Speaker 1: Bloomberg Audio Studios, Podcasts, radio news, Well.
Speaker 2: List morning, the World Airport Transportation Summit is underway in
Speaker 2: Rio de Janeiro.
Speaker 3: Let's go live to our colleague Guy Johnson.
Speaker 1: He is co anchor of the opening trade and standing
Speaker 1: by with the CEO of Air France Kalm Hie said M.
Speaker 2: Good morning guys, thank you very much. Indeed, yet I'm
Speaker 2: here with a group. CEO of Air France KLM. Ben
Speaker 2: Smith good morning. Okay, nice see. So the news overnight
Speaker 2: is that you have just announced that you're flying back
Speaker 2: in to Read. You're flying back into the Gulf. Is
Speaker 2: this the first of many steps or is this the
Speaker 2: first step you are taking? And then you're going to
Speaker 2: assess the situation and then you're going to look at
Speaker 2: what the rest of the golf is going to be
Speaker 2: looking like. What is the situation in the Gulf for
Speaker 2: an airline like you.
Speaker 1: Well, today we're very cautious in returning the cities which
Speaker 1: we've pulled out of. So we've gone back into read
Speaker 1: closer cooperation with the French state from a security perspective,
Speaker 1: with our cabin staff, with our pilots. We have not
Speaker 1: reopened to BAI as of yet. Tell them the Bay
Speaker 1: route are still closed, Gamma is still closed for us.
Speaker 2: So any what would get you back into those into
Speaker 2: those routes. What do you need to see in terms
Speaker 2: of the situation on the ground, What did you see
Speaker 2: and read? What do you need to see elsewhere?
Speaker 1: Well? I think we need as as just said, we
Speaker 1: need to have all of our stakeholders aligned to put
Speaker 1: us in a comfort position to go and right now
Speaker 1: we're not. We're not there on the destinations that we have.
Speaker 3: But does it need a peace deal?
Speaker 2: Does it need does it need a full cessation of hostilities?
Speaker 3: Does it need?
Speaker 1: Like?
Speaker 3: What kind of boxes do you need to tick here?
Speaker 1: I mean peace steel, no peace deal. As long as
Speaker 1: we're confident that it's not going to have an impact
Speaker 1: on safety at the particular airport, it doesn't necessarily need
Speaker 1: to be a peace deal. But we need to have
Speaker 1: confidence that we're not going to see any danger around
Speaker 1: those airports. Okay, so read there never was and there
Speaker 1: doesn't seem to be any today, So we don't have
Speaker 1: as a precaution. And we pulled out when the fighting started,
Speaker 1: but now we're comfortable to go back in.
Speaker 2: Let's talk about the situation when it comes to fuel.
Speaker 2: I think you updated the market a couple of days ago.
Speaker 2: You talked about the idea, you've definitely got enough fuel
Speaker 2: for the summer. What happens after the summer kind of
Speaker 2: you get the summer and then.
Speaker 1: What So, we've we've secured fuel through the end of August.
Speaker 1: We've got our full capacity in place. We've not we
Speaker 1: have not pulled any of our capacity. It's a little
Speaker 1: unfortunate that a lot of customers are still not confident
Speaker 1: the probably enough fuel. So we're seeing a late booking
Speaker 1: environment a little. You know, people are booking a little
Speaker 1: closer than we've seen in the past as far as
Speaker 1: the fall goes or the winter goes. A bit too
Speaker 1: early for us to have made a decision on how
Speaker 1: much capacity we keep in the market.
Speaker 2: Okay, just in terms of that messaging you've had to deliver.
Speaker 2: At the beginning of the war, there was this fear
Speaker 2: that there wouldn't be enough jet fuel, and the industry
Speaker 2: came out very quickly and said, we've got enough fuel.
Speaker 3: The summer's going to be fine.
Speaker 2: If fuel went up to sgnificantly from here, So in
Speaker 2: July or August you see a big spike in fuel
Speaker 2: are you effectively guaranteeing that all the routes that you're
Speaker 2: committing to.
Speaker 3: Now you are going to fly. I'm going to get
Speaker 3: there and I'm going to get home.
Speaker 1: Well, first off, if the fuel significantly spikes, we're going
Speaker 1: to have to raise ticket prices to compensate for that.
