Middle East - Critical Thinkers - Leading an airline in 2021

Transcript

Richard Maslen

Hi, I'm Richard Maslen and welcome to this latest session of the June, 2021 CAPA Live. Now the middle east has played an important role in aviation for a long time, but it's only been in recent decades that it's truly flourished changing the way that we travel internationally, embracing the low cost revolution and adapting it to it's own market needs. Bringing new levels of comfort, services and onboard amenities to travelers, but it's been hit hard by COVID and over the first five months of 2021 capacity levels are down by around the half compared to pre-pandemic. IATA to traffic data for March, 2021 showed it was down 80% compared to March, 2019. The recovery is happening, we're seeing more of the world begin to open up, but it's challenging. Cannot be denied the lead in any part of an airline in 2021, 2022. And even onwards is going to look very different than ever before. 

The impact of COVID-19 has required all airlines to reassess their processes, innovate and adapt to a new world order. Our regular critical thinking panel has this month come to the middle east and we're delighted to be joined by Mr. Abdul Wahab Teffaha, Secretary General of Arab Air Carriers Organization, Mr. Thiery Antinori, chief commercial officer at Qatar airways, and Mr. Waleed Al Alawi, acting CEO of Gulf Air. So I think it's quite important to begin with, to actually get an understanding of the local area and how it has been hit by COVID over the last 18 months. So Mr Abdul Wahab Teffaha, can you just give us a brief introduction as to how the middle east and the Arab airlines have been hit by COVID and what the situation is right now? 

Abdul Wahab Teffaha

Well, the hit was very hard, like everywhere else in the world. In fact, in the Arab world we have witnessed a steeper decline in both traffic and capacity than the other regions of the world. Our figures were minus 72% for the whole 2020, as opposed to 2019. And across the board, we were witnessing and facing restrictions which sprung up by regulations that were instantaneous, and we were struggling to see how we can manage that. So the situation is as dire as everywhere else, a little bit more dire in the region, especially that the spread of the airlines of the regions, especially the major ones, is so global, to the extent that especially in the advanced markets, we saw a huge decline and that affected tremendously our situation. In the first few months, three or four months of 2021, the situation is not actually much better. We're down 65% still as opposed to 2019. And we are expecting that if restrictions do not ease down, of course, the level of vaccination around the world, and the level of inoculation is not up to a certain degree that the world is going to feel safe for air travel, in spite of the fact that air travel itself is extremely safe, even in the case of COVID, I'm afraid that 2021 one to one will be a better year than 2020, but not by much. 

Richard Maslen

Okay. It's quite interesting to see how hard it's been hit. Obviously the business models of airlines in the region, particularly in the couple of areas, it's impacting their operations, it takes two to tango. You need to have other markets open to be able to serve. So, Mr Antinori of Qatar airways, you know you've grown as an airline during this crisis, you became from here the biggest airline in the world, which your CEO was most vocal about talking about. What has changed as being a commercial manager of an airline? What patterns are we seeing that's different, and what do you think will change considerably moving into the future and what will just be a short term issue? 

Thiery Antinori

I think it's extremely challenging. I think it will impact the way to manage airline in the future, even after the crisis. It has been about first of all, thinking about the customer for us. So continuing to fly because the mission of an airline is to be there for people, for the customer, for the trade. And we have been very proud at Qatar is that Al Baker took this decision, it was a difficult decision, to continue to fly. The operational resilience of Qatar Airways, that has been always an asset for the company and has been even reinforced during the last blockade. Probably contributed to that. 

So customer first, and after that, because we were operating on the every day, we were able to read the market maybe a bit faster than the users at being on cold engine. And we have been able to step by step rebound the network, but it's a lot about agility and changing the plan every day. And I see what is very new with chart is you have permanently to sync with the integration of the cargo, because you do not take a decision now to operate a flight or to resume a flight just because there is passenger demand. Is because in the combination of passenger and cargo revenue you can cover your direct operating costs. So I seen the main thing during the last year and the next year will be to generate more cash than your operating costs and to accept to lose money, but just to sweeten the deal of the fixed cost. And ahead to be more agile, more integrated and more sustainable, and to have the right fleet, to have a good mix between cargo and revenue without polluting the world. 

Richard Maslen

Sounds very interesting, how cargo for a long time was frowned upon a little as the industry has become such a vital part over the last year. And will do moving forward. Moving onto Mr. Waleed Al Alawi at Gulf fair. What are you seeing that's different along this recovery path for the airline? How are passenger bookings changing? Which markets are you serving as the demand shift is happening and what are you seeing in traveler sentiment to fly into Bahrain?

Thiery Antinori

To answer your question, today we operate today for instance 250 passenger flight, Qatar Airways today. It's exactly 50% less than in 2019 the same day. And we operate 120 cargo flights today, and it's 90% more than the same day in 2019. So your see the dynamics. 

