State Of The Aircraft Market: Fleet Orders And Deliveries Outlook

Transcript

John Thomas:overhang of supply. So, John, you obviously one of the largest owners of aircraft in the industry. How concerned are you about the current economic outlook? Even, even Brian Pierce at IATA said we may not have a recession, but it's going to be fairly flat. So does that cause concern for you in terms of the outlook of the order book?

John Plueger:Look, we're certainly watching it very, very closely, but so far While it's clear that freight has been down, depressed for the last several months, the passenger loads continue to be relatively strong, sustainable. And we have talked earlier today, in fact, the prior panel talked about environmental sustainability and the growing middle classes and the— And when you look at those 2 things. One, fuel and labor tend to be the 2 biggest costs on most airlines' P&L. That's not going to change in any way, shape, or form.

Rafał Milczarski:Right.

John Plueger:And so when you look at that fuel part and combine it with the environmental sustainability issues, particularly acute, especially in Europe, Northern Europe, and now with our young people, as has been mentioned earlier here, I do think that the ever, the ever-increasing affordability in air travel— it's, it's, it's, it's airfares globally have grown the least. In fact, some cases have, have actually retreated in cost over the last 30, 40 years— is going to continue to drive the fundamental model for new aircraft and growth and sustainability. Now, Whether we have a point or 2% in the next year to 2, there certainly is variation capability. But the bottom line for us is we don't see any major yet economic forces which is going to lead to a significant global reduction or leveling off in any meaningful way in the near term for passenger air travel.

John Thomas:Right. Um, so big, big sort of dilemma for Airbus and Boeing when, um, our friends at Bombardier came out with the CSeries, uh, game changer. Um, there was sort of lots of talk about do they, uh, do they reinvent sort of the narrowbody or do they take the incremental approach? And I think Airbus sort of led the way by saying, well, let's do the incremental approach, uh, with the neo, and then Boeing, uh, followed quickly thereafter with the MAX. Clearly, if you sort of look at leasing rates between MAXs and sort of the, the NG series on the Boeing side, big differential between what I can, what I can lease a MAX 8 for versus, well, pre the issue at the moment, let's say when things stabilize, versus what I can lease an 800 for. Do you think the economics, the improved economics of the, of the neo and the MAX really justify the size of the order book?

John Plueger:I believe they do. Again, going forward, it's greater payload range. It is certainly fuel burn. It is environmental sustainability. And so big picture, short answer is yes, I believe that they do. As a matter of fact, despite all the concerns we've heard at this conference, IATA, here this past weekend about potential concern for global growth, I will have to tell you that during our visit here and in fact all this year and looking forward to the Paris Air Show, we continue to have a lot of inbound requests for more aircraft.

John Thomas:Right.

John Plueger:For the NEOs, the MAX is a bit on hold depending on the outcome. But, but certainly it's hard for us to see a significant, if any, slowdown in demand. It could be a watershed year in that I do think that the order books Although they're sustainable, I do think that the very MAX grounding that we have— we're witnessing now, some of Airbus's delays in single-aisle production— this may produce kind of a recalibration here. It may, it may serve to have airlines take a reexamination. Are we still good on our growth path? Is this a time for us to make adjustments? And we will see.

John Thomas:Right. So how important— just on that bit about operational capability, I mean, how important is the, the modifications that Airbus is doing with the A321, obviously the A321LR? Do you see that as something that has underpinned some of this demand by just making the narrowbody sort of get longer legs?

John Plueger:Yeah, look, trip cost combined with seat-mile costs are hugely important. These are ever more capable single-aisle aircraft. The A321XLR will be really the first truly longer-range 757 type of replacement. There is tremendous interest in that product globally. And so that interest and that market demand, I think, speaks for itself.

John Thomas:Right, right. So on capability, obviously we've got some great aircraft out there, the widebodies with the 787-8s and the A350s. Um, which have much greater capability obviously than the aircraft that they're replacing. But, um, if you go on to Flight Tracker 24 or whatever any day of the week and do a snapshot, and I did it recently for the A350-900, probably about 80% of the A350-900s flying the routes today are basically flying routes that don't require the capability of that aircraft. So have we got a little bit ahead of ourselves in terms of drinking the Kool-Aid on this technology?