Speaker 1: And when you raise ticket prices, you'll be less demand.
Speaker 1: So the need for the full capacity that we had
Speaker 1: planned is probably not going to be going to be
Speaker 1: the case. So how we balance that out with the
Speaker 1: available the fuel, the price of fuel that you know,
Speaker 1: the willingness for customers to pay. We'll see how thats.
Speaker 3: So you might consolidate some routes with that.
Speaker 2: Is there a plan if you went up further to
Speaker 2: you would change maybe some of the current routes, the
Speaker 2: frequencies kind of where you fly, maybe the overlap between
Speaker 2: France and KLM changes. Is there a plan in place
Speaker 2: if fuel goes sharply high from here to kind of
Speaker 2: consolidate within the group.
Speaker 1: Sure, I mean, we've our our companies are old, are
Speaker 1: our global, our global brands and you know a lot
Speaker 1: of experience in adapting or last minute, medium term, long term.
Speaker 1: COVID was probably the most challenging for us to manage
Speaker 1: capacity and frequencies. So yes, depending on you know, how
Speaker 1: the availability and price of fuel does evolve over the
Speaker 1: next few months. Will adaptive it means or removing frequencies,
Speaker 1: consolidating frequencies, and we'll we'll we'll make do whatever comes
Speaker 1: with us.
Speaker 2: But that's not a plan you've got ready to go.
Speaker 2: That's something that you will do effectively kind of on
Speaker 2: the fly.
Speaker 1: Correct, you know, we're not I mean, the supply of fuel,
Speaker 1: price of fuel could be different in different parts of
Speaker 1: the world, So to guess what's going to happen, it's
Speaker 1: it's pretty pretty difficult to do that. But you know,
Speaker 1: airplanes can move around relatively easy and quickly. You know,
Speaker 1: we've we've managed to do that over the last the
Speaker 1: last few weeks where we've taken some capacity other parts
Speaker 1: of the region in our network and started use it
Speaker 1: on roots overflying the Gulf where there was there's been
Speaker 1: a lack of capacity, so to Southeast Asia as an example,
Speaker 1: where a big part of the European traffic what's going
Speaker 1: via the Gulf, and now we've been able to offer
Speaker 1: something that you know, it's important.
Speaker 2: Let's just talk about that for a minute, how sticky
Speaker 2: do you think that demand is to go over the Gulf?
Speaker 3: I e.
Speaker 2: Do you think people want to will want to fly
Speaker 2: through the Gulf after this, once there is a peace deal,
Speaker 2: do you think you may retain some of that traffic
Speaker 2: going out to Asia.
Speaker 1: Well, I think it's a It's another example of how
Speaker 1: dependent Europe is and European customers are on flying over
Speaker 1: the Gulf to destinations that I think could support more
Speaker 1: NonStop service. You know, with an unleveled playing field, You've
Speaker 1: got companies that are based in the Gulf that have
Speaker 1: been able to attract a big portion of the European
Speaker 1: demand via the Gulf. So when full capacity comes back
Speaker 1: in the Gulf, I would expect some you know, as
Speaker 1: if five of customers that you know in the past
Speaker 1: would have flown over the Gulf to prefer to fly NonStop.
Speaker 1: But the golf carriers are going to be Our expectation
Speaker 1: is is they're going to want to get their full
Speaker 1: capacity in plays.
Speaker 2: Either talk is possible, the talk is it's going to
Speaker 2: be a massive price wall once they come back.
Speaker 3: Tim Clark's gonna want his capacity.
Speaker 1: Back at Everard's for sure, for sure.
Speaker 3: So you ready for that. What does that look like.
Speaker 1: Look, they're the three golf carriers plus Turkish. They're extremely aggressive.
Speaker 1: That's not new for us. As I said, without a
Speaker 1: without a level playing field, we're not flying NonStop to
Speaker 1: many of the routes that under a normal scenario where
Speaker 1: there would be a level playing field that would be
Speaker 1: able to support. So this is not it's not going
Speaker 1: to be a surprise to us. Okay, just back into
Speaker 1: the issue of pricing and demand. Well, the consumer take
Speaker 1: much more.
