In-depth interview with new British Airways CEO Sean Doyle

Transcript

Peter:

... particularly at the cash position and the different approaches that governments in Europe have taken, both of your major full service carriers in Europe have been very substantially, to use a crude word, bailed out by their governments to a large extent. And I know Willy Walsh previously said none of the airlines should be bailed out. There has been some support for British Airways but more recently particularly. How does that affect your competitive position with the other two of the major three in Europe?

Sean Doyle:

Well, I think the first think I would say is that, at IAG, we were very quick to act on self help, and I think that was focused on probably three to four different streams. I think the first is to go out and raise liquidity in the commercial sector as best that you can, and we've been successful in doing that. We had a rights issue, we went to the bond markets, and then we actually tapped into some government facilities in the form of UKEF for British Airways to the tune of two billion before Christmas, and Iberia, Vueling and Aer Lingus have actually pursued similar paths. So I think credit being available on commercial terms was one of the sort of streams that we were looking to be enabled, and we've tapped into that. I think the second thing was to recognize the gravity of the situation and to change your business pretty quickly, and I think both British Airways, Aer Lingus, and other airlines across the group did that.

Sean Doyle:

And that was very tough and it was very tough on our people, but if we didn't sort of right size the business last summer, we would be facing into a much tougher situation than we're in today. And, look, we're by no means out of the woods yet, we still have a choppy path to recovery, but I think right sizing your business, acknowledging that the next three to four years are going to be very different to the last three to four years, and buffering the balance sheet through every lever that you have, I think has been successfully achieved.

Sean Doyle:

I wouldn't really comment on what's happening in Europe. I fundamentally believe that airlines are better run when they're run as businesses, and we've demonstrated that through airlines that were historically state carriers. And when they've been, number on, privatized, and number two, worked in a group such as IAG, I think their fortunes and the fortunes of the airlines in terms of growth prospered, and I still fundamentally believe that. I that, when we do see the dust settle on this crisis, the ability to run your airline like a business will be as compelling as it's ever been.

Peter:

So, by implication you're saying that because you had to strain harder, you had to work on your own two feet, you're probably better off coming out of this than, say, the Air France, KLM group, or Lufthansa group?

Sean Doyle:

I think I wouldn't necessarily speculate on that, where they're heading to. I think we all have new challenges, we've never seen anything like this. Before this, we had 9/11, which was kind of not as dramatic, your demand shock. We had the global financial crisis, but we've never seen situations where, over a summer, airlines have operated at 5% of their capacity, so it's a unique situation. And how we come out of it and what the impact is to the industry has yet to be clear and yet to play out. I fundamentally believe that we as a group move quickly, and we're all the better for it, and I think we're right sized heading into the future. With a business switch, I think we'll be better when we come out the other end of the pandemic, and we'll have to be because it's going to be pretty competitive out there.

Peter:

Yeah. I think the words leaner and meaner have been associated with the way British Airways is going to look, coming out of this. You don't look particularly lean or mean at the moment, but obviously, as you say, cost and efficiency is going to be very important in the next couple of years at least.

Sean Doyle:

Yes, and I also think that we've taken the opportunity to be more sustainable because we have retired some of our more older aircraft in the form of 31 747s, and we're now flying around 787s and A350s, which are up to 40% more fuel efficient. So, I think being sustainable is going to be a key dimension of an airline's right to operate in the future.

Peter:

Just going off at a tangent on that, as you mention it, Sean, I was talking to Alan Joyce earlier today about the 380s, and I gather you're going to be bringing those back in at some stage. Alan was fairly cagey about when Qantas is likely to do it because obviously it depends on when the big fat routes come back, but that is an aircraft that is in your weaponry as we go ahead still?

Sean Doyle:

Yes, it is, and I think it works very well for British Airways. Because of the sheer volume of aircraft that we have retired, I think we do have a place for the A380 and it's in our plans, and I think we can fly it to many destinations. We flew it to places like Hong Kong and Johannesburg, but it also worked fairly well into markets like Boston and Dallas, so even in the east coast of the US and to places like Miami, we found that the A380 worked very well. So it's got multiple purposes in terms of mission capability for British Airways, and that's why it is retained in the fleet.

