Tapping Asia’s Growth: How To Make Friends And Influence People When You’re Based Outside Asia

Transcript

Peter Harbison:We're going to move now to our last panel of the day, Tapping Asia's Growth: How to Make Friends and Influence People When You're Based Outside Asia. We've got, gentlemen, if you'd come and join me on the stage. We have from Finnair, all the way in from last night, VP Commercial Strategy and Planning, Hubertus Hessel, coming up first. Coming up second, we have Richard Nuttall, CCO of Royal Jordanian. Hubertus. Damian Hickey from Travelport. And our good friend Barath, who's the CEO of Jetstar Asia. Gentlemen, welcome. And we'll have to talk loudly and argue among ourselves to keep everybody awake because it's the last session of the day, so I want this to be controversial. No, not really. Asia is different, obviously.

Hubertus Hessel:It's—

Peter Harbison:apart from anything else, it's growing fast and everybody wants to be here and ideally to make money as well. And I was talking to Hubertus before just how different Asia is and how difficult it is to— I always remember once we get all sorts of funny phone calls in our office and, you know, being in Australia, we're a bit remote from everywhere. A mother phoned up. She was helping her daughter to do her homework on Asia and she wanted to know what the capital of Asia was. We told her it was Singapore, of course. But the point you were making, Hubertus, is the market is so fragmented. There's no alternative really to air travel. There's no train system. You can go by boat perhaps. The geography is such, the distances are such that air travel is the only way to go. And for a foreign airline operating long-haul into this region, it's really quite difficult to deal with the issues that that raises. You have to work with local airlines presumably if you want to serve more than 1 or 2 points in the region. Richard, you come out of an Asian background. You were with Cathay Pacific for a long time, been in the Middle East for a long time now. So you're probably quite, quite a good person to talk to about, for example, what the contrasts are about between operating into the Middle East and operating into Asia, and as a Middle Eastern operator, what, what needs to be done to, to get on the ground in Asia effectively. Damian, you're a master of all things, so you can cut across every area, but obviously not just on the distribution side. You've been around the industry for a long, long time. But there are certain quirks in the Asian market that— and the different Asian markets that make life difficult. And Barra, of course, you know your way around this region pretty well. You've been CEO of Jetstar Asia for a while. And an interesting airline has had a— let's start with you. And just, you know, when you're talking to foreign airlines, What are the things you hear from them? What are the things you can offer for them? This isn't a self-promotion exercise. This is, this is talking serious science.

Richard Nuttall:Yeah.

Peter Harbison:What are the problems you hear from them and, and, and what are the solutions? Not just Jetstar but others, how do they do it? And what are the complexities in, in actually making connectivity is largely what we're talking about, I suppose.

Barathan Pasupathi:Thank you, Peter.

Peter Harbison:It's—

Barathan Pasupathi:to just give you a short preamble on Jetstar Group and then I'll touch on What you've asked me to touch on. The Jetstar Group today has got 5 Jetstar-branded airlines across Australia, Singapore, Vietnam, Japan, and New Zealand, and we have actually gone domestic New Zealand as well. 11 years ago, if you asked me when we started, the LCCs were all about point-to-point distribution. No one actually thought about codeshares and interline. We stayed away from that, saying that it's complex, business, it adds cost. But then again, dial forward 10 years, today we have got more than 30 codeshare and interline relationships. This spans across from the onset of a dual-brand strategy with Qantas. We benefited from working with Qantas in 2006, having a codeshare arrangement, and then we leveraged this across partners flying into Singapore. Let me talk about Jetstar Asia to be specific with I saw some friends in Changi Airport there. You know, Changi is a fantastic hub. The population of Singapore is only 5.2, 5.3 million people, and if you look at the traffic in Changi, it's 54, 10 multiples of it. Where do all these customers come from? You know, they come from full-service carriers carrying them into Singapore. So we have in the last 10 years moved that further in terms of yield growth and started working with a lot of coach and incline partners.

Peter Harbison:And you're talking about the hub?

Barathan Pasupathi:When traditionally a lot of airlines said no, we have actually pushed that forward. And if you look at some of the statistics, we started with zero codeshare partners in 2004, and today in Singapore we have got 3 big codeshare partners. More will be announced. I can't say much, but some of my partners on this stage will talk about it, but more will be announced. But we have 23 interline and codeshare partners in Singapore alone, and as a group we have actually gone further. We have 36 one-way codeshares. We talk about growing in Asia. The easiest aspect of it in this curve is working on interline arrangements. We went into Yangon in 2006. We benefited on our relationship with Myanmar Airways International. We had an interline, took it to a joint service agreement and a codeshare, and then we are now standing alone in that market. Likewise, as a group, we have 36 one-way codeshare partners and— sorry, interline partners, and we have got 5 codeshare arrangements across the group. And of course, on the other aspect of it, we have got joint business agreements in certain partners. And in markets like Japan and Vietnam, we actually have joint ventures. Joint ventures. So it's an interesting arrangement and we have learnt a lot in our 10, 11-year journey, and some has been less than that.

