Is the long haul low cost model sustainable in the long term?

Transcript

Sandeep Bahl:I will quickly introduce our panel. You can see them here, but Rick, Trevor, and Adam, please, if you could come. And while they're walking over to the stage, I want to thank Brendan and Con and Jonathan The session before talking about is the LCC pure LCC is still existing or not, and then they delved into long haul. So that means LCC is still there because the LCC evolving into long haul. And why is that? Peter also just mentioned just now that there is technological advancements that's coming besides this. the warm air that we are looking forward to. A350s, 787s, they're all coming in. And what Jonathan said earlier, Chinese carriers don't know what to do with their tiny planes, or I should say not the wide bodies. So as they don't get access to cities like New Delhi, Beijing and Shanghai if they're going to fly smaller planes. So there are opportunities, right? The thin routes that are there to grab on the longer sectors are already— we can see some of the airlines have already started doing that. How it will go today for next 45 minutes, We have good experts here. They will introduce themselves to you for 2 minutes each. We will then have some questions and they will try to answer them. If they can't answer, some of you can answer on their behalf. But at the end, you will have an opportunity to ask them some questions. And those questions, how many you're going to ask depends upon how long you want to go because then the lunch is there, right? So this is the session, that's how we're going to do it. Rick, would you like to introduce yourself first?

Rick Howell:Thanks, Sandeep. Just to follow on from the previous panel, I think the obvious way that you can actually tell pure LCCs is when their executives come to the stage wearing jeans. If you hadn't worked that out, then you hadn't been paying attention at the conferences. Sorry, Adam. Yeah, I mean, aspirational at this point. So I run operations for the largest airline in the Philippines, Cebu Pacific. In 2016, we were the 3rd most profitable airline on the planet on a margin basis. We're at around about a sort of a 60-ish Fleet at the moment. We had an aeroplane deliver a couple of days ago. We actually have one in a shed that's actually being painted in Allegiant colours at the moment and is about to exit the fleet. So I don't know whether we count that one or not. But we've— we're a fairly complex but fairly pure LCC. And we'll get to the discussions of complexity a little bit later. If you don't know what we do, we operate ATR 72-500s and 600s in a 72- and 78-seat config. We operate a fleet of around 36 A320s, all in a 180-seat config. And we have 8 A330s, although 2 slightly different specs, that are all in a 436-seat pure economy config. Thanks, Rick.

Sandeep Bahl:Thank you, Rick. Trevor?

Trevor Spinks:Moving on to me then, guys. I had about just under 10 years in Europe with easyJet. That's where I got into this, the world of airlines and this passion that we all have. So various commercial roles within easyJet, seeing this sort of airline grow from about sort of 70 aircraft to 200. 5 years ago, though, I come over to Singapore. I'd never been to Asia, so straight over to Singapore, and I joined this company called Scoot, and I remember still looking at the Wikipedia site when I'd been approached for this potential interview, and there was literally nothing. It was the CEO who was from Singapore Airlines. 5 years later, Scoot's already started up its first subsidiary, which is Knox Scoot in Thailand. We've merged with Tiger, which is quite a big effort that happened sort of just last year, in July last year. We're currently— Scoot started on 777s, Not the most sort of friendly of aircraft in terms of fuel. Singapore Airlines is our parent company, and very quickly Singapore Airlines made the decision to give the 20 Dreamliner orders through to Scoot. We currently have 16 with 4 more to be delivered in terms of the Dreamliners, and we've got 24 A320s on the old Tiger fleet as well. So again, there's lots of those being painted around at the moment. There's an order book going forward for 39 A320neos as well. So we've got a lot of growth to come forward as well. So there's a lot of work to do in Asia where there's a lot of airports that we just can't simply land in now because of slots, etc. But we've got over 60 destinations now, just 5 years old as well. So it's, it's going from strength to strength very, very quickly. And it's got a lot of growth coming in front of us in the next couple of years as well.

Sandeep Bahl:Thank you, Trevor. Adam?

Adam Weiss:I am Adam Weiss. Aside from being overdressed, I am Director of Business Development for World Airways. We are a long-haul digital low-cost carrier emanating from the U.S. As you saw before in the opening remarks, it was striking that there's a ton of long-haul LCCs popping up around the world. There's none in the U.S., so we're going to fill that white space. We are filling that white space.