John Plueger:Look, I don't think so. You can only take any aircraft within— well, we have airline CEOs here. I don't want to dominate this conversation, but you can take any aircraft, particularly widebodies, and you have to start it within your route structure and you develop your route structure there accordingly. While it's true, probably most of the new technology widebodies specifically take take care of current routes. They are still developing new routes. For example, BA recently started London to Charleston, South Carolina with the 787. Norwegian has, has been developing secondary and tertiary city pairs with their 787. So I think it is an evolutionary process, but it is happening. Right, right.

John Thomas:Okay, so on technology, Martin, very successful airBaltic with being the launch customer on the A220. You recently announced, I gather, that the A220 introduction has been so successful that you're going to accelerate the grounding of the— or the retirement of the 737s. Admittedly, they were, I think, 20-plus-year-old aircraft, but I mean, what sort of been— what drove your decision to accelerate that retirement?

Martin Gauss:When we were the launch operator, and it goes back to 2012, when we had to select a new jet for the future, At that time, it was only Airbus when I came to the company. Then we invited Boeing, and only at a later stage Bombardier came and said, there's something new we have in the future called CSeries. Nobody thought at that time that, that CSeries would then win that competition, and we placed an order for economic reasons. The 700 MAX, the -19neo were not there, nor was the CSeries. We became the launch operator, and today We're flying it more than 2 years now, have 19 aircraft in operation. It has proven that we took at that time the right decision because 19neo, I don't know whether anybody will, will fly it in scheduled services. The 700 MAX is significantly heavier. The engine performance and the fuel savings which we get out of the A220 today is significantly higher than what was promised when we signed the contract in 2012. Now the range is extended. I think that there are all reasons to retire the classic Boeing fleet as fast as you can because the cash savings on each of the trips where we fly them in parallel is so extreme that it hurts the moment we have to fly with an older aircraft. So that drove the decision to retire the Boeing fleet one year ahead of schedule.

John Thomas:Right, and, and whilst initially presumably the A220 was acquired to replace the fleet, Presumably, given the increased capability of the A220, you see significant growth opportunities there.

Martin Gauss:Yeah, we have a special segment because we deliberately choose 150 up to 160-seaters. So we wanted that because that's what our model needs also for the future. And there is no other aircraft in this segment available. So the others are heavier, so they will come at higher trip cost and growing for us. is of course much easier if I only have to fill 150 seats instead of, like some of the competition, 220 seats. So our model is based on, on that aircraft, and that's why we're going for it. We're very happy with it, and it looks that we've taken in 2012 the right decision for the years to come.

John Thomas:Right, and presumably the increased range just gives you greater ability to grow your network.

Martin Gauss:Yeah, it's about 7 hours now. They just announced that it's increased by another 500 miles. which we even don't need anymore because 7 hours is already very long with that aircraft. But it's very nice, and I'm sure because the engine is maturing as well that we will see a lot more performance improvements on that aircraft over the years to come because it is, as you said in the beginning, it is a game changer. That aircraft is very, very different to the other narrowbodies in the market today because everything is new there, while if you go even to the MAX or to the Airbus Neo, You have a lot of the stuff which is from the times when, when these aircraft originally were built, while the A220 is a complete new development from scratch. And that difference you can see now. The aircraft hasn't picked up in sales as you would expect it from something that new, but I guess we will see that in the future and we will see that acceleration. The, the, a good indication is the leasing companies where the demand has significantly increased. to look out and see what can we do with you guys on sale and leaseback.

John Thomas:Well, I hear that there may be a big announcement next week in Paris, so we'll see, we'll see what the, uh, what the order book for the A220 looks like post-Paris. Uh, so Kresimir, you're, um, going through a fairly big refleeting at Gulf Air. Um, on the 39 aircraft that, that you've got coming on board, what's the split between just replacement versus growth?

Kresimir Kucko:Well, initially, in our 5-year projection, we planned to full replacement. So depending on taking consideration what was the elements that we can predict and put in our new strategy, which is a boutique strategy, commercial strategy, and because being surrounded by the neighbors who put enormous amounts of capacity on yearly basis, We have to find our own niche, and luckily there is a great demand and need for premium products, and we implement that first in our Dreamliners. It is the best-in-class product. We are talking business class.

John Thomas:Right.

Kresimir Kucko:It's basically by industry standards first class, and, and the same goes for economy. So we want this more personal approach, more space, more uh, uh, uh, applier of, of, let's say, general boutique concept in the, like in the hotel industry, for example, hospitality. So that's what you apply here. So in that sense, we see, for example, on our certain routes, we increase capacity significantly by 40% with the new product concept, and we have better results per unit.

