a CEO was to actually close down the airline. Obviously, I said yes, but I never intended to close down the airline. We had a winding-up petition against us during COVID Obviously, but we decided to put it in administration for a while, and we managed to turn it around. Show the government no, you were wrong. So we made a profit. Been making a profit since then. Ensure the financial discipline. So after all this work, now we have the old government back now recently. That was in November. So now I have no idea what is going to look like now because we went from a full restructuring to going back to probably what is going to be a loss-making.

Commentator:entity.

Sandy Benoiton:So now my mindset has to really change on how we actually deal with the new government. But again, it is my job as well to show them, give them the pros and cons, and then the decision, obviously, it's a bit of a hindrance, but there could also be very good support as well if they do understand.

Alex de Gunten:Alex, you're not— you used to be a government airline. That was many, many years ago. How's— you mentioned a little bit, then I think it was Gerry that also mentioned how the regulations and the paperwork— how's Canada doing in that area nowadays?

Alexandre Lefèvre:No, I think we've got a good relationship with our government. You know, we've got strong alignment on, you know, many strategies for Canada, and, you know, we are Canada's flag carrier. You know, we want to follow Canada's strategy, and Canada has Even if a bit reduced, they have like a huge immigration strategy. Like they want to, you know, more immigrants to come, you know, to Canada and we can support that. Now in the current context, they want to diversify the trade relationships, you know, getting more countries, you know, like to work with Canada and, you know, those trade relationships can support us and we want to support Canada, you know, in that objective. So, you know, that always comes, you know, with very interesting discussions because sometimes, you know, like obviously they want to open up all the doors to all foreign carriers from everywhere in the world. And sometimes we tell them, you know, like, be careful of protecting, you know, Canadian jobs, you know, before doing that. But obviously for us, you know, like, I think we have had like very good— I would say like post-COVID, very positive discussions around, you know, how we can participate into like Canada's, you know, like objective.

Alex de Gunten:Perfect. We have a couple of questions on the Slido. I'm going to choose the first one. Mergers and acquisitions, i.e., consolidation, is it good or bad for competition?

Martin Gauss:I think we see it everywhere in the world, starting in the US, then it came to Europe. I think it will also go to the Middle East. I think consolidation is good because if it's under free market principle, which it is, then it will make airlines stronger. For a while, at least before COVID it looked good because you have stronger players. But we saw yesterday there are 700 airlines. They went down, but now they're coming up again. Airlines come and go, but consolidation definitely helps because at the end of the day, it's one globe, right? Having strong players on the globe will get that industry to at least maintain the profitability in good times which we had over the— the last 100 years, which is small, but still, I think consolidation is helping there.

Alex de Gunten:I mean, if you look at any other global industry, I don't think there is one that is as fragmented as aviation, where even the biggest carrier does not have more than, what, 8%, 10% of total market share, which makes it inefficient in many ways and capital-intensive, and it also It gives— reduces the negotiating power with your suppliers because you're so fragmented.

Martin Gauss:I think it's because we have so many countries, right?

Jiri Marek:Yes.

Martin Gauss:At the end of the day, it's the countries. While we fly, there is no issue, but where we all fly from, we have regulations which are unique to each of us in the individual country, and that makes it a bit more complex. While if you go now from here to Sydney, you board a TAP Portugal flight, you connect somewhere. You as a passenger don't have that issue, but the different airlines you're using, all of them have different regulatory bases, and that leads to not have one global airline. Otherwise, we would probably see— if there would be global regulations which are the same everywhere, you would probably see even more mergers.

Jiri Marek:Yeah.

Martin Gauss:But we don't have a single European sky yet for the last 30 years, so I don't see this coming that we will have less regulation on a country base. I don't see this coming in my aviation time.

Alex de Gunten:No, it's slow. So we're running out of time, so before we let you go, I'm going to ask you one question each, same question to each. I'll start with Gerry. If you can put on your, I guess, your thinking cap and your glass ball, look through your glass ball, and you had to If you had to decide or guess what will be the next big crisis for the airline industry, what would you think?

Jiri Marek:Once all those aircraft will be produced and delivered at the same time.

Alex de Gunten:That will be the crisis?

Jiri Marek:Well, there will be extreme overcapacity.

Alex de Gunten:Okay.