Rick Howell:Thank you.

Adam Weiss:Our thesis is really premised on 3 tenets: to be contextually digitized throughout the customer journey. So we looked at the customer journey holistically, and we want to be serving products to— we want to serve products to passengers at the times that they expect them, from the moment they search to the moment they get off the plane and get to their place of destination. Mm-hmm. Secondarily, want to be very opportunistic about the equipment that we use and the routes that we fly. And third, we want to engage passengers socially and market to them in ways that historically they haven't been done. So we see a huge latent population, particularly in the U.S., that doesn't travel internationally. Part of that group is millennials, and they think and operate and behave in different ways. that consumers historically have. We understand that. Frankly, I am one of them, and our model is to activate them and provide them the connectivity and access to international destinations that they historically haven't had.

Sandeep Bahl:Great, great panel here, right? We have 3 different airlines, similar or very different ways of doing business. Having Trevor here who has worked for easyJet, where recently, if you see in Europe, there's Norwegian that has started as a long haul low cost carrier. So with that, let me ask you a question to the panel. What is really the difference between long haul LCC and a full service carrier? You know, forget about the ties and suits, right? So let's see, let's get to the grunt of it. What is the real difference?

Adam Weiss:Yeah.

Sandeep Bahl:A lot of full-service carriers are also saying they have very low cost now.

Trevor Spinks:Shall I start then?

Sandeep Bahl:Yes, please.

Trevor Spinks:Obviously my parent airline is Singapore Airlines and I did my career and I'm low cost through and through. When Scoot was started, Singapore Airlines, I think they did the right thing. They literally picked it up and put it in the corner. Although the CEO was from Singapore Airlines, it was left to do its own thing. Bar the startup team where they had like one planner, one maybe revenue manager to get us off the ground, it was really left to run itself. And it worked. They allowed us to make decisions in the speed we needed to make decisions as a startup airline, in the speed we needed to go as well. So you could kind of throw all these things about a low-cost airline has to have high utilization. Allegiant clearly proves you don't have to do that. If you looked at some of the numbers when I was at EasyJet, On a Tuesday afternoon in winter, utilization was very, very low. It was just lost in the bigger numbers, et cetera. Of course, you're going to have smaller teams. You're going to have a lot of reliance on third-party systems, et cetera, et cetera. So the difference between the long haul and the low cost as well is always going to be, to me personally, if you just put your family side of it. If I like to travel for business, I would like to travel in business class. I don't, because I work for a low-cost airline. So one day I probably should work for full-service care. But if you're moving around with your family, and now you're moving sort of 3, 4, or 5 people, the cost can really sort of grow quite quickly. And if you only need one bag between all of you, you're going to go on your low cost. So the difference between the full service and the low cost is obviously cost is put up there a lot of the time with the fuel burns, the aircraft technology, et cetera, et cetera. But to me, whether it's a BA or if it's United, You've got these guys who've been around for a long, long time. They're very, very well established. They have huge, huge head offices, huge, huge costs, et cetera, et cetera. And we've seen Cathay go through a lot of problems recently as well. So you've just got this very big structure that takes a lot longer to make decisions or maybe to get where they need to. And LCCs, it's about getting to those decisions quickly, making decisions. And if you do it wrong, we'll put our hands up and say, we've done this one wrong, move on to something else.

Sandeep Bahl:Yeah. Thanks, Trevor. Rick, any comment on that?