Peter:

Well, that leads nicely into the North Atlantic too. I mean, this is obviously a key route for British Airways and for a lot of the other European carriers too. It's also one that's underwritten very heavily by corporate and business travel. And the second question that comes out of that, that maybe we can address these in sequence, partly because of Brexit but also because the UK is in a much better position that its European neighbors from a health point of view at the moment, do you see British Airways and the IAG group being in a better position going ahead to grow in the US market, contrasted with the other major carriers?

Sean Doyle:

Yeah. Well, I think there's probably two different time dimensions. One, I think, is an immediate opportunity to open up the US. If you look at the vaccine progression of both the UK and the US, they're more or less mirroring each other and I think both countries have implementing very successful vaccination programs. And then I think that should lead to, I think, the ability for the UK and US to lead the way in opening up air travel, and I would hope that the US administration looks at the repeal of Section 212-F sooner rather than later. I also think that the US is kind of representative of the importance of aviation. There's a lot of focus on holidays, and holidays are important to give people something to look forward to, but the US is about trade. It is the UK's second biggest trading partner, the UK is the US's fifth biggest trading partner.

Sean Doyle:

The amount of foreign direct investment, there's over a million people of British nationality living in the US so there's a huge amount of visiting friends and relatives traffic, but the sheer amount of economic activity enabled by that relationship is significant. And you do business with people, not organizations. I think we do see fatigue with Zoom calls. We're hearing about people who want to invest in the UK, and vice versa, saying they need to get back traveling again, and I think we're impressing that kind of perspective on the UK government. There's an expression in Ireland, which I like. It's says, "If you want to buy the farm, you've got to work the land," and I think that's very true when it comes to travel and investment and business activity as well.

Sean Doyle:

So, I think in the near term we should be leading the way in terms of the UK, US, opening up, and I think the progress in Europe, as well, of vaccinations coming in the second quarter, that could be a template that others follow. In the medium term, yes, I do think that trade between the UK and the US will be a key focus, and I do that presents opportunities. But British Airways was already leader on the US market. We flew to more airports directly out of Heathrow than any other carrier in Europe. We served 26 cities in the US and over 30 North American destinations, so that kind of breadth and depth of the network we historically have provided there has been a competitive advantage for us.

Peter:

I think there's no doubt, obviously, that the trade between the US and the UK and Europe is very substantial, but I think equally it's true that it's not going to be as big this year and next year as it was in 2019, so there's going to be a smaller pie, in other words. What you're saying, I think, is if you can get there first, then you've got your part of the pie probably pretty well taken, whereas the others might have... I mean, Lufthansa, for example, is talking about being a smaller airline, everybody's going to have to cut back a bit. Does that put you in the stronger position as a result of that, being able to move first?

Sean Doyle:

Well, I think it would be a great opportunity if we could move early, and I think we've got a number of levers. For one, I think a direct network really helps. I think if you're flying to more places directly, you just have an ubiquity of offering that tends to win. Second, I also think that the hubs are very important to your... both the hubs that we fly into in America and the hub we have at Heathrow. Because if you look at the retirements across the industry, you're seeing aircraft like 75s and 76s retire, and that means a lot of secondary spoke operations between the US and Europe will inevitably shrink, and then I think the hub O&Ds will be the way that people will travel in the future. So I think optimizing the hub and redesigning our hub to really pursue that opportunity is something that we can pursue. And we have a very significant direct network but we've got a fantastic behind network into both Europe, the Middle East and places like Africa, so I think that's a big opportunity.

Sean Doyle:

And, of course, we fly into places like Dallas and Chicago and into American hubs in the US as well, like Philadelphia, which give us the ability to attract behind traffic from spokes in the US. So I'm quite confident that we'll be, one, very relevant, two, very competitive, and three, if we can get going earlier than the pack, even better.

