Optimising Fleets and Workforces in a Supply-Constrained Aviation Industry

Transcript

Alex de Gunten:Thank you, everyone. Thanks for staying with us. We have the great coveted spot of being right before lunch, so we're going to try to make it as interactive as possible, as obviously as interesting as well. This industry has been used to crisis for a long time, but normally the crisis tended to be external. You know, we had COVID, we had volcanoes that erupted that shut down the airspace. This crisis that we're experiencing now and the subject of the panel in terms of supply chain tends to be a little bit more of an internal, internally industry-created crisis. So we're going to explore a little bit of what that means, what's happening, and what are the areas that are really affecting us. So today, all the airlines and the leaders in this panel are working and operating in one of the most industry-constrained environments in decades. And we're facing aircraft delivery delays, we're facing engine reliability problems, we're facing long MRO turnarounds, infrastructure shortcomings, and shortage of pilots and technicians. And we heard a little bit of that already in the, in the panel before. And these individuals here have the, the very fun and easy job of balancing efficiency, resiliency, and growth. And obviously doing that with unlimited budgets, which we know all the airlines have. So it'll be interesting to hear how— How we're going to find out how they do it and how they survive and sleep at night with everything that's going on. So we have 3 very different business models. We have great representatives from the industry, from both a global network carrier, from a global cargo carrier, a logistics integrated cargo operator, and of course from a leading leisure carrier, as Air Transat. So I'm going to introduce the panelists, but I'm not going to go through all their CVs. You've heard from some of them already, and you have a lot of that information in the app. But so very quickly, I'm going to give each one a minute or 2 to tell us something about their company that excites them or something that we should be aware of. I mean, you all know about FedEx. You all know about United. You all know about Air Transat. So something about that. And then at the end of that minute and a half, I want them to also tell me, tell us something about themselves that we cannot find in their CV. So something that is different from what every corporate CV has that could be interesting for everybody. So I'm going to start actually with, I guess, with United. And if you want to introduce yourself, your title, And what you do.

Joseph Heins:Thanks. Joe Heins, United Airlines Network Operating Center Vice President. I think that what is unique about United is our growth plan, our plan in executing the plan to be the global carrier of choice. And we've heard earlier all the discussions around eVTOL and electric airplane sustainability, perhaps with the regional partners. But I can tell you that we have been interested in that space For a long time, I personally have been involved in researching that space and investing that space for United Airlines. I'm excited about our future. We're working with the regulator. We met the administrator this morning on a smart project. We're excited about that. I think to your second question, one thing I'll share is probably most people don't know is I actually started in this industry as a helicopter mechanic. And I don't have my A&P, But I worked on some pretty complex helicopters in my career.

Alex de Gunten:That's interesting. And we'll be talking a little bit more about the workforce side of things and the technical shortage that we have. Justin?

Justin Brownlee:Yeah, thank you. Like you said, everyone, I think, knows FedEx. And so every day I get to go to work with a company that truly enables global trade, connecting 220 countries and territories, 99% of the world's GDP. We do that with 500,000 employees, 700 aircraft, and what makes us very, very proud is an extraordinarily resilient network to be able to uphold that level of reliability that is counted upon, of course, and that we can talk about here in the face of these disruptions, how we've remaining— how we're remaining strategically very, very resilient. Then I guess what you would not find on my resume, if you read through it, you would clearly see that I love aviation. I've spent my whole career in it. But you would not know why. And the reason why is because when I lived in South Florida, I would visit Memphis, my grandparents. Everyone would go shopping except my grandfather and I would go to the little airport, Charles Baker, in Millington, Tennessee, where he had a Cessna 182. And I was too afraid to fly for a long time, and then too afraid to make right turns in the passenger seat for a while. But that was what instilled in me the love of aviation that I feel blessed to be able to come enjoy every day at work.

Alex de Gunten:So you had it in the blood from the very beginning as well?

Justin Brownlee:That's right.

Alex de Gunten:Great, great, great. Okay, and Marc, tell us about yourself and Air Transat.