Rick Howell:Yeah, it's an interesting discussion because there are quite a lot of low-fares carriers that actually aren't low-cost carriers. And there's a problem with being a low-fare carrier without a low-cost base. And unfortunately, it sort of generally ends up in a shareholder problem as much as anything else. On the low-cost side, I think the, the long-haul piece for low-cost— to be honest, I remain a little skeptical about the idea of pure long-haul low-cost. And that's just from my own experience operating our A330 fleet, where there are markets we entered that we exited. And picking up on what Trevor said, we're trying to change the way that we do business internally to become a more— well, as I've described us before, an e-commerce company with aeroplanes. We're trying to stop thinking like an engineering-led organisation, really connect directly with our passengers on a On a sort of more finite and individual level. But that actually is sort of the end result of a philosophical change that we want to try to drive into the business. And that is that if you talk to the guys from Google, Amazon, the big software powerhouses, they both have a fairly significant culture of experimentation. They have experimental teams. They have, they have a process that drives the business to try things, and if it doesn't work, it's not a failure. It's actually, as long as you learn something from it. If you don't learn anything from it, it's a failure. And that doesn't really fit very well with airlines, to be honest. And it certainly doesn't fit very well with full-service carriers, because if you actually don't, or if you've never done this before, when a full-service carrier goes to set up a new port, Right. It doesn't just say, ah, right, we think we want to go and fly to Berlin, for example, so we'll go and see who's going to be able to handle us at Berlin Airport. A full-service carrier will actually go set up an office. It'll employ a station manager. It'll employ station staff. It'll actually— it'll find a lounge. It will train people. It will invest a lot of fixed cost up front before it actually starts the process of delivering passengers. And it has to do that because the passenger expectation is, hey, I walk into a Singapore Airlines lounge in London, it's going to feel like the Singapore Airlines lounge in Joburg, in Singapore, or somewhere else. That's the passenger expectation. So it actually means that it's very, very difficult if you're a full-service carrier to be able to make the decisions that Trevor just spoke about and turn things on and off. You can't actually invest all this money, acquire all the people, acquire the real estate, invest in a lounge, and then go, ah, you know what, that, no, that's not a good idea. Let's cancel that. And that probably is the essence. I mean, the passenger piece is obviously fairly clear, the ancillary charges that, you know, the number of seats on the aeroplane. But if you're looking at it philosophically, I think the ability to execute a quick decision, and to not invest yourself into a position where you can't actually unwind a decision that hasn't worked, is probably the big difference between a full-service carrier and a successful low-cost carrier, not necessarily a low-fares carrier.

Sandeep Bahl:Well, thank you. I— yeah, Rick, it's a good point there where agility that an airline can adapt When they're starting a new route, going directly to looking at whether we should have our own vendor, our own people, or have vendor arrangement. But besides these costs, is it, you think, is the fuel one of the key drivers nowadays, or is it just fuel cost is same for all? Is it fuel is a driver for long haul, or? I think fuel is a driver for long haul. Fuel costs?

Trevor Spinks:Of course fuel is going to be very important. We had a big step change and went from the 777s to the Dreamliners, and when the new aircraft come in, that's going to help as well. But it's not the big driver that it was maybe sort of 10 years ago or 20 years ago or something similar. So it's— of course it's very important, but it's going to affect everyone the same. And from Scoot's point of view, we purchase our fuel as a group, so it's Singapore Airlines and it's Scoot and it's Silk.

Sandeep Bahl:So that's, that's another great point. Now, if we look at long-haul low-cost carriers, a lot of this, you know, you mentioned about Singapore Airlines quite a few times when it— in context of Scoot. Is their long-haul model more dependent upon their parent company, or is it more feed interlining? Whereas, as we earlier heard from a panel earlier, The low-cost carriers today are now jumping into the same thing, interlining, trying to get partnerships. How about the long-haul LCC model? Knowing that there are carriers like Scoot, parent is SQ, recently Joon started from Air France-KLM, BA or IAG Group came up with Level, Qantas has for a long, very long time Jetstar, and I checked with my friend from ANA, they have no plans to have a long haul LCC going for some time. So you think the parent company or having an interline arrangement or a feed from full service parent carrier will determine the success of long haul low cost carrier? I think it's a combination of both.

Rick Howell:Can I take that one?

Sandeep Bahl:Yeah, sure, please. Any one of you.

Rick Howell:All right, I'll, um, our parent company, we are, um, uh, we're part of a conglomerate, um, majority owned by, uh, um, by a, by a Philippine, uh, Filipino, uh, family, um, through the holding company, which, um, uh, our parent company, uh, primarily is in snack foods. Um, so the, uh, the, the For us, the full-service carrier and the full-service parent actually doesn't exist. And the ability for us to connect the chips and drinks supplied by our parent company to our passengers actually is not necessarily a big advantage, because they don't come in the right format to fit in the trolleys. So that isn't necessarily a significant driver.