John Thomas:Right.

Kresimir Kucko:So we've increased the ASK, we managed to increase RASK. So it's a In that sense, we will stick at the moment for this concept, original idea budget, that the new fleet will be purely replacement.

John Thomas:Right, so you're not really that worried about the economic outlook because again, it's not as if you're— well, you're getting additional capacity out of basically a replacement fleet, but it's not as if you're taking on a lot of extra equipment that if there was a downturn you would be concerned about.

Kresimir Kucko:Well, if some, let's say, less price-sensitive markets shows unexpected growth in demand, which we are facing now because of not reasons that makes me happy. I'm always sad if airlines go bankrupt. I like to win, right, fair competition, but at the same time, I'm very sad if somebody has run out of business. So in that case, we can have this luxury.

John Thomas:Right.

Kresimir Kucko:to remain with certain of the present, right? Because without ownership costs, it's a— it should be money-making by itself.

John Thomas:But so, so you're taking obviously a very prudent, uh, fleet replacement into— again, fleet replacement strategy. Um, some of your competitors, uh, have got pretty big order books out there. Um, does that cause concern for you? I mean, there's obviously been a restructuring of the Etihad widebody order book, but obviously Emirates and Qatar have pretty substantial order books out there.

Kresimir Kucko:Well, they are changing that structure of that order book rather, rather frequently, and sometimes it's— you're, I mean, ask yourself what is really going on. It's this year this order book, years or two another one. I mean, I'm sure at the end they know, of course, they are doing. But when you're talking about aircraft manufacturers, Some, some points are very interesting for this, for them. It's, uh, they never felt any, any slowdown. The worst was stagnation.

Rafał Milczarski:Hmm.

Kresimir Kucko:It's constant growth even in the times of crisis. Then they have this constant technology developments which has issues. And what bothers us at the moment more than what's going on in the neighborhood in terms of fleet, because we find our niche, I believe firmly that we find We find our niche.

John Plueger:Mm-hmm.

Kresimir Kucko:You have your cost— cost control program, and, but what, what at the moment bothers is this post-market support, which is not in line with our commercial expectations and demands. It is in a way some OEMs are basically maybe even hostage of their own strategy. So there is not enough approved MROs. It's a, it's a critical shortage of of MROs who can, who can do not only shop visits for the engines, but also for the airframes and components. So this makes something that we all feel now, especially with 787 program, with certain types of the engines, it's simply shortage.

John Thomas:Yeah.

Kresimir Kucko:Shortage not only of engines, but shortage of MROs who can perform overhauls and necessary checks until design errors are resolved in some reasonable timeframe.

John Thomas:Right, right. So, Rafał, you're also going through a re-equipment process. Presumably a lot of the MAX 8s that you're getting are replacing the Embraers, or that's the plan?

Rafał Milczarski:No, actually that's not the plan.

Kresimir Kucko:Okay.

Rafał Milczarski:We were an airline without, pretty much without narrowbodies. We were a very, we had a very strange fleet. fleet structure where our widebodies would combine with regional aircraft. So it was Embraer 175s, 170s, and 195s. When I entered the company, we had 3 narrowbodies, 737-400s.

Martin Gauss:Right.

Rafał Milczarski:And clearly that wasn't enough and it wasn't sufficient fleet structure for a sensible network. We had to make our network sensible in order to make our hub work, and this is why we needed to invest in narrow-body aircraft. We have organized a competition. There was a proper tender process, and we spoke to all OEMs because we wanted to give everybody a fair chance. Actually, well, people would say not surprisingly, Boeing came on top.

Kresimir Kucko:Yes.

Rafał Milczarski:Because we are a— we have traditionally been a Boeing company, but I really have to say it was done completely on merit and on the basis of calculations. I have to say the CSeries Bombardier was very, very close. It was a very, very close second place. And, you know, we have chosen Boeing 737 MAX 8. Until the grounding, I have to say this has been an amazing performer. for us. You know, it offers relative to, relative to the equipment we had, it offers around 20% fuel saving, which is amazing. But even more importantly, in environment-conscious airports, for example London Heathrow, it offers amazing noise savings.

John Thomas:Right.