Marc Lumpé:I think what's really important about Air Transat is that we have been reinventing ourselves over the last years from the transportation branch of a tour operator to a, as we always say, to a true airline, which is of course different in nature because you need to manage your networks differently. The operation is is very different. And it's a very interesting journey also mentally. It was one of the reasons also why I joined Air Transat back at the time to support this, this transition. But it's intellectually and culturally, it's very interesting to, to support this journey and to see the company really going into these, these new endeavours. Of course, we still have also tour operator part of the business, but it's significantly smaller than the airline part. And now to me personally, when you look at my CV, what you will see is probably a lot of high-stakes mandates over the years with a lot of transformations, so a lot of adrenaline. And I would argue that probably privately you would find that as well, because I love doing the normal extreme sports like snowboarding and skiing and all these things, but I'm also Pretty good kitesurfer, and compared to a lot of my pilot friends, they still don't understand this, but I have certain aircraft types on which I only have takeoffs because I never came to landing. I always jumped out. So I also do skydiving. So I like it when stuff is happening.

Alex de Gunten:That's great. That is great. Well, thank you for sharing those, those, that with us. And I'm gonna do something slightly different instead of just going through the normal panel, I thought I'd give some, some of the power back to the audience. So we have, I think, on Slido, I think we have a survey. So I'm going to ask the audience to choose how the first— what do you think is the— and if we can load the— there it is. What is the biggest opportunities, or what is the biggest constraint right now facing the airlines? In the short term? So if you can answer to that, and depending what you answer, we'll start going in that direction since obviously it's something that of higher importance to you. So we'll give it a couple of seconds.

Joseph Heins:I think you're missing all of the above.

Alex de Gunten:Well, yeah, they're all important, but we have to start somewhere. Well, I think deliveries seems to be leading the group. So we'll start with aircraft deliveries. Who wants to— let's start, I guess, United. You want to, Joe, tell us how that's happening? How are you doing in that area?

Joseph Heins:I think that's the generation of the ripple effect that creates supply chain issues around the older airplanes that all of us are flying. So especially around the wide-body airplanes, especially for United, we are waiting on 787 orders. We have a lot on the books, but getting throughput from Boeing has been challenging. And I think part of that challenge is that in, in the new world where we're able to sell different tickets for different parts of the cabin, every carrier wants a different cabin. And that's actually— there's empty shells, if you will, empty 787s with no cabins on Boeing's line because they can't get seats. So you've got this, got this effect. And then when you look at the airplane that that will most likely replace in fleets, it's a 767, which is a very old airplane, very complex airplane. Some of our 767s, we run into the engine issues on the older Pratt engines. So that, that to me is the number one. That's the driver. That's creating the ripple effect. If we had new airplanes, we'd be retiring those airplanes as soon as we could.

Alex de Gunten:How far behind, if you— from ideal, are you from where you expected to be?

Joseph Heins:We, we are several years behind. I think maybe 3 to 4 years behind.

Justin Brownlee:Significant. Wow.

Alex de Gunten:So, wow, wow. How about in FedEx?

Justin Brownlee:Yeah, and I think, Joe, as you mentioned about this is a The issue of continuing ripple effects. One of the ripple effects there that faces the cargo industry is the— is then a shortage of feedstock for conversion programs as cargo operators look out for their future fleet plans. I think looking at from a standpoint of overall aircraft availability, you know, one of the things that benefits us, I guess, from a standpoint of an advantage of having a very diverse fleet in terms of type, and also age, is our ability to maintain that capacity, even grow, despite some of these, these constraints and challenges. And I think it's, it's been a 3-point approach. First is really strategic asset modernisation, equipage, and, and retrofit in some aircraft. For example, we've put updated cockpits on our A300s. That gives them the ability to interface with next-gen ATC. As well as extend the life of that aircraft. Also, that kind of future-proofs our fleet of our legacy, our older aircraft. Thinking about also optimising our fleet and our network together. Right now we're in the process of returning to service our MD-11s where they've been grounded since November. And as they come back, they're going to move more toward US domestic-centric or continue that move toward US domestic operations. which simplifies our support model for maintenance and allows us to, you know, focus on reliability.

Alex de Gunten:How many of those MD-11s are still grounded?

Justin Brownlee:We have returned 2 to service.

Alex de Gunten:I see.