Jiri Marek:Which is not possible to happen, but—

Alexandre Lefèvre:Sandy?

Sandy Benoiton:There's always going— something is always going to break, right? I think geopolitical tension may be heightened. Something unexpected is going to happen.

Alex de Gunten:Some kind of a major war.

Sandy Benoiton:Than we had right now, yeah. So I suppose this.

Alex de Gunten:Fair enough.

Sandy Benoiton:The good thing is for us, we are— whatever happens, we are trying to look at what we can do with the crisis that happens.

Alex de Gunten:You have the experience in Afghanistan already, so you can take advantage. Alex?

Alexandre Lefèvre:It's a question mark, is how sustainable is the premium trend that we see today? And, you know, I think nobody can answer that question. You know, we, you know, like many carriers, we're flying over that, you know, like premium bubble. It's highly attached to GDP, but it's also like highly attached to, you know, like all, you know, we're speaking yesterday about all the AI bubble. If that AI bubble bursts, I'm pretty sure the premium travel will—

Alex de Gunten:A burst of the premium bubble.

Sandy Benoiton:Yes.

Alex de Gunten:Martin?

Martin Gauss:It's good that these 3 already were talking, so I was thinking. Yes, I saw myself looking in this glass ball, and I looked and looked at— I don't— I just can't do this and say this is the next crisis, so I just stay positive. I don't see that crisis there in the glass ball, so I just continue. And when it comes— You'll visit. So that's my—

Sandy Benoiton:Okay.

Alex de Gunten:Well, now this has been recorded, so if in the next year either of you is right on the prediction, I'm sure that CAPA can give you the crystal ball award for guessing the future. So thank you very much for joining the panel. Please join me in thanking them. Thank you.

Commentator:Okay, I think we're up for providing an instant commentary and feedback.

Commentator:Thank you.

Commentator:I thought what everyone said about managing in a downturn and how it gives you an opportunity to transform, it was absolutely right. It matches my own experience having done a few downturns in my time. I think it's like becoming an expert driver. You don't do that by driving smoothly down an ordinary road every day. You become an expert driver on the track or on the skid pan, testing the limits and flying off the track. What I think is also important is getting back to normal as well. I think the industry is very easy to get addicted to crises, and actually you also need to be able to manage the business and make money in the, in the the brief periods of calm in between to recharge the batteries, get the processes working smoothly again, and make some money. I do think over the whole conference we've heard a lot about the problems of constraints on growth and capacity shortages. I know that's very frustrating for an individual airline, but for the industry as a whole, it's actually very healthy that the industry is prevented from, from doing that overcapacity. thing we just heard about, which probably I would agree might well be the next trigger where demand turns down just as all the aircraft start getting delivered and put back in the air. Good luck to everyone for making some money whilst the times are good because you only really appreciate actually those were the good times after they stop. I thought it was a very interesting panel.

Alexandre Lefèvre:What did you think?

Commentator:Thank you, Robert. In Amazon, normally we say, when everything else is changing all around you all the time, Focus on the things that never change. In our case, it's price, convenience, and speed of delivery. In the airline's case, and I've worked in airlines, different airlines for 16 years, learned a thing or two. I'm type-rated for A320 as well, so I learned a thing or two. And it was said several times, you have to build the agility into the business by default, have that culture, and have the data-driven culture. Because you cannot guess what's coming, but you can be sure that you are better prepared, that you can handle whatever comes your way. Now, this can be done in several ways. One of them is building the resilience and agility by becoming very, very asset-light within the possible realms of possible. The other one is becoming more and more data-driven, and with that, focusing more on the future than in looking at data about the past, so therefore predicting what events might come. Even when something comes that is not possible to predict, you can always predict what events are triggered by that event. I think it was Winston Churchill that said, your plans when you go to battle are completely useless, but the planning process is precious. By building that muscle of predicting all the time and becoming core business-focused, like flying your planes, flying the planes on time efficiently, and giving people back their stuff, as we heard yesterday, I think it's a good focus to have. Becoming asset-light, predicting, and data-driven, and technology is here to help, is already helping a lot of airlines. predicting, but also becoming more efficient and more asset-light. I think it will never be— it will never come a stage where airline business will be a non-turbulent, calm environment. It's just the way it is. What we need to do is continue to build these muscles that are very strong already about dealing whatever comes our way. We're here to help, and thank you.

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