Trevor Spinks:Uh-huh.

Rick Howell:Of our success. Um, on the, on the connection side, um, so if you look at, um, just our own internal network, moving away from the value alliance, which I know Brendan's gonna, gonna jump on me at some later point about, um, but moving away from any of the alliance discussion, what we sell internally through our own, uh, through our own website, and we're about, it's now about 70% of our sales are through the website, Across our whole network, we see about sort of 5%, low single digits or mid-single digits, of our passengers actually arrange their own self-connection. So we'll sell a flight where they might go from Davao to Manila to Incheon. So we sell a connected product, but it's actually a fairly small percentage.

Adam Weiss:Okay.

Rick Howell:On our long-haul network though, so Dubai and Sydney, and we expect it'll be similar in Melbourne, we're actually seeing sort of mid-double digits. So these are people that actually arrange their own feed, their own connection to one of our domestic services. 15%, if you're a full-service carrier, 15% connectivity would be an abject failure. You'd actually, you'd take a walk through the hall of mirrors and a long hard look at yourself. For us, 15% of a 436-seat aeroplane, we're, you know, we're into the sort of 60 or 70 passengers per flight are actually coming off or joining our long-haul aeroplane and then entering our domestic network. So we don't need a full-service parent to deal with the connectivity, and we actually do make a lot of people happy by being able to join them at low cost from a long-haul operation into our, well, the most domestic, the most extensive domestic network in the Philippines.

Sandeep Bahl:Great point, because if you have, as I understand, if you have your own nice connectivity within your hub area and you have your long-haul operation coming and feeding into your hub, that will work very well. Having the chips on board long-haul probably won't work well. Talking about that, you know, in US, Adam, like what we are hearing out of Asia and Europe, level June started, in US you don't hear any of these big carriers thinking about going low-cost long-haul. They are working on making themselves a low-cost carrier anyway. Is that right, or you think there's something else is happening?

Adam Weiss:Yeah, no, it's absolutely correct, and it's the white space that we're looking to fill. 64% of Americans have never traveled internationally. Of the ones that do, only 41% in 2017 traveled overseas. So there's a huge latent market. The consolidation of the US 3 has really left large areas of the country without the opportunity to access destinations abroad. And it really takes a certain appetite and appetite for risk profile to sort of enter the aviation industry in the U.S. We don't anticipate that any of the larger carriers are going to form subsidiaries, long-haul LCCs. It will cannibalize a lot of their business. There's pricing pressure from the domestic LCCs already. And a lot of the profit margins are in in the long-haul networks. It's, frankly, it's striking that there haven't been any enterprises to sort of fill that void. There's a ton in Europe, a ton in Asia, none in the U.S. We try to understand why. We love the thesis and we're pursuing it aggressively. And frankly, I can't explain why there isn't— I think that's a great point. More people trying to replicate the model.

Sandeep Bahl:All right, yeah, but, you know, like, I think Trevor can answer this very well. Like, what is an extent when a carrier, a full-service carrier, looks at, okay, I need to have a long-haul low-cost carrier for SQ, say, building up Scoot? Like, what is the criteria? What drives this? And is it only because of the competition, or is it just they want to cannibalize their current route, or the routes are not making money? What are the reasons you think there are?

Trevor Spinks:I think it's all of the above. From the SQ side of things, once Scoot was up and it's proved itself and profitable from year 2 onwards, It's— if you're the parent airline, you've got routes that are maybe much more suited for the LCC model. We've taken over Athens and Jeddah from the SQ Group. We're going to take over some other routes in Malaysia and Indonesia from the Silk Group. So it gives you this portfolio to sort of move your aircraft or airline types around, whether it's the premium or the low cost. But why would you invest in Tiger 10 years ago or Scoot 5 years ago as well. Clearly competition is one of them. Qantas— well, AirAsia obviously had a great jump start in Asia with no one really sort of following suit for a while. And then obviously Qantas started Jetstar. And at this point, if you're Singapore Airlines, and you've got to remember that there's only 5 or 6 million people here to try and sort of move, and although Singaporeans do travel a fair bit, and it's a bit more traveling overseas than the Americans.