Peter:

Right, yeah. I know you come out of an alliance background in British Airways before you hopped across the pond. Your very close partners across the Atlantic, American, have been talking very keenly about using the smaller 321neos long range to connect both non hub to non hub but also hub to non hub, and even hub to hub. Is there an implication there that you've got a nice complementarity? Obviously those aircraft are going to roll out fairly slowly, but it does sound like a nice equation?

Sean Doyle:

Yes. I think it's quite a nice balance. Funnily enough, I took delivery of A321neo LRs into Aer Lingus, and we operated to Bradley, it was one of the first services across the Atlantic, so I'm very familiar with-

PART 1 OF 4 ENDS [00:11:04]

Sean Doyle:

... to Bradley. It was one of the first services across the Atlantic, so I'm very familiar with the technology. And AER Lingus and Iberia have ordered the XNR as well, so I think we're, we're committed to the potential of that narrow-body opportunity. But I think being able to fly smaller gauge aircraft with the unit cost efficiency of wide bodies from places like US hubs into European spokes is certainly very exciting. And I haven't seen American's plans in detail, but that would be something that would be obvious to look at. But we were very excited about the ELR and AER Lingus, and I think the XLR is a better range version of it and probably a bit more complete in terms of design as well.

Peter:

Yeah. There's been some, talking about AER Lingus, there's been talk obviously about AER Lingus playing a larger role on the North Atlantic than previously and using those narrow body aircraft. It's a lower cost operation even than British Airways. So it does sound as if you've got the formula there together with the advanced timing to be very powerful competitor in that market.

Sean Doyle:

Yes, and I think for me, what we see is what Alliance is doing is they just give you a lot more ways of getting people from A to B and a lot more combinations and a lot of recognition and a lot of loyalty. And I think you can also create real synergies for travel buyers because you're offering a bigger range of solutions on the shelf. And I think those levers will be as important in the future as they are in the past. And we do see people combine itineraries. They may fly out in the UK regions over Dublin and come back to Heathrow. And I think as [inaudible 00:12:37] Group and as an Alliance, we can enable that. And we've seen those types of itineraries really grow over the last decade as we've begun to enable customer solutions which allow that to happen in a frictionless way. But there's a lot of opportunity we will still pursue and we're very enthusiastic about making the most of these combinations of various partner mettle.

Peter:

Yeah. And going back to the hub operation, okay the US, North America is one end of those spokes. Looking the other way, Qatar is an important partner of British Airways. Is that, in terms of regrowing the Heathrow hub, is that going to be an important partnership or how do you see the Eastern side of your hub working?

Sean Doyle:

Absolutely. I think [inaudible 00:13:31] is a fantastic hub and the scale of network that Qatar has developed at some points over the pandemic, Qatar were the biggest airline in the world and the sheer breadth of the network they provide to places that British Airways doesn't fly to, or maybe it doesn't fly to with the same frequency, again gives us an opportunity to combine the networks and create real synergy. And it's a fantastic experience as well. I think anybody who flies Qatar knows about the standards they set. And they're a very important partner. We've worked very closely with Qatar. So I think as you look to the East and look to Asia and expanding our footprint, I think having a partner like Qatar is very important because I think our network isn't as developed into Asia as it is into the US and that's something that we would like to rebalance over time. But I think the ability to offer connections over [inaudible 00:14:16] to places that maybe we don't fly to yet or aren't significant in and combined them with direct services in the future, again I think you win because you're just creating more ways to get people there and back.

Peter:

Yeah. Yeah. And talking of that, British airways made some forays into China previously without a great deal of success, you'd have to say. Perhaps a bit premature, perhaps just the conditions for distribution weren't there. Do you see that given the China's is pretty much a safe haven now, do you see that as being one of the ports you could start to open up, one of the networks?

Sean Doyle:

I think we obviously always look to China because of the sheer size of the market and the potential, but we have flown back into more points in Asia over the last five or six years, like Kuala Lumpar and like Seoul that we had pulled out of in the early two thousands. So I think China's big, but Southeast Asia and North Asia is very big as well. And we'd launched Osaka in Japan for instance, because we felt there was demand there.