Hubertus Hessel:Yeah.

Barathan Pasupathi:But a couple of things that, Peter, we look out for is that you don't expect overnight success. You don't expect overnight success in trying to turn these partnerships on, and it takes time to work with partners in Asia. And in many aspects, some of the— what you see today may not turn out tomorrow or the next year. It takes time to build these partnerships. So we have learnt a lot in this sphere, and it takes time to build relationships in Asia, but Asia, but you need to keep working on it. You need to keep working on it. Relationship is a big factor. Face-to-face relationship versus emails, the basics, is important. And there's a bit of hand-holding to do in this part of the world as well. So there's a lot of opportunities for carriers flying to Singapore, and likewise, we are in tandem with a lot of negotiation and discussions with other carriers, not only coming to Changi Airport but across the footprint in Asia-Pacific.

Peter Harbison:We'll come back to that. Yeah, thank you. Moving along, Damian, what— you've been around this region for so long now, you've almost lost your Irish accent.

Hubertus Hessel:Almost.

Peter Harbison:What is tough about this market for foreign carriers coming in?

Damian Hickey:I think, as Barra— I agree with a number of things Barra said. I mean, I think you have to look at it from a couple of perspectives. I think the first one you mentioned yourself, Peter, is, you know, there is no Asia, right? There is no dialing code. There is no capital city. You know, you have to understand very quickly when you're coming into Asia is that Asia is a proliferation of different countries. They all have their own characteristics. They all have their own cultures. They all have their own way of doing business. So I think that's a basic fundamental of doing business here. That equally applies to an airline looking to go into Asia. So you have to build— invest the time in building the relationship and understanding of how things work. I think one of the challenges that's kind of become apparent probably in the last few years more than historically has been, there's been a move away from, somewhat away from the way that Jetstar has operated in terms of traditional partnerships of interlines and codeshares and kind of the industry standard way that you expanded your network. into being much more innovative in terms of, okay, how can I partnership without having to go through, you know, all the industry regulation and standards and do it on a more cooperative basis? And Asia's actually been very innovative on that. So you'll see things like, you know, AirAsia with their fly-through relationships. You see things that, you know, Changi and Tiger are doing with TigerConnect. So there are different relationships that are being formed. So one of my advices to foreign carriers when they're coming into Asia to look at how they want to work with partners in Asia is not to come within saying, well, this is the way that we have done business and in partnering traditionally, but actually come in and listen because there's a lot of innovation happening in Asia because Asian carriers have had to work in this environment. You know, you talked about the cross-venture, cross-border joint venture. That was created out of a necessity as that's how you had to work in Asia. So I think one of my advices would be come in, Listen to what innovation is going on and then adapt to working that way rather than coming in and saying, well, this is how I partner in the rest of the world, therefore why doesn't it work here? So I think that open mind is becoming more and more important.

Peter Harbison:Sounds like good advice. So Richard, I mean, is it hard to establish partners, harder to establish partnerships in Asia? What are the differences that—

Richard Nuttall:I think actually, first of all, on the subject of flying to Asia, it's sort of quite interesting because, you know, we're very different to yourselves. And I think that we're sort of a microcosm of the issue that Asia has, is that you've got this fantastic growth, but you've also got a massive growth in capacity. And you've got to make sure that the two are married. And while it sounds counterintuitive, We actually reduced our flying to Asia this year, and Asia is our least profitable region. And the region for that— the reason for that is pure geography. We are just the wrong side of 3 enormous Gulf carriers.

Hubertus Hessel:Mm-hmm.

Richard Nuttall:And, you know, we talk about connectivity, but the reality for us is that unless we have a sufficiently high 3rd, 4th freedom market, We're never, ever going to be able to compete on connecting traffic other than for filler traffic because the yields are just too low. If you're competing with 777 connecting to A380, you know, you can't do it with narrow-body to— even to 787. Fuel has helped, so we're actually going to start expanding again. We're going to go back to Jakarta. So I think you really need to know your market, and it's a little bit different for every other— for every airline. On the subject of connectivity, I guess I've got 2 comments to make. One is, you know, if you're a really big carrier and you're carrying in huge numbers of passengers, then you're going to make the investments you need in particular solutions. But if you're a little bit smaller, it needs to be easier because it's a question of, you know, how much time and resource is it worth putting into this, you know, particular case. I have to say that, you know, being a part of Oneworld and the sort of straight-rate pro-rate system where you can just link in, you can do your codeshares where you have the rights, and you don't have to get involved with all the pricing negotiations is great. And that's something that maybe will come up again tomorrow morning when we talk about joint ventures. But then I think the other issue is, you know, the fact that we keep coming back to that Asia is many, many different markets. And we talked this morning about the fragmentation. And it's the fact that you almost need a different partner in each market. And it's probably no surprise that the people who keep coming up with, you know, the biggest partnerships are Qantas, because you're talking about 5 destinations in one country, or however many it is. Whereas there's a little bit less, because everybody else is, you know, one destination, one destination. So, you know, maybe that's an opportunity for the guys who are fragmented, who've started this cross-border business and they've got sort of multiple AOCs.