Rafał Milczarski:And if you think about carbon footprint, This is actually our part that we are taking, that we are making, in making the whole aviation more environmentally friendly. The industry, including LOT Polish Airlines, is investing in new technology precisely in order to reduce the carbon footprint of our industry.

Kresimir Kucko:Right.

Rafał Milczarski:So I guess flight shaming doesn't notice that, but we have gone gone into amazing pains, the OEMs, the airlines. Overall, in general, we have, we have taken, we have taken a stance pro-environment, and this is why we've invested in new technology. Now, of course, what happened happened, and, and it's, it's, it's an— it's a horrible tragedy what happened with the aircraft. The aircraft is grounded right now. We have aircraft on order, we have aircraft that are grounded within our fleet. This is a very unwelcome challenge that we had to face, but we are dealing with this challenge bravely. This is what we paid for, and we are taking the stance that we have to really deliver the service to the passengers who have ordered it, so we are replacing these aircraft temporarily with other aircraft as well as ACMI aircraft.

John Thomas:Mm-hmm.

Rafał Milczarski:But we will be delivering additional MAXs. I very much hope that the process of bringing the aircraft back into service will be thorough because we only want this aircraft back if it's completely safe, if it has been completely reviewed by the FAA and And EASA. EASA is our regulator. But I'm quite confident that the aircraft will come back into service. And I'm sure when it comes back into service, it will be the safest aircraft in the world. And it will continue to be an amazing performer, which we as LOT Polish Airlines are looking to very, very keenly.

John Thomas:But in terms of your order for the MAXs, essentially that will replace the Embraer fleet? So that you will become a narrow-body wide-body airline versus a regional jet wide-body?

Rafał Milczarski:No, it's not going to replace our regional fleet. Our regional fleet is intact and in fact it's growing. So it has grown significantly since we started growing as a company. At the moment, you know, we had in 2015, before the year before I I started working for LOT as the CEO. We had around 45 aircraft. Now we have more than 80 aircraft, and we have increased in each category of aircraft.

John Thomas:Okay.

Rafał Milczarski:We've actually increased our fleet of Embraers. We've increased our fleet, which wasn't too difficult, of narrowbodies, and we have increased our fleet of widebodies. So we are, we are following a very balanced growth. We don't want to take any Dramatic steps. You can't fly a narrowbody everywhere. There are markets which require a smaller aircraft, and we're just very, very, let's say, calculated about this.

John Thomas:Right, right. So, but, but still significant growth. So obviously, any concerns in terms of the economic outlook?

Rafał Milczarski:I think there are various phenomena in the world that raise certain Take Brexit, for example. Overall uncertainty about the economic outlook for Britain and for Europe because of Brexit makes, I'm sure, some impact on the purchasing decisions of customers. Maybe sometimes they will restrain themselves and not fly. And the economy. on holiday, you know, twice per year, but just once per year, and so forth. So that's one element. Another element, of course, I think— I don't think the global economy is really enjoying what's happening in the trade theater.

John Thomas:Sure.

Rafał Milczarski:I think it's very, very dangerous. And while maybe in the past the world's trade wasn't completely balanced, and maybe not everybody played by the book. I'm sure the outcome of this is certainly uncertain.

John Plueger:Right.

Rafał Milczarski:And this can impact significantly global growth. We are very lucky as LOT Polish Airlines. Our home market is actually the world's 4th most dynamic economy. We will grow this year by over 4%, between 4.2% and 4.5%, which is amazing growth. We have a population that is very keen to fly. There is, and I hope for a long time in Poland, there will not be flight shaming. As we use flights for business, as we use flights to actually know the world and find out about the world, And I don't think you can deprive people of that privilege. People, as they become more affluent, they want to learn the world and they want to fly and they want to do business and hence they want to fly.

John Thomas:Right.

Rafał Milczarski:And I think we need to find an adequate answer to this phenomenon. Of course, flight shaming is another challenge that we will have to face.

Martin Gauss:Yeah.

Rafał Milczarski:So I would say, you know, I don't think there is doom and gloom.

John Thomas:Right.

Rafał Milczarski:I think, I think if we are sensible, if we are calm, we will continue to grow as an industry, and certainly we intend to continue to grow as LOT Polish Airlines. We do have a lot of catching up to do, you know, since for many, many years we had just been stagnant, more or less between 4 and 5 million passengers per annum. Right now we are the most dynamically growing European airline. And I think it will continue this way, but we just need, we need to stay calm and, and react to the challenges when they, when they arise. I guess there is no other solution.

