WEBVTT - Air France CEO Ben Smith Talks Delta Withdrawal, Uncertain Global Markets

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>We have airlines in focus today after Delta withdrew financial

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<v Speaker 2>guidance because of global trade uncertainty. Let's keep that conversation

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<v Speaker 2>going now with Ben Smith Air France klm CEO. Great

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<v Speaker 2>to have you in studio, Ben.

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<v Speaker 1>Well, thanks for having me.

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<v Speaker 2>So this isn't a conversation strictly about Terrace, but it's

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<v Speaker 2>pretty related. Of course, Delta not really able to have

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<v Speaker 2>any visibility at least when it comes to the US

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<v Speaker 2>given all of this trade uncertainty, the effect on consumers.

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<v Speaker 2>What are you seeing from where you sit?

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<v Speaker 1>Yeah, so we're based in Europe, we don't have a

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<v Speaker 1>domestic market, and on the Transatlantic we're seeing relative stability

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<v Speaker 1>in the premium cabins and we're seeing slight softness in

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<v Speaker 1>the economy cabins, but nothing as of today which is

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<v Speaker 1>causing us to shift any capacity.

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<v Speaker 3>I want to double down on this. What does relative

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<v Speaker 3>stability mean? Because at what point? And investors around the

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<v Speaker 3>world are watching every airline right now to see when

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<v Speaker 3>that starts to break in confidence. When you talk to

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<v Speaker 3>higher and consumers, when you talk to businesses, what would

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<v Speaker 3>cause them to stop spending on air well always.

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<v Speaker 1>Have a recession, would you know travel is one of

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<v Speaker 1>the first industries to get hit. I think after COVID

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<v Speaker 1>we've seen travel reposition itself on the priorities of many

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<v Speaker 1>many consumers. But you know, with fuel being down at

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<v Speaker 1>least for us, and we look at you know, how

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<v Speaker 1>could this uncertain time play out on our bottom line? Relatively?

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<v Speaker 1>We're we're always in crisis mode our business. You know,

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<v Speaker 1>in Europe we haven't had the record profits that US

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<v Speaker 1>carriers have enjoyed for a long time. So since even

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<v Speaker 1>before COVID, we you know, we've had to transform, transform, transform,

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<v Speaker 1>bring costs down. So it's you know, this is this

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<v Speaker 1>is a different, uncharted territory for us, but we are

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<v Speaker 1>used to CHRISTI it's in particular in France when it

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<v Speaker 1>comes to transport.

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<v Speaker 4>So in terms of costs, things are looking better, right.

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<v Speaker 4>I imagine fuel and labor are your two biggest cost inputs,

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<v Speaker 4>and neither of those things is rising. In fact, you say,

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<v Speaker 4>fuels coming down, what's labor look like so far?

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<v Speaker 1>Okay, you know we've we haven't reduced our capacity and

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<v Speaker 1>we haven't got big, big demands from our employees for

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<v Speaker 1>wage increases. So you know that's a relatively steady and

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<v Speaker 1>fuel coming down. That's a big win for us. I

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<v Speaker 1>mean hopefully it'll I haven't seen it this low in

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<v Speaker 1>a long time, so that's good news for us.

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<v Speaker 2>Yeah, it's been wild to watch what's unfolding in these

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<v Speaker 2>energy markets. I do want to talk about this anti

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<v Speaker 2>American sentiment that we're seeing developed across some industries. I

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<v Speaker 2>promise you're not going to hurt my feelings here, but

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<v Speaker 2>Airic Canada has already seen a drop in US travel.

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<v Speaker 2>Are you seeing something similar when it comes to your France?

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<v Speaker 1>Well, I just mentioned, you know, premium cabins. You know,

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<v Speaker 1>New York is still very attractive for for regions, for

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<v Speaker 1>French people, for Europeans from you know what I see

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<v Speaker 1>the people i've spoken to today. Still, I don't know

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<v Speaker 1>if you guys have any trips planned to Paris, but no,

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<v Speaker 1>it's a you know, I think it's we're hoping that

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<v Speaker 1>it remains a stable like we are today now. As

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<v Speaker 1>I said, in the economy cabins, we're seeing some softness,

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<v Speaker 1>but we're able to fill it with lower pricing. But

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<v Speaker 1>watching it very very closely.

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<v Speaker 3>You know, one thing I'm interested from where you sit

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<v Speaker 3>is do you look around and say, well, maybe this

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<v Speaker 3>is a good time to play some offense as a CEO.

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<v Speaker 3>Are there deals in this market that you might be

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<v Speaker 3>willing to strike in terms of stakes in other carriers

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<v Speaker 3>or even full on acquisitions given the weakness in the market.

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<v Speaker 1>Well, I'm here today. Yesterday we flew in on our

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<v Speaker 1>brand new La Premiere first class product. We launched it

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<v Speaker 1>on our route to New York on a Boweing Triple

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<v Speaker 1>seven airplane, and I spent some time walking around the

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<v Speaker 1>plane to talk to various customers, and it was a

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<v Speaker 1>you know, I was pleased that, you know, it's a

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<v Speaker 1>big willingness to continue to fly and our new product.

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<v Speaker 1>There was a lot of excitement around it. It is

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<v Speaker 1>what I believe is the best in the world, at

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<v Speaker 1>least from my perspective, and we're we're trying to position

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<v Speaker 1>it that way to have a private jet feel five

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<v Speaker 1>windows at each seat. You know, in French know how

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<v Speaker 1>to you know they call grete wines, great champagne, great food,

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<v Speaker 1>and half of our cabins are filled by Americans.

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<v Speaker 4>Let me ask about getting planes. There was a time

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<v Speaker 4>when that would have been my first question if I

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<v Speaker 4>talked to Gimpori of of the big the only other

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<v Speaker 4>big planemaker Airbus. I would have said, you know, are

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<v Speaker 4>you able to produce these?

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<v Speaker 1>Is it?

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<v Speaker 4>Is it no longer that time when you're worried about

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<v Speaker 4>getting more capacity.

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<v Speaker 1>Well, our you know, our plans for the next one, two, three,

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<v Speaker 1>four or five five years. We we were not counting

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<v Speaker 1>on growing our capacity significantly. You know, there are a

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<v Speaker 1>lot of carriers in developing regions of the world that

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<v Speaker 1>have got massive orders of new airplanes. Now we have

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<v Speaker 1>a lot of airplanes in order to replace existing existing

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<v Speaker 1>planes in our fleet, and if we have to take

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<v Speaker 1>some further delays on those, we'll maintain our older airplanes longer,

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<v Speaker 1>so you know, it will have higher expense on those airplanes.

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<v Speaker 1>We won't have the fuel savings that we're expecting, but

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<v Speaker 1>we've got the capacity that we'll need to keep in

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<v Speaker 1>the marketplace to keep our budgets going.

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<v Speaker 2>All right, Ben, it's really great to get some time

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<v Speaker 2>with you. Hope you come back to New York soon

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<v Speaker 2>and join us again on set. That is Ben Smith.

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<v Speaker 2>He is the CEO of Air France KLM