Peter Harbison:The other point I was getting at though too, Richard, I mean, Bara mentioned face-to-face, Damian's talking about the need to listen, is that— and we all know partnerships are very much about human beings. They, you know, you can have all the technical bits right, but if you haven't got the human chemistry right, it doesn't work. Is it different in Asia? I mean, obviously each country is different, but what are the differences that you really have felt seeing both sides of it?

Richard Nuttall:Actually, to be honest, I think it's a myth that it's an Asian thing. I think it's true everywhere in the world. And I mean, it's certainly very true in Asia, and I think that where you're across cultures, it's more important, and maybe it takes a little bit longer to build up that relationship. But I think it's true everywhere in the world. If you sit down across a dinner table with somebody, not a golf course, you get too preoccupied with the golf, but if you sit across a dinner table or you have a coffee with somebody or whatever, you're going to finish up doing more business and listening and get things sorted out versus emails. Absolutely. Absolutely.

Peter Harbison:But I mean, Damian's point struck a chord with me. I mean, for decades, for years, having foreigners, very clever people from Europe, very clever people from America, coming in and telling the industry how things should be done. I think there's still a bit of an overhang of that, isn't there? Or is there?

Richard Nuttall:I think there is. And I think it's always been there. But I think that the markets themselves in Asia— I mean, I left 15 years ago, so maybe I'm not the best person. But I think that the markets here have matured so much. There are many, many more airlines. There's much more in-region expertise. So I think it's true, but it's probably not as extreme as it was, you know, 15 years ago. Because the industry has— you know, the world is getting smaller. And so the differences are less. I mean, when I grew up in a small town in the north of England, I could go to a pub 10 miles away and not understand what people were saying because the accents were so different. And now with television— Depending on what's happening as well. Yeah, absolutely. But with television and now the increases in travel, and I think we do actually get closer.

Peter Harbison:Hubertus, I don't know how many times you've been down to this part of the world, but you're just a short flight away. I mean, having heard the other 3 gentlemen on your panel, what are your impressions of dealing in this market, say compared with dealing in the US? Which is another of your big markets, obviously.

Hubertus Hessel:Well, I would say the big difference— I would agree with Richard that I think it's a people business. We serve people, we deal with people, so you need to be approachable, and that doesn't work through emails. You need to sit down and meet. I found, from my personal experience, for instance, I believe in China There's a lot of expertise. I never come across, let's say, foreign management staff there, not too often at least. They might be educated outside of China, but there's a lot of expertise, and there's the opportunity for us compared to Europe is it's not such a rigid thinking of I'm part of this alliance, I can only deal within this alliance. A lot more pragmatic. That is because here's the startup spirit, here's the growth, new airlines coming up, so it's much easier. You run into open doors when you ask for a meeting, at least. Maybe the difference is the technical capabilities. There are some challenges, namely in interacting between systems. If you want to work with a Chinese carrier, for instance, Then it's TravelSky. Takes longer, but to agree usually doesn't take longer. It's maybe the challenge, I think, in specific this market is to find the right people to talk to.

Peter Harbison:Yeah, yeah, that's always an issue. An interesting point though, and you talked about the pragmatism in partnerships, particularly in the global alliances, and we see 2 SkyTeam carriers, major SkyTeam carriers in China, and they're dealing with just about everybody. Qantas has just formed a close relationship with China Eastern, Oneworld, but at the same time has a reasonably strong relationship with you. Obviously there's overlap here. I mean, is that something you find outside of this region, that people are much more pragmatic, airlines are much more pragmatic about the global alliances versus No, I think particularly in Europe it's very rigid.

Hubertus Hessel:I think it's all set. That might be linked to the number of airlines decreasing rather than growing. So everyone is preoccupied with themselves, and it's, I would say, a very competitive market as well. I mean, the margins are very thin. And the competition is from the other airlines. Lacking behind the US by far, and I would say here in Asia, and I'm actually glad to be part of an alliance which is not so rigid in terms of whom we can partner. And we saw the slide from Jetstar. I think we have all kinds of these partnerships as well, from 130 interline partnerships. To actually less codeshare partnerships being around for such a long time. But I would say here it's more about doing business. And since it's not one country or one continent— I mean, it's a continent, but it's very scattered— you have to define very different partnerships because we fly to like 15 destinations in Asia.

Peter Harbison:Yeah.

Hubertus Hessel:So yes, you can build a joint venture in Japan. In China, maybe a joint venture wouldn't even cover half of the country. You have to work with different partners there. And yeah, I think it's very specific to this market.

Peter Harbison:That's interesting. And of course, if you're dealing on a bilateral basis with 15 different partners, or say 10 different partners outside of the one world club, You then don't have that nexus between— those partners don't have the nexus between themselves. So you're sort of— you're not able to use the one-world umbrella for all of those relationships. So presumably it is complex because you're having to negotiate different deals with each one. Technology's different in each case, obviously, because there's no attempt at standardisation.