Sean Doyle:

But I think what could be exciting about China this time around is the fact that the economy is maturing obviously, and moving towards an innovation and a services based economy. I think that plays more to what the UK has to offer because the UK is a very big services sector, a lot of financial services, a lot of insurance products. As China begins to develop, for instance, it's sort of social security nets and systems, I think there will be a lot more business activity between the UK and China. And obviously I think it's part of the economic strategy of the UK government. So I think the UK will have a lot more business to do with China in the future and we want to be part of it.

Sean Doyle:

I think we also need to kind of have competitive visa arrangements as well. And I think that was one of the issues we saw flying from China into Europe, the transit visa arrangements that the UK had weren't competitive compared to Schengen areas. And I think we would be lobbying to have that change if we were to think about areas like Chengdu we flew to, but, but I think that was an issue that we had to grapple with.

Peter:

Yeah. So we've talked about Heathrow. What about Gatwick and London city? How are your plans towards those airports now? Are they changed because of the pandemic?

Sean Doyle:

Well, I think they have changed in the short term because we've consolidated or 320 operation into Heathrow for short-haul and that will carry on for the foreseeable future. We do fly long haul out of Gatwick still, and we're operating out of Gatwick as we speak. And London city obviously has been hit hard with the reduction in the corporate and business segment, but I would be kind of very optimistic about London city as well, because it's got two dimensions. One is it's, I've a very convenient airport for business travelers, but if you look at the East of London, the sheer growth in population, the demand actually for the leisure network out of London city, it has been something which I think people don't appreciate. So an awful lot of the traffic that we fly on our operation out of there is actually not corporate, and that's been a key growth sector. You just get the train out of London city and you see the amount of residential development going on in the East. It's very exciting, and I think we've got a great footprint, a leadership position on that airport to capitalize on.

Peter:

But that does have a lower yield profile as a result of that, presumably, and therefore sort of dictates the type of mettle you use, for one thing.

Sean Doyle:

I think the type of operation we have is dictated by the airport, the sort of [inaudible 00:17:49] limitations mean we're on an [inaudible 00:17:50] operation there. And it's kind of opening limitations that we have to work with as well. But I think London city has built itself as a reputation for convenience. It's got to be cost competitive as well and we always emphasize that to the airport. But I think for travelers in East of London, they appreciate that convenience and the ease of using that airport.

Peter:

Yeah. So let's move to the real nitty gritty for the future, the near term future for international travel. Traffic lights, you name it, we've got everything. We've got pre vaccine/ we've got pretesting. We've got a whole array of different issues, which you've got to confront, presumably largely on a bilateral basis if we're talking about the US. How optimistic are you that we'll see, for example, non-essential travel out of the UK by the middle of next month?

Sean Doyle:

I suppose we had two communications last week, one from the Prime Minister and then a subsequent communication from the Secretary of State, the first thing to say is it does represent a step in the right direction in that it's the commitment to reopen travel and it's a commitment to create a framework by which travel can reopen. And I think that's an acknowledgement that the industry is important and that the industry is a key lever in getting the economy up and running again. But I think we need to be more ambitious. I think the framework could be simpler. I think it could be more affordable. It could be more easily understood. And I think it doesn't need to be as onerous as it is to manage the risks that we're dealing with. And I think the other thing the framework misses out on is the ability for vaccinated travelers to travel and be a lot less risk in terms of vaccinated travelers traveling than they would have been this time last year, and that's not really referenced in the framework.

Sean Doyle:

So I would hope that it gets better as we get closer to the summer, but we won't really know exactly what that framework looks like until early May both in terms of what countries are really more category and what it might evolve to. But our plea would be it can evolve to something a lot more straightforward that can still, I think, make sure the travel can be reinstated more safely. So things like PCR for green card or travel, we think that should be lateral flow. And also, we've done some work with [inaudible 00:20:22] here, which shows that two tests, a pre-departure test and an arrival test, is about 88% effective in reducing infectious days. And that tells you that the protocols for amber are over-engineered compared to the risks that we're dealing with. So it could be better and it could be clearer and we're making those points to government.