John Thomas:So, so with the, um, with the unfortunate situation with the MAX, um, we've already seen a couple of airlines, um, either defer or cancel their MAX orders. Um, you would therefore, from what you were saying before, you would say they're more airline-specific specific rather than any overall concern with the MAX?

Rafał Milczarski:If somebody's ready to cancel the MAX order because of what happened, I think it's more of an emotional decision than a rational decision. And I think people are entitled to both. People are entitled to make emotional decisions and rational decisions. I choose rational decisions. You know, we have We have chosen an aircraft type which suits our needs.

Martin Gauss:Mm-hmm.

Rafał Milczarski:Yes, we are now going through probably the most difficult path of having an aircraft which is grounded, of having an aircraft which is associated with 2 deadly accidents. And, you know, it's an— It's such a tragedy, and I really feel so sorry for all the people who died and all their families. It's an insane amount of suffering. But I really am sure that the aircraft will be safe in the future.

John Plueger:Right.

Rafał Milczarski:And I believe it's our obligation to— and I think I'm sure Boeing will have to participate in that. In trying to persuade the public that their aircraft is really safe to fly. I think Boeing will have to undertake, undertake a lot of efforts to reinstate, reinstate its, its credibility on the market. But I'm sure they are aware of this, and we, and we certainly as other airlines will be making them aware of this too.

Martin Gauss:Mm-hmm.

Rafał Milczarski:I can't see reasons at the moment, unless there are some new findings by the regulators, Sure. to cancel the MAX orders.

John Thomas:Right.

Rafał Milczarski:On the other hand, I don't know everything. I haven't seen the final results of the investigations into those 2 accidents. I am not privy to all the information that the FAA or EASA are privy to. We will, we will make decisions as we, as we have the full picture. At the moment, our picture is both regulators are really making a very, very detailed analysis and, and great effort, not hasty, very, very calmly and carefully to try and bring the aircraft back into service.

John Plueger:Mm-hmm.

Rafał Milczarski:And I think this is what actually should be done. We have to patiently wait. I don't think any single airline is pressuring anybody, any regulator or anybody in fact, to bring the aircraft back into, into service sooner than it is feasible. We just have to wait.

John Thomas:Yeah, yeah. So open question to, to all of you. Kresimir raised the issue of constraints on MRO, that, that was a, that was a constraint in in terms of, um, you know, from an operational perspective. Uh, we heard constraints at the IATA, uh, AGM, uh, around airways, uh, and airports capacity constraint. Um, given, given the order book out there and the, and, and what that implies in terms of the fleet growth, um, any concerns that there are some of these externalities that may dampen the fleet growth?

Martin Gauss:Um, well, What we can see in Europe, the airspace structure is a mess and looks like it will stay a mess for a while. So if we are not sorting it out, it will have more delays, and eventually if there is no solution, then it might be that we cannot fly all the aircraft which are on order in Europe. But I have a very strong belief because the attention on it is now there for 2 years in in a very different way because of what happened last summer to European air traffic control. Everybody expecting something similar this year. So if it is happening similar this year, there's a new European Parliament elected. I'm sure that in their legislation period, which is the next 5 years, there will be changes to the European airways structure because there will be a lot of pressure on politics to do something about it. I think we're in the final stages that Europe gets a proper Single European sky. It is, I think it's a 30-year-old project. It should come now. If it comes, I think that there is a lot of ease there and shouldn't have any impact on the order book.

John Thomas:Yeah, but Martin, to be a skeptic, haven't we said that for the last 20 years, that next year, that we've reached a breaking point in Eurocontrol and we've got to get to a single, single European skies?

Martin Gauss:There's a new debate. We said that for 30 years and nobody listened to the airlines, no Eurocontrol. I think it has completely changed with the CO2 discussion because that is a new, relatively new discussion, and that discussion is overtaking anything. And I think that discussion is going to put the pressure on. If I look at the damage which is done not having that single European sky offsetting any of the savings the airlines deliver, Whoever was investing in new equipment, and all of us do put billions into new aircraft, reducing 50% emissions on the aircraft we fly, 20% less CO2, and then we are burning it all because the airspace structure is not good enough. I think the decision this time will come because of the pressure of the CO2 discussion, and therefore I'm very positive that in the next 5 years we will see major movements there.

John Thomas:Yeah, Kresimir?