Sandeep Bahl:Yeah.

Trevor Spinks:They were feeling the punch, feeling the pinch from obviously the AirAsia guys above them, from Jetstar below them. Jetstar Singapore started up themselves as well. So all of a sudden, they're going to have their own yields decrease. People are going to jump from the Singapore to Melbourne routes, and they will lose out to these low-cost carriers as well. So do you start your own low-cost carrier to compete with those and cannibalize yourself? It's yes and no.

Rick Howell:Yeah.

Trevor Spinks:So we actually fly to the big 4 points in Australia, and you could look at the history and say, oh, maybe when Scoot started one of the Australian destinations, it stops Jetstar starting up to Singapore, because can some of the routes handle 2 long-haul low-cost carriers? So in that sense, Singapore Airlines kind of cannibalizes themselves, but they keep the money within the group rather than sort of maybe sort of reacting too slowly, and that money also leaks into the economy. into Yeah, I think that's a really good point. a third carrier as well. So it's a little bit of everything as well. And obviously geographic position as well is hugely important.

Sandeep Bahl:So Adam, you think, like, with now WestJet going into long-haul routes in North America, but they, before launching their long-haul, they have gone into building up these alliances with easyJet and Ryanair, etc., out of Gatwick for the feeder traffic. And recently they also announced a very big joint venture between— with Delta before launching their long-haul low-cost service. Is this a model you think a new long-haul— if an airline wants to get into long-haul mode, that they are already predicting that we might have to get into this? Whereas what we are hearing—

Trevor Spinks:Yeah.

Sandeep Bahl:from Trevor as well as from Rick, you know, Cebu Pacific can just feed it on their customers. Is it a different model all the way there in Northern Europe?

Adam Weiss:It goes back to the discussion that we were having before, that the term low cost is sort of nebulous. It depends really what the lens through which you look at it. I mean, you don't see very many announcements of new full service carriers. No one's coming out and saying, we're gonna be a full-service carrier. It's more ideological and strategic in a way. It's the way that you brand your airline. It's being digital. It's not being beholden to legacy systems and legacy ideologies in a way. To answer your question, I think when a full-service carrier wants to enter the long-haul low-cost market, It's not a natural evolution for them to sort of go down in class. So they need to find these opportunities to do so, whether it's through network alliances, whether it's through rebranding, whether it's through just a general change in strategy. Everyone wants to participate in this hot white space, but it's difficult for larger airlines to do so. to do so because they're not agile, they're not malleable. When you're a startup, you are. You have a clean sheet. You can pick the systems you want, pick the routes you want, pick the equipment you want. It's difficult for a large carrier to sort of replicate that model and participate in the space the way that a startup can.

Sandeep Bahl:Good. You know, Peter earlier in the morning mentioned about a lot of new planes being delivered. Wendy also talked about Boeing is delivering a lot of planes in this market. And you will notice many of those planes are bought by— on the order books, a lot of low-cost carriers are also there.

Rick Howell:Because—

Adam Weiss:so—

Sandeep Bahl:and some of these are wide-body, long-range, ultra-modern planes. So my question is, is there any particular features of these new planes that actually might enable a sustainable LCC long-haul model? Because sustainability is also important, right, in our business. So you think this will help the new generation planes here?

Rick Howell:Interestingly, when we When we were looking at— and we, you know, I'm not giving anything away here. We continue to evaluate the options that are in the market. So don't immediately assume that we're actually out for an RFP for new wide-body aeroplanes. We continue to look at this on an ongoing basis. One of the things that was quite clear from both manufacturers, the 787 and the A350 were both not designed for LCCs. And that actually manifested itself in 2 ways. We have an A330 with 436 seats. The limit on the aircraft is 440 seats. Airbus lied to us a little bit and told us we couldn't get the extra 4 seats in, but Lion Air did, so we're a little annoyed about that because they have a 1% lower cost base than we do. Anyway, that's a— That's water under the bridge, Airbus. The issue for us in the 787 was very interesting. The 787-8's too small. 787-9, OK, it's an aeroplane that actually has the same seat limit as the A330 because of the door exit limit. So we started digging into that a little bit more because it's It's obviously more fuel efficient than the A330, and actually ran into an interesting problem that Boeing had actually never thought about or never run into before, and that was that the all-electric air conditioning system was actually not capable of sustaining life for 440 people. So, OK, oops, there's a small problem. A350, same doors as the A330, so you get a whole lot more aeroplane. Our A330s weigh about 121, 122 tonnes empty. That makes them very light A330s, in case you were wondering. A350 would be carrying about an extra, extra 20 or 30 tonnes of aeroplane to be able to fly further. That's true. But we'd still actually only be able to put 440 people on it. So if you're just looking at it as a straight aerodynamic, thermodynamic argument, why would you want to carry an extra 30 tonnes?