Sean Doyle:

And then I think you're right. We need to make sure that we have reciprocal, understandable frameworks at the other end of route. What is, I think, encouraging is the advice the CDC gave a couple of weeks ago for vaccinated travelers. One, they consider travels be low-risk for people who've been vaccinated. And two, international travel protocols for vaccinated travelers are much simpler for when they return into the US. Now that's for US citizens, but I think it is a more simpler, pragmatic solution that they've communicated than the one that we saw in the framework here.

Peter:

Yeah. I mean, just in terms of the specifics, obviously Europe is a very big market for you, quite obviously, but it is going through different levels, France, particularly, some very severe third wave. And they're not getting on with the vaccinations anywhere near like the rate that you're doing in the UK. Are you hopeful that we're going to get even an orange light, an amber light for any of the European countries?

Sean Doyle:

Well, I think we'll have to wait and see and look forward. My expectation is that when you get to the end of Q2, Europe is in a very different place. You will have seen Germany, I think administered 710,000 vaccines over the weekend. They're really beginning to scale up their vaccine program. And you do see a lot more supply.

PART 2 OF 4 ENDS [00:22:04]

Sean Doyle:

... They're really beginning to scale up their vaccine program. And you do see a lot more supply come into the marketplace from various providers over the coming months. So I think Europe will get the kind of traction and see the benefits that places like the UK and Israel have been seeing in the coming months. So I think what government policy has to do is look forward to where we will be rather than anchored in where we are today. We will be in a much better place. And I think if the policy and the framework anticipates that properly, we will see significant travel recover. But that would be my read of the situation as we're sitting here today. The progress in the vaccination program here has been remarkable. And I think if you look at the data and the effect it's having, it does give us room for optimism.

Peter:

Yeah. But I would assume, and obviously we don't know, as you say that much of the show in Europe is going to have to have some serious testing requirements on it. These are expensive tests as well, particularly when you're talking short haul routes. I understand you've been doing something towards subsidizing or helping reduce the cost of those, but it's a very substantial part of a short haul affair, isn't it, for a customer?

Sean Doyle:

Well, look, I think, the first thing is the lateral flow testing is very affordable and we have a range of options there. And I think the government are looking about enabling lateral flow testing from the NHS to make travel more affordable because I think the prime minister did respond rightly to the challenge that you got to make sure that if travel is enabled through a framework that it's also accessible for everybody.

Sean Doyle:

Now, the second thing is we're working with suppliers and we are announcing a partnership today, which will have PCR testing available for £60, which is a significant reduction on the cost that we would have seen over the last couple of weeks. So we think that the supply chain will become more affordable, but also I think, to deal with the risks we're dealing with, there could be a framework which has less tests involved.

Sean Doyle:

Now, what I would say is there's a huge amount of pent-up demand. Every time we see a travel corridor opened up or the government policy alleviate the travel restrictions, people want to travel because they haven't been traveling for 12 months. So I think we're working on the affordability supply side with our suppliers. I think the framework could be simplified to deal with the risks we're dealing with. And then I think that, yeah, there is a bit more complexity and a bit more cost to travel, but there's a huge amount of demand out there for people to get away.

Sean Doyle:

I was looking at the VFR market alone, a lot of people have not seen relatives or elderly parents for over a year. And that is one of the big emotional tolls this pandemic is taking. And I know when I get the chance to go back and see my family in Ireland, I'll be on a plane, I'll be taking a test and I'll be going.

Peter:

Got a lot of them here in Australia, too, [Sean 00:24:53].

Sean Doyle:

Yeah, of course.

Peter:

Irish and British. I mean, given what you were saying right at the start about how the UK Government seems finally to have recognized that aviation is important to it, any likely movement on the holy cow of the APD?