Hubertus Hessel:Yeah.

Peter Harbison:That's time-consuming. It's hard to get into this market.

Hubertus Hessel:That is true. So there's a lot of travel involved, and you need to be adaptive. So you need to find a solution for every partner or every market. I think in the basic arena of interlining, code sharing, there is a fairly high level of standardization, systematic We can run into issues. And then working with low-cost carriers, I think sometimes capabilities still have to be developed. So that's much easier. It's much easier to work with network carriers.

Peter Harbison:But it means a lot of resources, human resources as well, doesn't it? Just to keep all these balls juggling.

Hubertus Hessel:Yeah, it's— we're a small team. I'm heading the Alliance and Partnerships team, and we're only 5 in that arena. And we have actually more than 100 interline partnerships. Of course, you don't get around, once you settle those agreements, and meet everyone every year. But someone has set it up in our 90 years of history. No, it's people-intensive. And especially it's cross-functional, so we work very closely, especially for the Asian market, with our government affairs. We also work with Finnair, namely promoting, of course, Helsinki as a transfer hub. We work together with our network planning, obviously, and then we work together with existing partners because That is also a possibility to open doors.

Peter Harbison:Bara, you've, as you were saying, you've been pretty pragmatic in your relationships. It's not limited to one world or anything like that. So from your end, do you try and standardise those relationships? You know, make them all fit to your model?

Barathan Pasupathi:2 comments on that, Peter. I enjoyed the dialogue when we talked about complexity and having a greater number of team members to manage this codeshare and interline relationships. But the Jetstar Group, even though we have 5 Jetstar-branded airlines, we have a group platform and we basically harness the economies of scale of all these relationships and have a very single point of contact for all the codeshare and interline relationships. So any partner working with us has one relationship and then you get 5 markets. So we, of course, obviously we learned along the way to do that, but we've got there, we've got there, and hence we see a number of partners coming on board and working with us. And in order not to add complexity, we're very pragmatic in terms of our code share or interline solutions to partners. We have basically, to the extent of having a menu card, as we can do this, we can do this, we can do this. So you're not without going over the top on adding any further airport handling costs or transfer costs. We've also, what do you call it, streamlined processes and added technology. Of course, codeshare passengers can see their baggage and everything end-to-end, even though it's a 2-sector journey within our network. And that has also taken time to develop. And of course, we've worked with airports in order to enable that as well. We have been very pragmatic in terms of trying to find solutions for this, but it's a lot of lessons. And it's very different from the typical full-service carrier to full-service carrier codeshare relationship. And the other avenue we see is that if you take Jetstar Asia alone, with the huge developmental plans at Changi Airport, you find that, for example, we are in Terminal 1.

Peter Harbison:Mm-hmm.

Barathan Pasupathi:And a lot of partners are actually in Terminal 1. With the other airlines like Cathay and AirAsia moving on to Terminal 4, which is coming on stream, we find that we are in a very nice soft spot, perfect, perfect position to basically work with all our partners in a non-Star Alliance way.

Peter Harbison:Yeah, I experienced that not so long ago. I came in on BA from Sydney and was transferring to Jetstar, and I then discovered I had to go out and in or into Singapore, collect my bag, and come back in because we're in different terminals. And that's— I must remember to complain to Changi Airport about that, but it's actually in their favour. It's actually not their problem, is it? It's because you haven't done a bilateral.

Barathan Pasupathi:Yeah, and it's— we're working on— I think BA was one of the parties we are still working on, and there's a number of partners And it doesn't matter which terminal the originating airline is, we can actually do it. Changi is very seamless. We can actually reduce— we have actually reduced minimum MCTs, minimum connection times, from 90 minutes to 75. We can even push further as well.

Peter Harbison:So you— we've mentioned airports, and I was glad you got onto the topic of airports because obviously we're talking connectivity, we're talking low-cost carriers, and and therefore a change in the way the airport has to operate as well. And you have to educate the airport. At our conference in Bangkok when we were talking, Tony Fernandes was lecturing airports about what is really needed at an airport these days if you want to be able to accommodate this growth, because this is where the growth is coming from, isn't it? How do you find that works too? OK, you've got your network, you can relate to, say, a Finnair or whatever, and then and do the same deal with the other Jetstar partners in the region, but you've also got to have a similarity presumably of airport performance as well to be able to do these things.

Barathan Pasupathi:If you look across the Jetstar network, we actually exist in the main terminals. We've not moved to the low-cost terminals in many airports, many countries. In Jakarta, we're in the main terminal. In Bangkok, we're in Suvarnabhumi. In KL, it's only in KL that we moved to KLIA. KLIA2. First reason for that, there's cost reasons for that. And Changi, we are in Changi. And you've seen a lot of fulls, our codeshare and airline partners, actually come to the main terminals. In that way, the experience, the customer experience has been seamless. And it's actually, it's just not the soft experience, it's also the back of the operations as well, which is seamless as well. So we have stayed, we existed in the main terminals, we worked with partners around the main terminals, and that's not proven to be difficult. And Singapore is a blissful experience getting through Singapore. It's a fantastic airport, and our customers, you know, sometimes they're kind of puzzled that it only takes them 20 to 25 minutes to move from one aircraft to another at Changi.