Adam Weiss:Yeah.

Rick Howell:for the same number of people, because those same number of people actually have to pay for that extra 30 tonnes to move every time. Those 2 aeroplanes were not specifically designed for the LCC market. No, no, Scoot have done very well, you know, been very successful in their implementation of the 787. Doesn't necessarily work for us. 330neo is going to be interesting, depending upon Depending upon exactly how that works out, mainly with the engine manufacturers. For us, the essence of any wide-body aeroplane that we have is that we must be able to sub it into parts of our network where there is demand. And the demand might not just be passenger demand, it might be cargo demand. Some of our prime A330 routes, we're actually— we're We're seeing revenue of more than 20% coming from underfloor cargo. Now, when you have 20% of your revenue come from underfloor cargo, that's aside from ancillaries like seats or baggage charges or things of that nature, means that you can actually drive down the cost per ticket quite significantly. If we can enter a market and we compete with Scoot, and they have lower fuel burn than us because they're flying a 787, we're flying an A320neo, A330, but if we can undercut them by 20% just by virtue of carrying more cargo than they do. Low-cost carri— low-cost passengers are, are not particularly loyal in, even though we have a great loyalty program, well it's actually, sorry, a lifestyle rewards program. Even though we have a, you know, a good program in that, in that regard, 70% of our passengers travel less than once per year. So 7 out of 10 passengers are going to forget about the experience before they come back again. So it really does come down to he with the lowest cost wins. And if you lose the religion and start driving unnecessary cost into your business, you're just not going to compete.

Sandeep Bahl:A good point, especially on the belly space. I think that really determines how to make the profit. And if I have some friends from cargo vicinity here, long haul, low cost cargo fares you're looking forward, you know who to talk to here, right? The cargo really needs some jump.

Rick Howell:Just to jump in there, we're actually not a low cost cargo operator.

Sandeep Bahl:All right, okay.

Rick Howell:All right, we're a low cost passenger operation.

Sandeep Bahl:All right.

Rick Howell:Our cargo operation is as full service as you could possibly imagine. All right, thank you.

Sandeep Bahl:Just for clarity. That's a great point. I want to have an opportunity for audience to ask some questions, and then we will wrap it up. So anyone has any burning question to the panel? Andrew.

Rick Howell:wide-body aircraft for LCCs rather than the declining market segment of full-service carriers?

Sandeep Bahl:So the question is how we can get the manufacturer on board so that their wide-body new planes are more suitable for LCC operation. That's from Andrew. Would you like to—

Rick Howell:Yeah, that's a great question, Andrew, and I think I was talking before about how airlines that are sort of engineering-led tend to be sort of lethargic, and they don't change direction very well. You need to sort of slap them around a bit to make them move. Aircraft manufacturers are like legacy airlines on Xanax. It's actually convincing them to change the—

Sandeep Bahl:Sorry?

Trevor Spinks:Sorry, I—

Adam Weiss:I agree.

Rick Howell:Anyone— sorry, Embraer, I didn't mean that. If they're not going to pay attention to where the successful investment-grade opportunities are, and if you want to have a look around and see where are the developing investment-grade airlines, they don't have lounges. They actually wear polo shirts. So the manufacturers, and unfortunately, and there's a bit of a, I mean, we are our own worst enemy in some regards in this area, because as Trevor had said, we're usually a fairly small team. It's usually fairly young. It's not generally made up of grumpy old bastards like me that actually try to beat the manufacturers around to get them to change their—

Trevor Spinks:No.