Sean Doyle:

I know there's a review planned, but I think we had a minor increase in APD, which was disappointing. People have got to realize that aviation networks are probably the key enabler of economic activity. And if we want to grow to places like Asia, we need to be competitive and APD makes the UK industry uncompetitive. So we'll be making the case that that needs to be part of [Virtaview 00:25:39] if we want to have a strategic commitment to aviation and could see aviation as part of global Britain. And the government says it does, but I think it's got to follow up that commitment with real action. And APD is a punitive tax and it's gone one way over the last 10 years. And it's about time, I think it moved in the opposite direction.

Peter:

Yeah. Taxes tend to do that, don't they? Alan Joyce here in Australia, I meant to mention before, Alan Joyce of course has talked about, as you may well have read that Quantas is going to have a requirement for any passengers boarding to have already been vaccinated. And also, seen research that he says 89% of Quantas passengers researched agree with that strategy. Now it's obviously a government override on that sort of decision, but where do you stand on vaccinated passengers on BA?

Sean Doyle:

I think we've been clear that it's a combination of pre-departure testing, which I think gives people reassurance that when they're flying that it's very safe and we know that it is very safe based on the data that we have, are also evidence of vaccination. The policy about how people can cross a border we leave to governments. What we're focusing on as a solution is to enable the verification of whatever you need to travel. So we've got three streams up and running. One is, as I said, we've been trialing a VeriFLY solution with American Airlines, which enables the digital verification of travel requirements.

Sean Doyle:

Secondly, we've got our own document verification portal on our app. And thirdly, we're working with IATA and I think the IATA Travel Pass solution is exciting because I think you will get both the rules engine integrated with Timatic, which we already use as an industry, but also you will get a verification portal up and running that the industry can tap into.

Sean Doyle:

So I think the solutions to meet the requirements of whatever the government will require for people to travel can be automated and made frictionless. But I think our job is to ensure compliance with the regulations, not necessarily from a British Airways perspective to dictate them. But we know that travel is very safe. We know the data from IATA shows very, very low incidents with people traveling. And I think all of those incidents happened, even before the [IK 00:27:57] or the insurance framework was adopted by the industry in August. But that would be our position. And we've been consistent with that all along.

Peter:

Yeah, I mean, there's another issue, isn't there, aside from inflight transmission. And that is that aviation is by far the best carrier of COVID because it transmits it around the world. I mean, that's a given. And the only cases we've had in Australia, for example, in the last few months have been returning Australians mostly, who've come in with something. So you do need a form of multilateral, to use a broad word, passport. There does seem to be a proliferation of them. I mean, you've mentioned a couple yourself and then you've got the European green pass. How's that going to settle down? Do you think that can resolve itself quickly so that they're mutually recognizable?

Sean Doyle:

Yeah, I think that the more people innovating in this space in a way, the better, because it means that we have got a competitive dynamic going on in terms of creating this capability. And I think actually, the more suppliers, the more solutions that various carriers can adopt. So I think having people who can perform verification and create apps that people can use is a healthy dynamic. I think what we will focus on is being able to integrate those APIs into our core airport processes and also being able to transmit, I think that verification to various authorities in a way that's automated. So I think that the plumbing or the integration is actually very important. The app development in a way is the more straightforward part of it.

Sean Doyle:

But you mentioned about the art of travel, like the data I've seen from IATA on onboard transmission has been 42 cases across 1.2 billion journeys. And most of those cases happened before we implemented things like social distancing at airports and the use of masks on board. And we do see that trend of actually minimal transmission on board an aircraft continue. I think an aircraft is a safer environment than many other places with the way the HEPA filters filtrate air and the other measures that we have taken. So we're not hearing any concerns about people traveling and the risk of transmission when people are traveling. And I think that's been more than supported by the evidence.

Peter:

Oh yeah. I mean, I don't want to get into a dispute about that. I wasn't arguing that point, but I think actually, I mean, it's a whole lot safer being in an airplane than being in an airport once the numbers start going up. I mean, you see some of the pictures out of the US, it's just ludicrous to have any talk about even spacing. And they've still got a lot of activity on the COVID side. Yeah.