Peter Harbison:Are airports keeping up with the game though?

Barathan Pasupathi:We are seeing that. While I talk about Singapore, I think I can also talk about the experience we're seeing in T4 in Melbourne. We have gone into a fully purpose-built terminal in Melbourne with 36 kiosks and bag drops, and it's 100% self-service. That's the other thing. I think some, some of the airports get it. Obviously, some need to come to the game, but it's the innovation and this whole disruption that everyone is talking about is happening, and that will happen as well.

Peter Harbison:And obviously through this process, Damian, to get into your favourite territory. I mean, we are looking at a whole array of different new issues arising here. Not only the technical issue itself, but the fact that you've got different foreign airlines coming in with different understandings, with different systems. I mean, what are the biggest issues there, and what are the soluble ones, what are the insoluble ones?

Damian Hickey:Well, I think you need to go back to your kind of earlier perception, Peter, that You know, that you had kind of this feeling that particularly a lot of foreign carriers coming into Asia were saying, well, you know, this is the way I do business and this is the way you need to work. I think you need to understand that, you know, that's not necessarily for the wrong reason. You know, the industry that we operate in traditionally has been based on a global complex network, and in a global complex network, to be efficient, you need to have standards. You need to standardize systems, you need to You need to standardize connectivity. You need to standardize process. You need to know that when your partner's bag ends up on your flight, that it's going to be handled correctly. So there are reasons for doing that. Now, I think one of the biggest disruptors into the whole partnership arena has been the low-cost carriers. The low-cost carriers, when they started moving into the partnership arena, said, yes, we want to partner. We're maturing, but we want to partner. We don't want all those overhead of standards and compliance. Complexity, because as we know, the only thing that low-cost carriers hate more than cost is complexity. So they don't want all of that. So that's put huge pressures on all of us in the industry. People like IATA saying, okay, I need to come up with new standards. So that's why you need somebody to work on that. But also it's people like ourselves who are technology providers have to look at doing things differently and no longer say, well, You know, use this ATPCO way to file your fares, or use this IATA way of doing interlining. And they said, okay. And again, coming back to listening and say, okay, tell me what you want. What kind of business model are you trying to achieve? And let's see if we can come up with a newer way, achieve the same goals, but maybe we don't have to do it, you know, in 2015 as we did back in 1965, right? And I think that's what's changing. I think we have to look at it a different way. Recognizing that it is a complex business and sometimes we need to do those things. But, you know, not always just assume that we have to do it the same old way. So there are, you know, technology has evolved. We can do things differently. So I think sometimes it's just stop and think and see, does it make sense?

Peter Harbison:Because we want to just— we've got to disrupt and we might as well disrupt ourselves. Richard, you?

Richard Nuttall:I think that's absolutely right. I mean, in the same way that we talk about LCCs LCCs and full-service carriers, the products sort of merging. I think it's just the same with connectivity. I mean, as a full-service carrier, we have LCCs and pseudo-LCCs that we don't work with because it's just not worth the investment to us in the same way that it's not worth the investment to them to change. But we're seeing examples around the world of LCCs and full-service carriers starting to to work together, and it's just a question of how big is the opportunity, and it needs a bit of give and take on both sides.

Peter Harbison:Well, what's a pseudo-LCC, by the way? This is a new category we've got.

Richard Nuttall:Hybrid, I don't know. What's an LCC? Yeah.

Peter Harbison:OK. Let's go back to Barra, particularly because you've been at the heart of a lot of this stuff, the technicalities, because it is interesting, actually, I mean, for someone in the business. And your experience, for example, working with Changi, the iterations you go through, the experiments, you make mistakes because you're actually, you know, from what Damian was saying too, you're actually doing things that nobody else has done before. So you've got to learn, you've got to make mistakes. What are the biggest mistakes and what are the biggest breakthroughs you've had?

Barathan Pasupathi:The biggest mistakes that I would think that we probably have done in our 10 years is not saying yes sooner to a number of things. Not saying yes sooner to a number of things. And I've got 2 slides I'd like to share, and these are, you know, we talk about collaboration and what's the next chapter. The next slide I have, once it's on, I think they're getting it on, is how we are We are saying yes to technology adoption in the business. You talked about it before. I talked about technology. Let's talk about— I spent— Peter, you asked me yesterday, is that I'm missing in the segment. So where are you, Bara, at the Aviation Summit? I was actually in the business traveller segment, the business traveller segment. And 10 years ago, when we— 11 years ago when we started, we didn't pay much attention to the business market, to the business market. We said, let's go the typical left extreme low-cost market, point-to-point, you know, don't coach, don't interline, and it's just FIT and leisure market. But roll forward 10 years forward and then on our flights to Singapore-KL, Singapore-Jakarta, Singapore-Bangkok, 50-70% of the first flights of the day are suits. I'm surprised all the time when I bought these flights. It just suits business travellers. And true enough, in a recent survey by Asian Business Travellers, more and more customers in this market are switching to LCCs. Of course, you know, there's a difference between a 13-hour segment journey and a 2 or 4-hour journey, but that switch is happening. That switch is happening. And more and more of these business travel customers are bundling a business experience with a leisure experience. And so they are breaking the business journey and connect and having leisure experience. And more and more of these customers are, what do you call it, looking for conveniences. Switching on 3 times of these customers are now booking on mobile. So that's one aspect of it. The second one—

Peter Harbison:This is making life really tough for the corporates as well, of course, isn't it?