Speaker 2: The storry post post pandemic has been that I'm going anywhere,
Speaker 2: I don't care what the price is. I'm going. I'm
Speaker 2: going to apply up the front of the plane. Demand
Speaker 2: has been very strong. If prices get pushed much higher
Speaker 2: from here, does that still apply? Are you confident that
Speaker 2: the pricing way to defect demand? What are you what
Speaker 2: are you expecting to have?
Speaker 1: Well, we're pleasantly surprised that demand is holding. Paris are
Speaker 1: still a very attractive destination, Amsterdam is still a very
Speaker 1: attractive hub to flow over. So what we're seeing on
Speaker 1: the bulk of our network is a strong, strong demand,
Speaker 1: predominantly in the premium cabins, and we're not seeing customers
Speaker 1: avoid the trip sometimes. As I said, they're booking a
Speaker 1: little closer in. Yeah, but demand is very strong. That's
Speaker 1: all about M and A. Okay, that's the way easy Jet.
Speaker 2: So easy Jet those that know is a is a
Speaker 2: low cost carrier based in Europe. Castle Lake, we understand
Speaker 2: has made an approach. The details of it remain sort
Speaker 2: of failure opake. At this point in time, you have
Speaker 2: some experience in working with them. We've obviously seen what
Speaker 2: the SAS deal did and how you and how you
Speaker 2: manage that process. Air France was the first name that
Speaker 2: came to mind when I heard that they were involved.
Speaker 2: Came to mind any conversations with Castle Lake. Any interest
Speaker 2: you in any way involved in this process?
Speaker 3: What's happening?
Speaker 1: No, so we're not involved. Is there any interest? It's
Speaker 1: not something we've been given much thought. I mean easy
Speaker 1: Jed is a you know, it's a it's a very
Speaker 1: impressive airline. They've had a fantastic i would say history
Speaker 1: in how they've developed. They've got some great positions you
Speaker 1: know in Geneva, London, Gatwick, et cetera. So it's very attractive.
Speaker 1: In their market cap is low, so it's not surprised
Speaker 1: to us that there's there's a party or there's a
Speaker 1: group that's looking at you know and buying them or
Speaker 1: buying aforshrom them. Not as surprise to us. Your Castle
Speaker 1: Lake is an excellent private equity firm as well. We've had,
Speaker 1: we had and still have a great experience with them
Speaker 1: in sas as you've just said, So it's not surprising
Speaker 1: to us. But we're not involved in this transaction.
Speaker 2: But your sense would be that the market is undervaluing
Speaker 2: that business right now, undervaluing the slots in Geneva and
Speaker 2: places like that, undervaluing the slots that they have for
Speaker 2: airbus aircraft and to lose Your sense is that that
Speaker 2: is being undervalued at the moment.
Speaker 3: Hence why I was saying the interest.
Speaker 1: Well, the slot portfolio is quite impressive. Yeah, the number
Speaker 1: of slots they have at gat Work. I mean they've
Speaker 1: got some new slots at le Nate that they gained
Speaker 1: through you know, the remedy slots that Lufthansa had to
Speaker 1: give up the coaches of it t A and you
Speaker 1: know even what they have at Orley in Paris is
Speaker 1: we're all uncomfortable with the position they have in Orally.
Speaker 1: So it is impressive.
Speaker 2: So so if cultle A came to you your you're
Speaker 2: sounding like you would be.
Speaker 3: Do you think this is this?
Speaker 2: This could be an interesting opportunity if they came and
Speaker 2: wanted to talk to you, you pick up the phone.
Speaker 1: Oh yeah, for sure. Yeah, and I would expect OLI
Speaker 1: our competitors to do the same.
Speaker 2: Okay, but but yeah, I don't think i G would
Speaker 2: work very well.
Speaker 3: But I could see from sweat be working. Do you
Speaker 3: expect the call? Do you think they're going to come
Speaker 3: to you?
Speaker 1: I pick, I don't know. I mean, have to get
Speaker 1: that led to that question to because.
Speaker 3: Of a fairly early stage in the process.
Speaker 1: I think so okay, so but it's great to catch up.
Speaker 3: Yeah, thanks guy, really appreciate it. Thanks you very much
Speaker 3: and deep spending some time with us today.
Speaker 2: Ben Smith, the group CEO at Air France KLM, thank
Speaker 2: you very much