Peter:

I guess overall, you're pretty confident that we can, from an industry point of view anyway, get some sort of a cooperative approach to it. Where the problem seems to come though is when you've got to get governments at a multilateral level agreeing things. I mean, the industry has been pushing it and I'm sure Willie will be pushing it very hard for IATA. How likely do you think that even the EU countries will see eye to eye at a government level?

Sean Doyle:

Yeah, I think in the EU you've seen the tourism reliant economies move quickly. So countries like Portugal and Spain are keen to get sort of an aligned process up and running. The green certificate process that the EU were looking at, I think is a representative of an understanding of the economic impact of not getting aviation back on its feet. And I think, what I would say is the UK and the US has an opportunity to create a framework that others could adopt because I think when there are rules of the game for opening up travel to the US, I think people will kind of converge on that because it's such an important market. And I think Britain's got leadership at the G7 this year. I think that's a great opportunity to coalesce on policies that could be adopted. And I do think we'll be much better if there's a coordinated approach than if there is an uncoordinated approach.

Sean Doyle:

At the same time, I think countries will adopt frameworks based on the situations they're dealing with at a point in time and that will be something that we'll just have to navigate through. But if we could get a consensus, all the better. I think the industry is very good at reaching frameworks and adapting to various challenges. We've shown it over the last 50 years. The way we responded to 9/11 is a classic example. But you're right, I think governments could enable a quicker, more coordinated return to safe air travel if they basically cross boundaries and align them on an international framework.

Peter:

Yeah. I mean, you can envisage a process where it's essentially based on bilateral bubbles, which then hopefully expand a little bit or join up eventually. Certainly, we're about to start in our little bubble with New Zealand next week-

Sean Doyle:

Yes.

Peter:

... which is very encouraging in very special circumstances. Sean, can I turn before we switch off to the elephant in the room?

PART 3 OF 4 ENDS [00:33:04]

Peter:

... before we switch off to the elephant in the room. It hasn't gone away, it's still there, and that's the environment and what the airline industry is going to do about it. I know you've been doing some active work on SIFs, but I mean, what's the feel in the UK about the flow underneath all the economic and industrial activity? What's the feel among some of the most radicals, I think globally, that you've got in the UK when it comes to aviation?

Sean Doyle:

Well, I think the first thing which we've got to be clear about is that we're guided by the science, and IAG was the first airline group in the world to commit to net zero by 2050. That's aligned to the UN sustainability development goals, and I think it will take till 2050 for aviation to have things like zero-carbon aviation solutions from a technical perspective. One is this will take 30 years to fix ultimately. I think the industry, we're very much aligned with the scientific objectives of the UN in terms of reducing the impact of carbon on global warming.

Sean Doyle:

But I think probably, within that framework, then, you've got near-term opportunities of which sustainable aviation fuel is very credible. We've committed to a supply agreement with LanzaJet. We're committed to a joint venture to develop a SAF plant up in Humberside with Velocys. We're pushing the UK government to support that through the Jet Zero Council.

Sean Doyle:

We think you could build 14 SAF plants in the UK. That would give jobs to many remote parts of the UK and help the rebalancing agenda of the UK government. But also the great thing about SAF is you can just integrate it into the existing supply chains in a very efficient way. It can substitute kerosene, and airlines don't have to ship it to various airports because they can take credit for their commitment to SAF no matter who actually uses it in the ecosystem. And I think SAF is going to be very important for the next 20 to 30 years, because there are some exciting developments coming. But I think for longer-range missions or longer sector trips, SAF will be required. I think that'd be very expected, that it will form part to the framework.

Sean Doyle:

I think the second thing we're doing is obviously making the existing fleet more efficient. We're taking delivery of A320neos, 787s and A350s, and they're replacing older 747s that are retiring, and that will continue across our group over the next 10 years or so. Those aircraft are also, I think, far less noise-polluting than the older aircraft are. So I think the capital investment we're making already [inaudible 00:35:54] is significant.