Richard Maslen

Mr. Alawi, can you hear me now? 

Waleed Al Alawi

I can try. I don't know if you can hear me. 

Richard Maslen

Yes, yes I can. Did you hear the question I asked or would you like me to repeat it? 

Waleed Al Alawi

[inaudible 00:09:04]. Unfortunately, you're coming in out. I will just go ahead and talk. Maybe I hope you can hear me. For Gulf Air, since the start of the pandemic we actually never stopped flying. And our contribution was initially repatriation flights, many repatriation flights throughout our network. And then we moved from repatriation to cargo, ie food supplies and PPE. And now we continue to increase the destinations or try to recover to some of the destination we used to fly. Recently been involved in the cargo carriage of vaccination to [inaudible 00:09:51]. So the challenge goes on. As far as the market's concerned, it's tough times and the market is changing every few hours, one of the governments will come up with a restriction and you have to [inaudible 00:10:10]. So restrict the movement that you have is being managed all the time. So obviously any airlines would look at a [inaudible 00:10:21] you can maintain a network for a week. We'd have it would possibly look at twice a week, so challenging, difficult times with what is happening with the market. 

Richard Maslen

Okay. Thank you. Thank you for sharing your view on Gulf Air there. Mr. Abdul Wahab Teffaha, Can we go back to you and look at, the market's beginning to open a little now certain of parts of the world. Are you beginning to see some hope that the second half of 2021 will be a much stronger position for the airlines in the region than perhaps the first six months of the year has been? 

Abdul Wahab Teffaha

Absolutely. Let me give you an example of how the removal or easing the restrictions would actually bounce back a level of traffic which we haven't seen since 2019. Back in November, 2020, the UK and UAE removed mutually the requirement for quarantine. Immediately, and for the next three weeks, the level bookings were above 2019 by 8%. Above 2019 by 8%. That gives you an indication of the actually eagerness of the public to travel is there. The only problem is what are the level of restrictions that are being imposed by governments? And on this point, what we really don't understand from some governments is, what are the criteria that on which they based their restrictions? Or there are criteria... I'm sorry, somebody is speaking? Yeah. All right. Anyway, that happens with technology. You see face-to-face that doesn't happen. So the problem we are facing, is that there are guidelines and recommendations by the WHO, and by the international civil aviation organization. 

And those guidelines are recommending to different governments of the world that in case the level of positivity rate of testing is so much, then the country concern is labeled green or red, depending on the level of exposure to the virus level. And so on. But unfortunately these are only guidelines, and most of the countries, in fact, out of 153 countries, which actually accepted those guidelines, only 55 applied them, and the rest of them did not. Now, if we get to a point where governments, especially health ministries, would accept to be transparent and saying, "These are my criteria for traveling into and out of my country, and to those destinations." I think the situation is going to be easing tremendously. Now, what I fear most is that we'll have another wave maybe in the fall in the Northern hemisphere, because now in the Southern hemisphere, there is a new wave. It's not as strong luckily, but there is one. So, my biggest fear is to have another wave in the fall, although it's not going to be big because of the vaccination. And then the government are going to each to go back to their comfort zone of closing up everything. I'm very hopeful that if governments ease the restrictions, people are going to fly and to fly massively. 

Richard Maslen

It sounds wonderful if that will happen. Unfortunately, politics quite often gets in the way of these decisions. And I think for an airline, Mr. Antinori, for an airline, how difficult is it for you to ahead givens that we don't know what's going to happen with future waves of COVID, we don't know how governments are going to react? We've we've seen here with me in the UK, changes to the structure, changes. Markets opening, markets closing. How can you sustainably run an airline in that environment? 

Thiery Antinori

By being extremely agile, by having the right process to evaluate the fleeting together with the cargo and the passenger departments together as one team. And also by putting all odds on your side, in terms of bio safety. To be the airline you can rely on. To have customer travel with confidence. We cannot have influence as an airline on the decision of the governments. We cannot have as an airline decision and any influence on how the pandemic will spread, obviously. We are not there to complain or to comment too much as an airline about the government policy, because each government is sovereign, but as an airline, if you have the right process or right fleeting and the right bio safety, and the right product and the right attitude, you can at least take your higher share of the smaller pie and survive and navigate to have a longer breath than the other. 

And that's why at Qatar Airways, his excellency Al Baker has focused a lot on bio safety. Before the crisis, we were already a five star airline in Skytrax in terms of product. We were already at HIA a five star airport in Skytrax. But during the bio safety, the most important awards has been the two or the five star. So five star bio safety as the first global airline having become this COVID-19 safety index. And the same with HIA being today's the only airport in Asia, in middle east I think [inaudible 00:16:57] was the first one. So that's how we navigate. No obsession with planning, but flexibility and putting all odds on your side. And I think very good communication with your employees and Mr. Al Baker excels at that. To have the people behind you trusting the management and being flexible, accepting to work less and sometimes giving more. 

