LEVEL CEO Update – Adopting Different Production Models To Support Low-Cost Operations Out Of Spain, France And Austria

Transcript

Vincent Hodder:Well, so I think as a starting point, I really do feel like I'm standing on the shoulders of giants. People like Alan Joyce and Bruce Buchanan at Qantas Jetstar, who really started the first successful low-cost long-haul model, both of whom were role models and teachers of mine as I came up through my career. But also in different ways, people like Federico Bloch and Roberto Kreeb from TACA, who really, I think, mastered the model of multiple AOCs inside a single operating brand, to the Tony Fernandes and Conor McCarthy from AirAsia and AirAsia X, the development, further development of the low-cost long-haul business, the Michael O'Learys, the Ryanairs, the easyJets. All of these elements have sort of come together and we're taking pieces out of each development that the industry has gone through to put it together in a new way. So I feel it's a lot of weight to put onto their shoulders, but it's fantastic for me to have the benefit of all of that experience come together in developing what I really think is a new business model for the future of aviation. So if you think about the customer being the centre of what LEVEL is about, and around the customer we build the brand, the commercial offering, the customer experience, all the way through from search and booking on the website, right through to the airport experience, the travel experience, and beyond. That's the full responsibility of LEVEL as the airline management company. We distinctly separate, though, that airline management company from what we call the production units, the people who are actually flying the aircraft, who have the AOC, who deliver the product to the customer on a daily basis. And we do that to break that vertical integrated chain that is so traditional in the airline industry, but which locks you into a particular way of operating and a particular way of delivering the product. And it's not necessarily by design, but already 15 months into operation, we're already operating with 3 distinctly different production models. One which is an external production model where Iberia operates under the Iberia AOC. Our business out of Barcelona. We have Open Skies, which is an IAG subsidiary. It's actually a subsidiary of LEVEL itself, which is operating our French business. And then we have a franchise business called ANASEC, operating as LEVEL Austria. So 3 completely different models across long-haul and short-haul, all designed to work together in a consistent way to deliver the overall LEVEL promise to the consumer. So I honestly believe that you could not do what we are doing anywhere except inside IAG. The organization of that group as a multi-brand portfolio of airlines who are targeting different geographic and different customer segments, LEVEL fits into that mix and it fills up a white space that existed for IAG, but it as an incredibly difficult thing to do, to build a new low-cost model in the long-haul sector, we have the scale and the capability across all of our sister operating companies to draw on to help us to move faster, to scale quicker, and to get the business to profitability faster. So I don't want to let too much out of the bag too early, and we do have a period of consolidation over the next 12 months as we had only 2 aircraft deliveries coming into the long-haul section of the business. But I think longer term, what I would say is we've got a fairly ambitious and aggressive approach to how we want to scale and grow the business. I think you're going to see more in the long-haul sector, both in terms of growing the footprint of where our operating bases are, as well as growth in the number of aircraft that we have in each of the operating bases. I'd like to see further enhancement and development of the short-haul franchise model as well. And, but I think it's what we're going to see is some really, really exciting stuff coming up over the next couple of years. Well, we've been talking about long-haul low cost for a long time, and Jetstar, for example, started with its long-haul business in 2005, 2006. So it's not exactly completely new, but the history of those discussions really started out with a lot of negativity. It's never going to work. There's no way to make this happen. There's no demand for it. Over time, that's changed. Different people have come into and have expanded on that business. We've learned new lessons about what works and what doesn't. And we've now got to the stage where I think the launch of LEVEL in Spain is a prime example of why the model works. So in the first 16 hours, I understand they sold 60,000 or 62,000 seats in the first 16 hours of being on sale. That's a level of pent-up demand from the consumer which says, yes, we do want this model, we do want to lower the cost of long-haul travel, we do believe that introducing this model opens the world up to us as consumers in a way that nobody has done before. This conference today, as the first Long Haul Low Cost Pacific Global Summit, is really a recognition by the industry that, okay, We can't ignore this anymore, and all these people behind my shoulders are all here because they want to understand more about the model. They want to be participants in the growth of this section of the market.

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