TAP Portugal CEO Update
TAP Portugal SVP Network and Revenue Management, Elton D’Souza, outlines the airline’s 2017 profit target and traffic growth drivers, noting that it has been a record year for revenues every month so far. He gives an update on TAP’s partnership with Azul and its impact on its position on routes to Brazil and looks at its emerging partnership with Hainan Airlines. He ends with a look at the impact of the A321neoLR on TAP’s network.
Transcript
Elton D’Souza:We hope to have, let's say, to double the profit in '17 compared to '16. It's, at the moment, the bookings and forward bookings are extremely good. We've put in a lot of new capacity, we've started 10 new destinations, but I have to say that we are very happy with the results and they are very, very positive. And I think the road forward is basically very optimistic and positive. So we've changed a lot of things at TAP, as you probably heard yesterday. From the fleet, we've changed the product, so we basically improved seats on board, we got new planes. We increased the customer offer. We changed completely the network, so we focused on offering a proper schedule and the proper frequencies to customers, which was not there in the past. And most importantly, we changed completely the pricing. We changed the pricing to what we call a customer choice offer. We launched last year already in October in Europe. And then now from September this year, we launched on the intercontinental. We are one of the first network carriers to offer what we call this customer choice product or branded fares to the customer. So customers have a possibility to travel on a discount fare without bags, up to, you know, buy up to 3 bags or 4 bags or even 5 bags. So the whole spectrum is in there and the customer can choose what they like. We have seen huge demand growth because of this, and so we almost grew by 25% with these actions. And the launch in September this year has been so far extremely positive with the bookings now, and we have every month this year had record revenues. In our 72-year history, this was the best revenues each month. And so we had the same for September, and we expect the same for the next 3 months too. So we will obviously have record revenues in the year, and the profitability therefore will be almost— we expect almost double compared to what we had last year. The partnership with Azul is going to get closer soon. We are discussing a joint venture with Azul, and hopefully We will get approval in the coming months or early next year. It's what we have expected. This will be what we call revenue sharing, so we basically will then not worry about each individual bottom line. We will sell without preference, and this gives us access to all the destinations within Brazil that Azul flies, and it will make us the strongest carrier to Brazil from Europe because we basically already fly to 11 destinations nonstop from Lisbon and from Porto, and basically nobody else in Europe does that. So we are able also through all our individual gateways to grow and move passengers to various destinations every day via a different hub on the way out, via a different hub coming back. We've also increased capacity with this joint venture, and we will increase more capacity next year based on this joint venture? With Hainan, Hainan has, with their company called Beijing Capital, which is one of the companies in the group, they started flying already from July this year to Beijing to Lisbon, and we basically code-sharing with them. So this is the first start. We have the shortest route from China to São Paulo over Lisbon, for example, and they are able to connect to our 11 destinations directly nonstop, which not many other carriers are able to offer for traffic between Brazil and China. So we expect this also to grow in the future from a perspective of them adding more frequencies on the route from Beijing to Lisbon. And together with our joint agreement with Azul, we can also take their passengers then directly or to any other destination beyond. So the LR's will basically fly to all the destinations which are in the north of Brazil, which is the east coast of America. So we are looking forward to not only fly to our existing destinations, and what the idea is to replace one flight a day with 2 flights a day. So possibilities of offering customers more connection, more schedule, and more access to the markets. And also what it will do is it will lower our costs. So we expect to fly at much lower fuel costs especially. Today the industry is happy because the fuel price is around $56, but we don't expect that to last forever, and we are getting ready for the next gen when we are able to then go forward and actually be competitive even in the future with higher fuel prices.
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