Barathan Pasupathi:Yeah, that's why I attended. Yeah, I attended the corporate travel segment to also assure them that we have reached a certain level of maturity and we're not going to cannibalize the market, but there's— I think we can work together to build the market further. There's a lot of the TMCs who are not working with LCCs because of the ease of booking, and then there's incentives, no incentive arrangements, but there can be targeted initiatives and we are moving, we're moving on that. We'd call it a basic package. business model. There's 4 things customers are looking for: flexibility, speed at airports, reliability, and service. So you give them these 4 things and they'll keep coming back to you. Another thing that we didn't adopt much earlier and we are doing now, as you talked about at the airports, in Changi Airport— Ilya mentioned earlier about kiosk and bag drops. We're working with Seata, we're working with Changi Airport, and 3 years ago when you rolled this out, customers were saying, we don't want to use it, but now we have 51% penetration in Singapore alone. Given that we are a fully international airline, that's a great achievement and we're pushing that further with Changi Airport. Yeah, that's pretty remarkable.

Peter Harbison:Thank you. So, sorry, I missed, what was the biggest mistake? Not listening to other people, not listening to what you needed to do?

Barathan Pasupathi:Yeah, I think basically not adopting ideas early enough and waiting too— it's too late at the curve, but we are still there adopting. At least we— it's not late to move, but in some areas I wish they'd moved a bit sooner.

Peter Harbison:Yeah, it takes me back actually to the first session this morning when Dermot was talking about learning and making mistakes, and he said one of the really— if I remember rightly, one of the really important things things is actually to realize when you've got it right. But at the same time, I guess, to keep a mind open because there's always going to be a better way of doing things as the market changes.

Richard Nuttall:I think there's a balance, isn't there? I think that, you know, you can work for organizations that don't get anything done because they try and do 80 things all at once. And the key thing is to try things fast but to make sure you've got a team that will align between what you're trying now. And it's okay to make mistakes. We're going to make them A lot of difference between an idea and implementation, isn't there?

Peter Harbison:There's a big gap there sometimes that a lot of people fall down. Hubertus, I've kept you off the scene for a while. What are your feelings in terms of particularly, you know, the issues when it comes to working with, say, a low-cost carrier in the Asian market? That must be quite time-consuming. Yes, it is. Because you have to work with the airport, get the systems right, and that sort of thing. How does that compare, say, with doing a deal in the US?

Hubertus Hessel:Yeah, maybe just one comment, because in Europe, in essence, all the carriers have gone hybrid. So the low-cost carriers are moving up the ladder, and the full-service carriers are moving— removing services from the product. So I think the product becomes much more interchangeable. Which gives us the opportunity because we, we always had this strategic question to what's the balance between being an effectively effective hybrid carrier in Europe and then a full-service carrier on the long-haul section. Now we are much more open, of course, to work in Asia with low-cost carriers as well because people, our customers, mainly our customers they're used to the concept in both ends. So that makes it easier. I managed, I think the concern is of course the, that they're mainly based in our headquarters, the concerns about the product differences that you have. There's not usually not a business class, that is something, but I think some of the carriers are very adaptive and provide options for the partners to choose from. So this, this is really a smart move, and I think it's driven by technology. And as we move forward, I hope it's, it's going to be even more seamless. I think the earlier panels have spoken about some of the initiatives driving it. And I think one challenge, of course, is We more and more look at total revenue. So also we are growing our ancillary revenue share of our total revenue, and the proration of course is based on a net fare, which is— this share is becoming smaller and smaller. So I think you have— it takes more time to find an agreement which is sustainable for both sides, and that's what makes a good partnership, if it's sustainable. for long term. So we cannot rely on the standards, so to speak, in this arena. And also some of the alliances have moved away from that a long time ago, and that is always an issue. And but then working with low-cost carriers, it's, it's much more profitable, just to say, because they have lower costs.

Peter Harbison:Yeah.

Hubertus Hessel:So there's more profit, there's more profit to be shared as well, and makes us also more competitive in the market. I think working with low-cost carriers here in Asia, it's quite relaxing because there's no competition from our network model. It's really purely expansion of our virtual network. So whereas when you deal with network carriers, there is of course some common interest, but then there's usually also a downside to it.

Peter Harbison:Let me come back to that. I just want to ask Bara, are you happy to share your ancillaries with partners?