Justin Brownlee:And we had 29 total.

Alex de Gunten:Wow. So there's still a significant amount of—

Justin Brownlee:So they're coming back. The work is underway to bring them back. And then I think finally, it's, you know, again, like that continuous modernisation with strategic effort to, to ensure that our legacy fleets can provide not really just a filler gap, but also can be part of growth plans as we do take new deliveries in.

Alex de Gunten:Okay.

Marc Lumpé:Yeah, from my perspective, I would say it's certainly the engine piece, but that's also because we are— we're extremely exposed to the Pratt Whitney situation because the backbone of our fleet is the A321LR, which is Pratt Whitney powered. So that was certainly the biggest topic. The aircraft delivery delays, that's hitting us also to some extent. But I think strategically we are growing a little bit. We're not growing with 20 or 30% per year, so we can manage that a bit easier because the existing fleet that we're having The A330 Classics on the widebody side, while the A321s, they're new, so that's a little bit easier to manage anyways. But also A330 Classics, despite their age, we are getting very good reliability out of them, above 99% TDR. So you can, you can maintain also old aircraft to a very high standard. Of course, they need more love, that's normal. But if you don't have the, the availability in the market, you can manage this, and that's Why I also think the engine issue is worse, because, uh, you— there's nothing you can really manage. I mean, it's just at some point of time you're just running out of engines and then you have to start grounding aircraft.

Justin Brownlee:And so I think the MRO, ensuring that MRO support obviously is, is key too. And I think that takes— that's another ripple effect. Uh, engine world is a little different than, than perhaps base and, and airframe. Um, but again, taking a maybe longer, longer-term view at the strategic aspect of Of MRO, one example we've done is we recently insourced a heavy check line for 767s. That was something that we felt very imperative that we would continue to maintain that capability and that capacity internally in case or when the MRO market faces constraints or might walk away from a very old airframe.

Marc Lumpé:But that's, that's a strategic move that you have to do. We are, we are not doing this currently ourselves, heavy maintenance, but I maintain the capability in our MRO environment that we can insource this if we have to, because if you really are running old aircraft, that's something you may have to face at some point of time. But that's why, I mean, you can manage this if you have enough foresight. The engine issue is just difficult.

Alex de Gunten:And I will expand a little bit more on the MRO and the supply of parts. But going back one step, I mean, most airlines or many airlines have been hit hard by the engine problems, by the late deliveries of the aircraft, due to different things. What have you learned from that experience in terms of now as you sit down with the manufacturers or with the engine manufacturer in terms of your negotiation? Can you change the contract somehow? How do you protect yourselves so it doesn't happen again?

Joseph Heins:Well, I mean, you can certainly have the conversations about contracts, but something we found— we talk a lot about AI here today— is we're using AI to make our parts supply predictable. It may be delayed, but if we can predict the time it is going to arrive to a certain percentile, we're okay with that because then we can, we can stock and keep our stock up. So that's one, one approach. The other approach is when the Pratt engine had the problem in Denver, we went to Concorde and met with Pratt for 10 weeks to ensure that we could work together to find an inspection cycle on that airplane. And we came up with one. We extended the life. for a little while. Now we're continuously work— working with them on that. We actually have what we call ambassadors that go out to our parts suppliers and, and are embedded with them to ensure they know our needs all the time.

Marc Lumpé:Well, I think contractually there's only so much you can do because even with the best contracts in the world, I don't know what Pratt Whitney could have done also because at some point of time, uh, it's also, uh, it's also financially not sustainable and, uh, if You would have had watertight contracts including ripple-on costs, etc., etc. At some point of time, you just send the company like that also into bankruptcy, and then nobody has won anything. So I think the key really is what you have done as well. You have to work together. And what I found, despite the very painful number of years that we had with Pratt Whitney, it was still a very positive cooperation because you could see that they were trying to do what they could. They are largely sticking also to the strategic industrial plan that we spoke about at the end of 2023. And I think really when you, when you hit a concrete wall like that, no contract in the world is really going to protect everybody. You just have to work through this and make it work nevertheless. And Then it's important that on both sides, and I think Pratt Whitney, they showed that, that everybody shows good faith and is really trying to make this workable. I don't know what your experiences were, but I think it's—

Joseph Heins:Yeah, they've— I feel they're pulled a little bit away from the Pratt engine, the 777 Pratt engine. Certainly the Pratt gear turbofan is a focus too. Yes.