Abdul Wahab Teffaha

Richard, may I say something? 

Richard Maslen

I think flexibility, agility, adaptability. 

Abdul Wahab Teffaha

Richard, may I say something? Thiery said that we will not complain as an airline about what the governments do. I will do all the complaining, Thiery, don't worry about it. 

Thiery Antinori

It's your job! It's your job yes. You are better than me for that! That's why my boss loves you so much, because you are representing the industry very well. Very good, excellent. 

Abdul Wahab Teffaha

Thank you, thank you. 

Richard Maslen

I think it's important at these times particularly, that organizations like yourself are championing the industry. It's now more important than ever that the airline voice is heard, and having too many different airlines saying similar things, but not a joined up thing is a struggle. So yeah, it's important. We all need to get back, and I think we've seen here today, some little issues with a little bit of technology. You know, technology has made big steps forward, it's enabled us to continue doing business even while we've been stuck in our home environments. It's not ideal though. And I think we are eager to get back to face-to-face. So, it's a slow process and it has been a slow process, but you've mentioned about the sentiment of people to travel, from the airline perspective, if Mr. Antinori, or Mr. Al Alawi can answer, what are you seeing from an airline's perspective in terms of that return to travel, and particularly the business travelers that, it's a lifeblood of this industry, that a lot of people are talking about business travel being very slow to return. Are we seeing it return and to what levels are we seeing? So Mr. Al Alawi do you want to answer that first? I think you might be on mute still. I think we may be having a few issues there, so sorry. Mr. Antinori, we've been coming to you quite a lot here, sorry about that. But [crosstalk 00:19:43]. 

Thiery Antinori

Thank you for that, thank you for that. 

Richard Maslen

Yeah, please. What is Qatar Airways seeing? 

Thiery Antinori

It's very difficult to read in the crystal ball. I personally think that it will take time to reach the level of business travel pre-COVID, but I share your view also that to make a good deal, to make a good transaction, to make a good business, you need to see your partners, your supplier, your teams around the world. So the people will continue to resume business forever, but probably less than before. Because non essential travel, may be cut. And because some procurement department or some CFOs may use the opportunity of the crisis to cut cost without thinking too much of the top line. So to save $500 or a couple of thousand dollars on one trip, you may expose five or 10% of your top line or a deal, but that's very often what some companies are doing. 

So I think because of that, and because also of probably more time needed in the [inaudible 00:21:01] business to rebound, I think the business travel will suffer a couple of years. And at Qatar Airways to meet that, we'll offer very good value for money, because we have the best business class, also most private business class in the industry. The Qsuite. That is in fact first in business, with full privacy. So again, it's about adaptation, reading the market, being there with the trade and giving them the impressions as you are the airline they can rely on. And these guys they know, because during the bad times in 2020, some airlines were not to refunding the tickets fast enough, or were not there to fly. So again, we try to put all odds on our side with the product, with the attitude, and we hope the CFO will not win the battle or the procurement department versus the top line and the commercial people who need to travel to make better business. I think the successful company will not reduce their travel expenses. And the losers may reduce their travel expenses. So we welcome everybody on board on Qatar Airways, but especially the winning companies. 

Richard Maslen

Thank you very much. Mr. Al Alawi, do we have you now? Can you hear us? 

Waleed Al Alawi

I can hear you. I hope you can hear me. 

Richard Maslen

I can now. That's much better. Can you give me a little overview of what you're seeing in terms of the return of travel and particularly in terms of business travel and what levels you're seeing and perhaps habits that have changed? 

Waleed Al Alawi

We are actually seeing small improvement through the time, and I think the vaccination have helped a lot. We in Gulf Air value our customers and obviously do follow all the rules and regulations by the health ministries as well as WHO. So we are all reassuring always our passengers. And with the vaccination programs rolling in worldwide, we see a little bit improvement in the number of passengers booking to travel with us. So all for all, the COVID insurance we have just introduced recently, which actually gives the confidence as well to our passengers. The fact that our crew are a hundred percent vaccinated gives more assurance to our passengers. So we see small improvement as time goes on from our passengers returning, we are able to restart some of the destinations we have. Like recently Mykonos, Santorini, and Singapore. We're going to go to Málaga soon as well. So we see an improvement in the booking as time goes on and passengers gain confidence in the system stem as well as the different airlines, including Gulf Air. 

Richard Maslen

Okay. That's really positive. One thing that is changing quite considerably, is the need to use technology. Technology was a developing part of the industry. It's becoming an even more important part of the industry, perhaps as we've got a good connection with you here, Mr. Al Alawi, perhaps you can tell us how Gulf Air is beginning to expand its use of technology to meet the needs of its travelers. 