Barathan Pasupathi:We actually get a lot of ancillaries from partners. It's the way, the way the model works is that that, you know, our partners who prefer to interline and codeshare with us have an option from a basic product to a full-service product. And this is basically bundling the unbundled experience, as you call it. LCCs unbundled it and full-service carriers bundled it.

Hubertus Hessel:Mm-hmm.

Barathan Pasupathi:And so some partners request for not only a meal on board, amenities kits, blankets for sectors of more than 4 hours. So we actually do get That's why we're pushing on, not in the business travel segment, but for coaches, interline. It is better yield perspective from that rather than going above the line in newspaper campaigns where LCCs are battling each other for yield. I think that the point Richard raised on capacity in the market is very relevant. There's a lot of capacity added by carriers. 3 years ago when we pulled the brakes and said we are slowing down, People looked at us, but now we have matured in terms of how we use our capacity smartly.

Peter Harbison:Hubertus, coming back to that point, in Europe, Michael O'Leary of Ryanair has suggested to Lufthansa that they cut out all their regional services and just let Ryanair be their feeder. I mean, it's partly tongue-in-cheek, but not entirely, and it's also partly a veiled threat, but it's essentially what you're doing at this end of the market, isn't it?

Hubertus Hessel:Yeah, I mean, in essence, that's it. I think it's, as I said, in Europe, it's— we're thinking much more in these boxes, you know. I'm a full-service carrier. There's this low, ultra-low-cost carrier, at least a few years ago. I mean, they're working on it right now, obviously, improving the customer experience as well, and that just doesn't go together. But it's only in the heads of some people who have been maybe very long in this industry. I can't see why it can't go together. I actually presume the idea is not so new, but maybe now the time is ripe for these kind of ideas. Actually, I think it was at the CAPA event in Helsinki when Ryanair has announced this.

Peter Harbison:Yeah, in Paris.

Hubertus Hessel:Removing flights from Finland, but they're open to work with us as well.

Richard Nuttall:It's interesting if you look in the more mature markets where the LCCs and the full-service carriers have had to compete for a long time. You fly regionally in the back of the bus on a full-service carrier and the product's hardly different from the LCC. In fact, some of the LCCs, it's a nicer service, it's more relaxed. You know, I don't think that the two are quite as far apart as they used to be, and for people from certain markets, you know, they're used to it.

Peter Harbison:There's still the old factors, aren't there? The frequent flyer hooks and also, of course, the corporate deals. You have to get outside those corporate deals. You— what's your situation on frequent flyer points?

Barathan Pasupathi:I mean— Actually, full-service carriers with frequent flyer points Emirates Skywards and Qantas loyalty points, they actually burn their miles and points on us. So they can burn them to get a ticket on us.

Peter Harbison:Does that happen with any of your other partners or just with Qantas?

Barathan Pasupathi:We have started with Emirates, sorry, with Qantas and then with Emirates. But any partners who have a loyalty program and who want to use points on us, you're most welcome to. Most welcome to.

Peter Harbison:But you can't earn them at this stage?

Barathan Pasupathi:Not yet.

Richard Nuttall:Not unless you pay yourself.

Peter Harbison:Any questions? Yes, I have one over there. Good afternoon.

Richard Nuttall:Peter Bellu from Malaysia Airlines. I wonder, the panel, what your view is on the future of the low-cost long-haul model in the region?

Peter Harbison:Baru, why don't you start?

Damian Hickey:Okay.

Barathan Pasupathi:Very good question. I think you've seen a number of long-haul or low-cost long-haul carriers. Let me share the Jetstar experience on this model. We actually ran, had a long-haul low-cost base out of Singapore. We flew from Singapore-Beijing, Singapore-Auckland, Singapore-Osaka, if memory serves me right.

Hubertus Hessel:Singapore-Osaka.

Barathan Pasupathi:And we pulled back. We pulled back for a reason. We, as a group, we are very focused on performance. I met Christoph and we had a very good conversation on this aspect as well. We're very focused on performance and we said that it doesn't really make sense to ply next to next with next to full-service carriers across these markets, not one, sometimes two, sometimes three.

Hubertus Hessel:Right.

Barathan Pasupathi:You know, famous brands and markets. So we got off the market, but we are smart in terms of how we use the long-haul low-cost model. If you look at us in terms of where Jetstar uses it, we connect Singapore or Melbourne to Singapore and we connect it across the Jetstar Asia network. So there is a function that the model plays for us. On top of this, from Australia we are in some fairly Fabulous leisure destinations. We're in Honolulu and Bali is seeing phenomenal success. And lately we just launched from Wuhan in China to Gold Coast on a 787 model as well, but that's on a partnership model. It's a fully chartered service and we have the ability to sell some seats, but we are very targeted in terms of how we use the wide-body aircraft. They're capital intensive and you want to make sure that you, you get the right yield and the right cost mix for that model as well. So we're very diligent on how we use the units.

Peter Harbison:It does give you a lot more— just slightly different, going off on a tangent a bit— it does give you a lot more flexibility, doesn't it, having a number of different models in your fleet now? That Dermot was making the point this morning with the 321s and the 320neos, that suddenly you've got a short-haul fleet that actually can operate long-haul almost with similar performance characteristics. That's— so what you're saying is going to change, isn't it, again?