Sean Doyle:

And then I think we're investing in innovators. So we've launched a joint venture with ZeroAvia. We've committed to their recent round of funding. ZeroAvia have flown a hydrogen-powered turbo-prop operation. They have ambitions to develop this technology, and we'd like to support that ambition. Hydrogen appears to be an exciting area of development that not just ZeroAvia but other players are looking at. Now, that's more radical, and I think it will take longer, but we've got to start placing bets right now to find a solution that will get us to net zero in terms of technology over the next 20 or 30 years. The other thing I would say is the industry is committed to course here, and we need a carbon accounting framework for offset, and also we think the carbon capture commitments and investments will form a part of the framework as well as we get into the next decade.

Peter:

Yeah. I guess my long-winded question was really more about... I mean, the things you're talking about obviously are necessary and they're going to come, but not much is going to come before 2030 in terms. I mean, ATAG's goal, I think, is 2% of SAFs by 2025. My question was really more directed towards, given that we've had a year of hiatus, basically, in aviation, has that fueled the fires of the environmentalists? Are you going to find it tougher talking to those people who'd like to climb on your airplanes at airports because we're going to be ramping up the volumes very quickly again?

Sean Doyle:

I wouldn't find it tougher because I think we've got a great story that we've been telling for quite a long time. British Airways was the first airline to invest in carbon offset back in 2002, and I think we've always recognized that this is absolutely critical for the industry to take ownership of, to retain this right to operate. Let's not forget, people love travel. We have a challenge of a carbon footprint that we're dealing with. I think we've got a very credible story to tell. So I'm quite confident that we will be able to communicate and articulate what we're about and also articulate the fact that travel is very important. It's very important to economic development. It's something that people love doing, and they can do it in a way that will be far more sustainable in the future than they have done in the past. And we shouldn't be shy about having this debate and taking it on.

Peter:

Of course, in the industry, you've got to have some sort of coherence, and we had [CEOV 00:38:33] United on last month saying that all carbon offsets are a total waste of space. We can't plant enough trees, can't plant... Billions of trees are going to have an impact in the next 10 years. Is there going to be that standardization, particularly if you get pressure points like the UK and like France and Germany, the EU generally? I mean, how do you address that?

Sean Doyle:

I think we're going to need many dimensions. So of course [inaudible 00:39:01] and I think the [UETS 00:39:03] are forms of carbon offset and carbon trading which exist today. So they're up and running. We will need more. We need more fuel efficient aircraft. I think we need new technologies to come along, that I think if there is a marketplace for them in the form of carbon capture, replacing maybe carbon offset in the future, that becomes very exciting. So I think you've got to start the journey and I think it has multiple dimensions, and I think we will push on on many boundaries here. But yes, I think it is going to be a key debating point. I think we'll come out of the pandemic with certain changes in the political landscape as well. Sustainability is going to be a key global priority, and we're going to have to be part of this. We're going to have to be part of the solution.

Peter:

Yeah. I guess particularly because President Biden has discovered climate change for the US, and I think your prime minister has some personal contacts who feel fairly strongly about it too. So we're going to have to do [crosstalk 00:40:04].

Sean Doyle:

I think the green economy is part of the economic [inaudible 00:40:07] in the UK, and I think we have a good story to tell. It's got many dimensions to it. It will take a bit longer than other industries, but we will get there by 2050, but it means pushing on a number of fronts.

Peter:

And meanwhile, you've got the big front to push on, which is getting your airplanes back in the air and filling them with passengers at decent yields, I guess.

Sean Doyle:

Yes, so that's our priority, and our people are ready. We're very excited to get back in the air, but hopefully we're in the final quarter of what's been the worst challenge, I think, for aviation maybe this side of World War II. Well, it is. And we'll come out the other end.

Peter:

Good luck with it, Sean. Thanks very much for talking with us on CAPA Live. Been great talking.

Sean Doyle:

Great, Peter. Thank you very much. Bye-bye.

Peter:

Bye-bye.

Speaker 1:

PART 4 OF 4 ENDS [00:42:14]

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.