Marc Lumpé:Yes.

Alex de Gunten:Let's go back to— you mentioned the MRO and developing more capabilities in your own MRO. Do you see that as a trend? I mean, for the longest time, the airlines all had their own MROs, and they did. Then there was a shift on, oh, we're going to just get out of that business and let the MRO independent, so-called independent MROs, or aligned with some OEMs, do the work. Do you see that pendulum moving in, in the opposite direction or not?

Justin Brownlee:Probably not in a large scale. I think the key there, though, is the partnerships with the MROs and the ability to work together in that element of it, and not just the airframers and the OEMs, is to have that partnership through these broad, sweeping, and long-term challenges and constraints. I think what, as we've been able to do with our facilities and infrastructure, I think there's a refinement of that strategy that can just increase just that little grade of of the self-help we could have in case we are disrupted or facing some, some enduring challenges.

Joseph Heins:Okay. Okay.

Alex de Gunten:Well, let's— the second point that was, I think, came in second on, on, on the survey was the workforce point. So how much of your constraints right now when you're planning for the next 3, 5 years is aircraft versus workforce?

Marc Lumpé:Well, from my perspective, we're in a pretty good position because we— I get the people that I need. But that also has to do with 2 things. Number one is it's a supplier brand, airline brand in the market that people actually want to come work for you.

Joseph Heins:Mm-hmm.

Marc Lumpé:So that's very important. And, and then we have a very good culture. For certain, in certain areas, it's good if you have, if you do strategically your training as well. And that goes for mechanics as for pilots. Because what you want to do is you want ideally to have the base load of your pilots. You do this through your own cadet program, and we're doing that. I've heard before that this is apparently, I don't know, in the United States, apparently this is $200,000. I don't know where this is coming from because we are doing this training also in the US. And I'm getting a pilot off this— well, a person off the street into the cockpit for around $100,000 US end-to-end, and student loans do cover this. In Canada, we have a bit of a different structure, but the logic is pretty much the same. So I don't really have that problem.

Alex de Gunten:You're not concerned about lack of pilots or technical—

Marc Lumpé:I think if you're running a regional airline, then this might be different, but I think the The top-tier airlines in the countries should usually be okay. I don't think this is different in the US from what we are having in Canada. Again, if, if yours— if your brand is intact in the market, that people want to come work for you, the market is not that dry that you are really facing big problems. It is tight, but it is, it is manageable.

Justin Brownlee:Do you agree? Agree on the, on the pilot side of things. I think the challenge there— there are new and unique challenges with new entrants into the aviation industry. AMT force. And I think one of those challenges is, is the teaching and training. And I think we've got to meet the, the, this new entrant cohort and how they've come up through school learning and the technology they have, and meet them where they're at in terms of how we onboard, teach, train, and, and excite them with an efficiency of their work through into a career that can be very, very exciting, as we all know here.

Joseph Heins:Yeah.

Justin Brownlee:So I think that's That's upon the industry, is to attract and retain, but also make easy and not force onto a generational cohort that has learned differently, the same way we've learned and trained.

Marc Lumpé:Oh no, that doesn't work. You have to adjust this, certainly.

Joseph Heins:Yeah, the pilot piece is you have to maintain a balance so your regional partner has enough pilots to feed the mainline. So you have to have programs in place, some structure in place, agreements in And we do that with our partners, that holds a pilot in a regional airline for a certain amount of time before they come up. And everyone has their development programs. But pilots are really expensive. And to manage that expense month by month, schedule by schedule, I think is one of the biggest challenges we face, specifically with pilots. And the other part of the workforce we mentioned earlier is the technicians, right? They're licensed. And the dispatchers are licensed. And believe it or not, we're trying to hire dispatchers every day and find people that want to do that role. They're limited, which you don't understand because it's pretty good money. You don't have to travel. You don't necessarily have to meet all the medical requirements, but you can be in aviation. So—

Alex de Gunten:Is it that the younger generation doesn't want to get their hands dirty, kind of? They're more— they want more technology-type jobs than— Machinists or whatever different technical type jobs?