Waleed Al Alawi

Well, we are pushing full speed ahead for digitalization. We would like to improve our position and we would like to improve the connectivity with our passengers. We have connectivity through WhatsApp, Facebook. We have web chats with our passengers and so on, and don't forget all these apps, give the passengers the confidence that no virus will travel hopefully through the technology that we use nowadays. We are one of the pilot airlines as well to work with IATA on the Travel Pass. So that is actually something we will look forward to rolling out full speed. We are still in trial phase, but we think that will actually support our passengers to come back and fly with us. 

Richard Maslen

Okay, and over to you, Mr. Abdul Wahab Teffaha about technology. What are you advising your member airlines? What's your view from the group above, looking down on individual carriers in what they are adapting, what the general trends are. I think you're on mute, Mr. Teffaha. 

Abdul Wahab Teffaha

Sorry about that. 

Richard Maslen

No problem. 

Abdul Wahab Teffaha

I believe there are two tracks that can actually, I mean, let me say that the only silver lining in the COVID crisis is how technology was able to provide, I don't say 100% alternatives, but alternatives for people to continue to communicate, to trade, and do business. And if we don't take advantage of what the technology has provided us, then it's going to be a big mistake. Now let's see, this is why I said there are two tracks, one track, which is by airlines, airports, and stakeholders, and the value chain evaluation. The other track is by governments. And our strategy, which was approved by our board and our general assembly, we identified that technology is a priority for us to be able to harness, in order to continue the process of airlines, airports, and so on, and to getting to a touchless passenger experience. And to try to convince governments to do the same. Because what has happened, and what has transpired in the last almost year and half, is that businesses were able to adapt to the situation through the use of technology. 

The problem is the governments, although I know understandably they take much longer, but not all of them have adopted and embraced technology as problem solvers. And this is where we are focusing our future efforts to try to convince part of that effort is definitely the IATA Travel Pass, and what we are trying to do is to convince governments to apply the same methods that they are applying to ensure the security of the air transport, to apply that and other processes which so far have not been being applied to. Security or immigration officers accept your boarding pass on a phone, accept basically now you'll have the certificate on a phone, accept you to board by a boarding pass on the phone, why not accepting a proof of identity or a proof of visa on a phone? Imagine if this paradigm shift happens, what would be the future of aviation and the future of facilitation and the processing of passengers? So this is definitely a top priority for us. 

Richard Maslen

I think that's the opening to a different world for aviation, and hopefully one that we can use this. They always say, "Don't lose the opportunity of a good crisis to make the changes necessary." And hopefully as an industry, we will take notice of that. Obviously one of the big key things now as well is going to be environmental sustainability. So Mr. Antinori how is an airline going to operate in the future? We've seen airlines are seen this as the bad boys, they're seeing this polluters. It's not a great reputation in the industry, but the industry is working really hard to minimize it's environmental footprint. As an airline, how can you show the world that you are an environmentally sustainable business? 

Thiery Antinori

I think just by supporting all the people in the industry associations at IATA level originally here with ARCO, about all the multiple initiatives that are good. First of all, it will be an industry because we have to stand as an industry first of all. And so only at the airline level, we have different things we are doing, different measures, mainly to reduce the consumption of fuel. With weight, \with different technologies, et cetera. And also by operating the right aircraft, by buying modern fuel efficient aircraft, by being reasonable with the environment. And that's why Mr. Al Baker decided to fully ground the Airbus 380 during the crisis, because economically it's not a viable options. And also because of the environment, because with an Airbus 350-1000, you can transport almost the same number of passenger. 

And the big difference with a 380 four engine, engine is that on same hold, the 380 is just producing 80% more CO2 emission, and accessory at less cargo capacity. That's why that's what an airline can do. One, supporting IATA, ARCO and the different organization, working on a cross-industry all initiatives and cert. Having the right fleet and operating the right fleet and having a responsibility around that, what we try to do, like many other airlines at Qatar Airways. We do not believe in the future of the 380 and on the four engine aircraft. Because of that, I have a daughter she's 14, for her sustainability matters. Maybe for some airline managers, sustainability doesn't matter. For Mr. Akbar Al Baker sustainability matters. 

Richard Maslen

Okay. Well, thank you very much. Thank you everyone for joining us, we are short on time there. We have completed that session. So thank you very much for joining us. We've had a few little technical issues, but I think we've got through it. I hope it's not been too much of a problem for everybody watching. Again, thank you very much for your time. Thank you for joining us and goodbye. 

Abdul Wahab Teffaha

Thank you. 

Thiery Antinori

Thank you. 

Waleed Al Alawi

Thank you, and goodbye. 

Richard Maslen

Cheers. Thank you everybody. Thank you for that. And I think we got through it and apologies for any technical issues.  

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