Kresimir Kucko:I think Europe is the most difficult place to run the airline because of overregulation, because of taking all these issues as political issues. You know, denied boarding compensation becomes a political question before parliament elections and everybody, I'm protecting the rights—

John Thomas:Of the consumer.

Kresimir Kucko:Which are not at the end basically. ETS, you have Eurocontrol, which is— I criticized them on a number of occasions because they're like a mastodon. I mean, we have 38 towers. America is 5.

John Thomas:Yeah.

Kresimir Kucko:On a larger airspace to be controlled and all of that make our— and then you have this state aid policy. I did restructure airlines in my life under DUP and Commission regulation which are— I have to— I've said that many occasions, it's idiotic really because, you know, you have competition from one from the West which are not driven by market really always.

John Thomas:Right.

Kresimir Kucko:If you can't go bankruptcy, if you can't have strikes, I'm not saying it's easier, but it's, let's say, less demanding. On the other side, you have other unregulatory or regulatory issues that basically are not— nothing to do with the market. So this is quite a big challenge besides all of the challenges we mentioned today. But MROs, It should be done something. We should develop more. The other limited factor is also pilot shortage. I mean, we, we have pilots, but we don't have enough good pilots available on the market, you know. So this is something, and you know, to produce— it's maybe not nice word, but you know what I mean— yeah, a good captain takes at least 7 years.

John Thomas:Well, and the irony is, obviously, in the Diversity Awards yesterday, we heard that There's still— and, and you look at the numbers— there's still an appallingly low percentage of female pilots. Um, and how do we— I mean, you would— the logic would say that in a time when we have this chronic shortage of pilots and, and, and the future, actually just turning on the ambitions of women to become pilots could solve a lot of those problems.

Kresimir Kucko:Oh, by all means. We have, we have. I'm proud to say we have Ladies being captains and, and first officers, of course, but we try to stimulate as much as possible. Of course, in, in, in, in Bahrain, actually, it's, it's, it's opposite. More ladies will qualify for the pilots than for the—

John Thomas:Well, we all know that they make better— we all, we all know that women make better pilots anyway.

John Plueger:True.

John Thomas:John, do you see that as a concern in terms of the pilots?

John Plueger:I can already tell you, uh, this past Last year we had a wide-body aircraft going into China that was delayed specifically because the pilots hadn't finished, they didn't have breadth.

Martin Gauss:Right.

John Plueger:And I think the Chinese government and the regulators do a very effective job of making sure that the airlines which they oversee have proper training and experience, etc. So pilots are a big factor, but all of these different things— pilots, MROs, etc.— I think to Martin's point, do get addressed over time. And I would offer one comment on the MRO side, particularly on the engines. Over the last several years, there's been a real huge strain on engine MRO work because a lot of it— let's face it, a lot of the new technology engines that we have, the geared turbofan, the LEAP, the Rolls-Royce Trent, have had teething problems.

Martin Gauss:Right.

John Plueger:Right. Big ones, serious ones. And a lot of these manufacturers had to do everything they possibly could to take engines off wing, put engines on wing. That requires shops to do. I do feel a little more optimistic today that more of that is behind us now, that we— I hope I'm invested a lot in this, but I do feel that we're making some progress. So that some of the acute critical shortages of putting— getting engines into it, getting an airplane into an MRO to change the engines, I'm hoping now as these improvements are worked through, the performance improvement programs, etc., I'm hoping that we'll have a little bit more relief over the next couple of years. We will see.

John Thomas:Right, right. Martin, any—

John Plueger:Rafał?

Martin Gauss:All I can say on the pilot side, we have also that demand. And what we, we did, like a lot of airlines do, we set up a pilot academy taking pedestrians to make them airBaltic pilots. And then a couple of years later, most of them will become captains. What I see is that I think we airlines are not good enough for that very young generation, these still pedestrians today, to advertise how good that job as a pilot is and what kind of a long-term future you still have being a pilot.

John Thomas:Yeah.

Martin Gauss:There's so much other interesting jobs in the digital world today that young people tend not to even see that the pilot is a great job.

Kresimir Kucko:Yeah.

Martin Gauss:It's a very well-paid job. It still has a perspective. Perspective, if you start today, I would give it 20, 30 years before you maybe think about having commercial aircraft not flying with pilots, maybe even longer. So anybody who starts today becoming a pilot will have an above-average salary in the future, and we'll have a very interesting job with all the technology coming, electrification of engines, and you have a global job. I think we as airlines are not doing enough to make that job as attractive as having a job in Google or Amazon.