Joseph Heins:I just don't know. It's just tough to find them now. I mean, we're finding them, but you do have to do a lot of work, a lot of recruitment, a lot of advertising, branding. We have our own facility in, in where I work is training center for dispatchers, so we can get them their license and create it. But just finding those recruits is tough.

Marc Lumpé:But that's also, but that's also a structural problem in the US and in Canada for that matter. For dispatchers in particular, because you don't need licenses to be a dispatcher in— for all intents and purposes, because in Europe and anywhere else in the world, you don't. And if you look then at, for example, companies like Jet2 in the UK, they— then you can fully automate already today this whole dispatching piece, right?

Joseph Heins:Right.

Marc Lumpé:And then you just have operations supervision and control that you're doing through your ops center, and that's it. So I think that's true. But there are also certain professions where I think we might want to have a word with the regulator at some point of time if you really need to make this that hard for airlines. Yeah.

Alex de Gunten:Okay, so let's talk a little bit now about new technologies. We heard in the previous panel talking about eVTOLs, how they're coming in, when are they coming in. I know United, you've You've done quite a bit on that. Can you share where do you see that going in the next couple of years?

Joseph Heins:Well, at United, we invested in an eVTOL company very early on based on potential more than anything else. And I'm not sure we've passed some of the challenges around battery power, battery storage, logistics of takeoff and landing and storage and parking area in an airport. Some of that has to be solved. Pilot certification in the US is going to be a big deal. I know that Archer has actually gone to the Middle East to fly over there due to easier regulations, certification. So I think that piece is going to slow that down. Now, is there going to be eVTOL airplanes in New York City doing the hopper that the helicopters— I think that'll happen fairly soon. But to integrate with the industry, we've got to find a commercial Reason and solve the logistics.

Alex de Gunten:So you're not, you're not doing that planning already? You don't have those, you know, that process going, okay, by this date we're going to be starting doing, you know, LaGuardia to Manhattan?

Joseph Heins:Yeah, we're keeping our eye on it, but there's no planning.

Alex de Gunten:No, still not up there.

Justin Brownlee:Yeah. And how about on the cargo side? Yeah, there's obviously applications that all of these endeavors have with from a cargo perspective. And the key there, of course, is payload and range. And scale. And I think, you know, right now, you know, like with FedEx already covering the entirety of residential and business area, the use cases are not necessarily going to replace a route. They're not necessarily going to replace a truck per se that's doing a route that already has that efficiency at scale that we have. I think it'd be the use case of, you know, ops recovery, urgent cases. Very niche type of applications, and they're going to be great when they're there. There'll be, there'll be an exciting use for that technology for sure.

Joseph Heins:Perfect.

Alex de Gunten:I haven't heard anything. Is there any plans in Canada? I've heard about, you know, in the Middle East, and Billy Noland was pushing hard at Archer saying, you know, we want to do it in, in the US. And supposedly Trump has given a priority to this project. Anything in Canada?

Marc Lumpé:Yeah, I think when it comes to this, to this whole eVTOL technology, There are, except for the US and certain Middle Eastern countries, I think there's a lot of structural problems that you have to overcome because in most countries on this planet, you can't just, you can't just land everywhere you want to land.

Justin Brownlee:Yeah.

Marc Lumpé:So you need, you need approvals, and these approvals are very hard to get by. In Canada, as in Europe, I really have a hard time seeing that working out because yes, it's less noisy than a helicopter, these things, but when I look at the resistance that already building new smaller airfields gets from local populations, opening up cities for anybody wants to fly anywhere kind of eVTOL traffic. Politically, this would be in a lot of countries suicidal. So I think the technology has a lot of potential, yes. But do I see this globally large-scale deployment? I think there's a lot of political problems that need to be overcome for that. But let's see. I mean, it's very often it is once the technology is available, then this new technology has a bit its own ways of imposing itself. And I would, of course, love to see more of this because from a theoretical point of view, if you look at intermodal traffic and you take away all these political challenges that you have with this, there is a lot of potential. We just have to see how we can really fit this into the political landscape in a lot of countries and then operationally into the wider networks. Let's see.