Barathan Pasupathi:Yeah, and the thing is that if you see Singapore as one experience example of how we use the 787 Dreamliners into the market, if you look at our Jetstar-branded airlines across the network, we have options in terms of connecting international markets to domestic markets. That's where we are using the units carefully.

Peter Harbison:Anybody else, any thoughts on the long-haul model?

Richard Nuttall:Well, I mean, we discussed this in Helsinki, didn't we? I mean, the long-haul low-cost model is actually not new. I mean, they've been doing it in Europe. I remember 20-odd years ago we had a strike at Cathay and we used some of the charter operators in Europe and we had Tristars with 375 seats on. You know, we had 283 on ours. But I think the point is it has to be very niche. It's leisure markets. It's places where there's not particularly an incumbent. There's not a business market. Because if you're going between major city and major city, you've got the big— you've got the legacy carriers. They're getting the revenue from the front end. And in the low season, they will probably They can price whatever they need to price in the back of the bus. So if you're trying to compete from major capital in Europe to somewhere in this region, you're not going to have a lower cost than Qatar or Etihad or whoever they'll compete. But if you can find that niche market, like Wuhan to the Gold Coast or wherever it may be, or Chinese carriers going to the Maldives, there's niches. But I think that's what it is, a niche. I think that's a very good point.

Peter Harbison:Well, Hubertus, you're sitting right next to Norwegian, who's perhaps the leading exponent of long-haul, very long-haul low cost. Are they successful? Go on, you can be honest with us, we won't tell them.

Hubertus Hessel:I should know that now. I think it's very interesting what Norwegian is doing because they filled a niche which is We, well, we as European full-service carriers left open by joining up in joint ventures in the North American market. So basically yields have gone up, profitability has gone up, and I think we discussed that this morning as well. It, it leaves a new opportunity for new incumbents to come into the market, plus they have the technology I mean, the 787, great aircraft. They're very smart in merchandising.

Peter Harbison:And the A350, of course.

Hubertus Hessel:Yes, A350 coming in will also change the market, I think. They have— they're very smart in merchandising, absolutely. I mean, myself, I have it on my list to fly once with them long haul because I want to see it, experience it myself. what I've heard, very smart in merchandising. So actually the fare level, we compete, and some of the established carriers have chosen to compete with them. That's not what their total revenue is made up of. I mean, they have 20-25% of ancillary revenue, and I think—

Peter Harbison:Amazing.

Hubertus Hessel:You have a customer in the plane for 7, 8 hours. Look at all the opportunity, I mean, you have to sell. Of course, I agree, you, you need to be smart in your network planning. You have to find the right niche market. I think there's other examples in Europe like Condor, an airline which basically just was a traditional tour airline serving tour operators, or charter airline, and now moved into the business of selling individual seats. They've been quite successful, and they've been under the radar, so they haven't, they haven't attracted too much attention as well. Just one word, I think, from at least between Europe and Asia, there is low-cost long-haul, but It's connecting via the Middle East. I mean, it's— yeah, they have a really, really great cost position. The fares are okay. A lot of customers choose it, fueling their growth. So I think it would be very difficult to come into this market.

Peter Harbison:Yeah, yeah, interesting. Last chance, any other question? I guess we're going to close the door very soon. Okay, and any final comments? What have we missed, panel? Anything you'd like to say before we close?

Barathan Pasupathi:No, I think it's just one parting comment from me. It's what do you call it? At Jetstar Group, we are always open for business, be it full-service carriers, low-cost carriers. If anyone finds that you'd like to collaborate with us, just pick up the phone and give me a ring.

Peter Harbison:And you'd like to say the same, Damian, would you?

Damian Hickey:Yeah, I think the other thing is just, you know, the basics of partnerships still apply. It doesn't matter, our industry is no different than any other industry. You've got to invest in it, you've got to have the face-to-face relationship. To give you an example on kind of investing in the partnership, you know, I've been across a number of PSS migrations for a number of carriers, big and small, and it never ceases to I mean, it amazes me. One of the things we've looked at is, okay, how many partnerships do you have? First of all, they don't know. And they run into hundreds, okay? Hundreds of interlines and codeshares for every size of airline. When you get into the details, people are opening up drawers and dusting off files and saying, okay, they're not partnerships. You know, we all know you have to invest in the partnership to get what you want out of it. So the basic principles still apply.

Peter Harbison:Yeah, good point.

Richard Nuttall:Yeah, I mean, I think that I'd agree with that. I think tomorrow morning we're talking more about it. But yeah, there's a lot of deals that people have, but the ones that really bring value are the ones where there's something in it for both parties and you build up the trust and the relationship over time. Absolutely.

Peter Harbison:Good. Well, thank you very much indeed. And I found it very interesting. Hopefully you did too. Let's give them a big hand. Give him a big hand.

Hubertus Hessel:Thank you.

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