Kresimir Kucko:Mm-hmm.

Martin Gauss:So I think if we get that changed, we will also have it not so difficult to start recruiting pilots and, and, and getting people who do not know what to do in the next years to maybe take that path. So something we try to address locally, it works for us at the moment, and I guess the others will do the same, otherwise they won't fly their aircraft.

John Thomas:So, so pilots, let's say we can solve the pilot one, but I would imagine that if it's hard enough to convince people that it's great to be a pilot, I would imagine to be engineers is even, or mechanics, is even harder. So you, you having issues in terms of, uh, having enough engineers, or, or you think that, um, you've got the right— because again, Boeing have obviously come out and said there's going to be a pilot shortage, but they've also said there's going to be a mechanic shortage as well.

Kresimir Kucko:Well, I mean, there is always a, a movement, you know, especially at the one point when, when the, when the GCC carriers were growing, then it was a lot of engineers and mechanics, licensed mechanics, come to the region and build the MROs. At the moment, I think we are all good in this.

John Thomas:Mm-hmm.

Kresimir Kucko:There is a good brokers companies who provides mechanics in the seasonal workload, which is normally in Europe winter. And we also do something with the government sponsoring the developing of the talents in the airline jobs. So, I mean, becoming licensed mechanics, Takes shorter, luckily, than a good pilot.

John Thomas:Right, that's true.

Kresimir Kucko:You can, you can be on the market in 3 to 5 years basically as a B1 licensed mechanic, so B2 doesn't matter. So in that perspective, but airlines should, they're considering more not performing only line maintenance, or if some of them who didn't, they should, but also the base because it's not that big and difficult step to increase your work scope from line to base as well.

John Thomas:Right, right. So generally speaking, everyone feels pretty confident on the board, on the, on the panel. We probably have time for 1 or 2 questions. Any questions, or we've made everyone feel pretty comfortable that there's no real overhang there? Just so long as— Martin, I love you. Having observed this industry for such a long time, if we can fix If we can go for a single sky in Europe, that will be wonderful.

Martin Gauss:Let's be back in 5 years. If we have it, I was right.

John Thomas:Oh no, you said 2 years.

Martin Gauss:They have to fix it within the next 5 years before there's a new European election.

John Thomas:Yeah, right.

Martin Gauss:I'm very, very positive. There's a lot of pressure from us as airlines in Europe, from Eurocontrol there's pressure, and more and more governments understand that issue because it is so stupid to fly zigzag in Europe while everywhere else in the world you can fly straight. So stop the zigzag flying in Europe and make that sky a proper sky, and then we'll have a lot less problems and we'll really do something for the environment, which is X times bigger than some other initiatives.

Rafał Milczarski:I'm slightly more skeptical about single European sky, Martin, but I, I think what we have to insist on as airlines is that we remove the inequality of punishment for underperformance. I think, you know, it's really ridiculous that we as airlines have to compensate passengers according to EU 261.

John Thomas:Yeah.

Rafał Milczarski:Yet, now we are actually compensating for damage inflicted on us and on passengers.

John Thomas:By the system.

Rafał Milczarski:By the— not only by the systems, a lot of times by the irresponsible trade unions. who decide to strike abruptly and they decide to put the whole system into a halt, and they bear no consequence for this.

Kresimir Kucko:Mm-hmm.

Rafał Milczarski:So I think, you know, as a minimum, as a bare-bones minimum, what we need to request is that there is punishment for underperformance. If the air traffic control ANSPs do not provide the service they are supposed to provide, they should be compensating the airlines.

John Thomas:Absolutely.

Rafał Milczarski:If they cause delays, we should be receiving the money from them because we have to compensate our passengers unless the European Union Commission would like to change the entire compensatory scheme. But I think without introducing the— an element of monetary reflection of of the service quality provided, the system will never improve.

Martin Gauss:Right.

John Thomas:You need a stick.

Rafał Milczarski:You need both the carrot and the stick.

John Thomas:We need a stick.

Rafał Milczarski:We have a, you know, we are paying a lot of money, so the carrot is really huge.

John Thomas:Yeah.

Rafał Milczarski:But the stick is nonexistent. Yeah.

John Thomas:Yeah. Okay. Thank you. Please join with me in thanking our panelists.

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