Alex de Gunten:One of my concerns that I see with aviation, if you look at our main product, which is to take a person from point A to point B, sometimes starts at home or whatever, overall in the last 20, 30 years, we're not doing any faster than than we were doing it 30 years ago. It takes longer to get to the airport. It takes longer there. The airplanes are not flying. So this kind of technology might help shorten some of these sectors and some of those sectors. So I don't know if we have any questions on the Slido that I can— or from the audience. I can't see much, but I don't think so. And I don't see anything on Slido. So I'll continue then. On a couple of other points, infrastructure. We heard before about ATC. How much of that is a headache for you from a planning perspective, and do you think 2028 it'll be working?

Joseph Heins:Well, I think they'll replace their older cables with fiber optics by then. I think that they have an opportunity to replace their radars. to some of the communications tools, but I think that's about it. They've got a lot of facilities across the country that need upgrading. That will take some time. They've deployed an army of technicians to get it done and they've trained them. And Administrator Bedford considers that piece handled. Where our involvement with rural infrastructure is around real estate in the airports, right? We are heavily involved and actually have to pay for some of the upgrades in the terminals and the tarmacs and things like that. And are the airports of the future going to have the capacity on the ground to handle all the airplanes? And not just blue sky, but during IROPS when you have to— when everybody's trapped, right? That's our concern. And we are heavily involved in the construction around the airports.

Alex de Gunten:Are we working as an industry, overall industry? And I know right here we have the GAD meetings, lots of airports involved. Are we working close together to make sure— because it's a problem for everybody and the solution is not side A or side B or side C. Do you see that conversation happening? Are you looking and talking to airports, to government? Are they involving you in this process or is it once they send the— they tell, okay, this is what we're going to do and live with it and we'll try to modify it kind of thing?

Joseph Heins:Well, for us, we are. We're involved in those conversations. We have leadership teams in government affairs as well as real estate at every airport. So we're heavily involved in all of those discussions. I don't know if— I'm sure that the rest of FedEx and Air Transat are involved also.

Justin Brownlee:Yeah, I agree. We're, you know, the administration's taking a very whole-of-industry approach with the operators and the trade associations, and that's very, very vital.

Alex de Gunten:You do a lot of your flying out of commercial airports, but you also have dedicated airports or highly dedicated airports. Do you see that switching? Do you see FedEx moving more out of that, or will that formula continue?

Justin Brownlee:Actually, the preponderance of our flights are right out of the same airports that service the commercial— the passenger carriers. I think the difference with us is a lot of times the evening, the overnight operations. And so we're always there making sure that no one forgets about the dark hours.

Marc Lumpé:Well, I think we are working together. Is there room for improvement? Certainly, because in the West, for my life, I've worked for a long time in the Middle East, and I know how integrated the approaches are there between airlines and airports. So I think there's a lot to learn from how they are managing this. But there is a cooperative spirit, which is already good. So it's not that we're working against each other. It's just this whole thing from an infrastructure point of view, I think the West can learn a lot from how the Middle East is doing it.

Justin Brownlee:Perfect.

Alex de Gunten:So we're about to wrap up, and I don't want to delay you from lunch. But before I let you go, one last question. If you could ask— and I'll ask each of you— your suppliers to fix one thing, what will be the one thing that would be your priority right now?

Joseph Heins:I'll go first. Predictability. We look for that constantly with our suppliers. As I mentioned earlier, we use AI tools to try to Make the delivery predictable. If we can have that predictability, we can make decisions and we can go forward. That's gotta be number one.

Justin Brownlee:Yeah, I have the exact same answer. I think there's not one thing to pick on other than that theme, because that allows us as operators to have that planning cycle to have and build in that resilience of the network we need when the disruptions or the delays occur. So I think predictability is key and I fully agree.

Marc Lumpé:Yeah, I think from my perspective, we, it would just be to get the GTF engine all of them back into service. The rest we can manage. Might not be, but that's— you're asking for one thing.

Alex de Gunten:So that's one. Yeah, absolutely. Only one. Well, thank you very much, gentlemen. Thank you, everybody, and enjoy the lunch.

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