Rick Howell:change their minds, because the young and upcoming teams that frequently run low-cost carriers actually haven't developed that sort of nasty attitude that comes from being the recipient of love from the manufacturers for so many years.

Sandeep Bahl:Good. Any other questions? Yes, please.

Trevor Spinks:Hello.

Rick Howell:My name is Christian Heilander from MasterCard. I have a question, 2 questions actually. The first one, what would you define being the ancillary revenue streams of tomorrow? How do you develop that? The second one would be, how do you attack the cost at the airports? What do you do to reinvent the airport flow?

Trevor Spinks:Can I take the airport cost one? I saw a huge difference when I was in Europe with easyJet and then when I come to Asia. easyJet was obviously huge and you could bundle into airports and you could throw your weight around and we want to come here and I'm not paying rack rate. I don't think easyJet paid rack rate on anything.

Adam Weiss:Yes.

Trevor Spinks:So you go right down and then when you come into the end of your contract, you want to go to them again and say, I want to renew that contract at that very low rate. When I come over to Asia, even with Singapore Airlines behind us, etc., etc., You didn't really negotiate with the airports. You had this rate and you paid it. Okay, one of the differences between a full-service and a low-cost to me is the low-cost would go and get these rates. You're bringing a huge number of people in, sometimes to secondary or tertiary airports or something similar. So negotiate with these airports and bring your airport costs down as well. And that has started. Okay, some airports don't need to because they're hugely constrained anyway. But if they're really after sort of trying to sort of get these these low-cost carriers in with these huge numbers. They'll get paid by the per pax, so it's in their interest to get these high-density aircraft in. So that's where I'm in terms of the cost side on the airports, is negotiate with them to start off with rather than just accept what you're given on page 1.

Sandeep Bahl:Yeah. Yes, please.

Adam Weiss:To answer your ancillary question, we look at the term ancillary, it's historically been a status stigmatized term. People think ancillary and they think pain points. It's paying for baggage. It's paying for— to expedite your place in line. We see it as augmentative, not detractive to the customer experience. So the technologies that have been in place have really prevented passengers from accessing— from replicating the behavior that they have at home. We sort of want to emulate the couch experience. And we think that the Wi-Fi, the connectivity is there now. And that gives you an opportunity to monetize passengers in ways that historically haven't been done. E-commerce is a huge driver for us. We just never understood why someone that's literally physically constrained from 3 to 16 hours that's desperate for distraction, how you can't figure out how to monetize that person. It's bewildering to us. And the last thing I would say is that So ancillaries, from our perspective, are going to come from the same places that e-commerce currently drives revenues, which take a point on transactions that are made on board, on shopping channels, on gaming, on social interactions. Be really progressive in your thought. Rick says that they want to be an e-commerce platform that flies, and we truly believe that also.

Rick Howell:Yeah.

Adam Weiss:So airlines have these wide swaths of customers that most businesses don't have. They have them constrained. They have them captive. And there's tons of ways to monetize them using current technologies that haven't existed before. And to us, ancillaries, the old definition of ancillaries, that's just revenue. That's not ancillary revenue. New ancillary revenue is comes from digital and e-commerce.

Sandeep Bahl:Thank you, Adam. It's amazing, you know, most of the things that we heard are all related to whether this long-haul LCC is sustainable or not. They're all ending up like you have to adapt and change. You have to— sustainable in any business, it's a common theory, that we have to work with different partners, whether it's a manufacturer of airplanes, look at it whether they can— our business model as an airline business model is changing, can they change themselves or not? And at the same time, technology that Adam is talking about is driving so many new opportunities, unbelievable ancillaries, you will hear it in the next session also, all the money that you're going to make with the ancillaries. US and India, And not even US, I think in Asia nowadays you see the ancillary revenue is taking over, taken off in a big way where it's not only the baggage fees anymore, it's much more than that. So with that, I want to say thank you so much. Thank you, Rick, Trevor, and Adam, and for wonderful team here. And now I leave it with Peter. Thank you, CAPA, for this. Thank you. Thank you so much.

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