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Quest Means Business
IATA: Airlines Could Return to Profitability in 2023; EasyJet Slashes Summer Flight Schedule; Jet Fuel Prices Rising at Faster Rate than Crude Oil; Bennett and Lapid Agree to Dissolve Israel Government; Newark Airport Cancels, Delays 200 Flights Monday; South African Airways Exited Bankruptcy Protection in 2021; Malaysia Airlines CEO: Forward Bookings Are Sluggish. Aired 4-5p ET
Aired June 20, 2022 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:19]
RICHARD QUEST, CNN BUSINESS ANCHOR, QUEST MEANS BUSINESS: Eleven o'clock at night, 2300 hours here in Doha, in Qatar, where the world's top airline
executives, the CEOs have been gathering for the annual meeting of IATA, the representative group of aviation.
The US markets are closed for Juneteenth, so we, tonight have a special program. We're looking at aviation, the recovery, the problems, and what
comes next.
There's been a dramatic return to the skies, a pivotal moment, if you will, for the industry. IATA is now projecting a profit turn to profitability in
2023.
Tonight, you'll hear from Willie Walsh, who says the number one challenge is high jet fuel prices. At the same time, there is the issue of
overcrowding, staff shortages, key airports in chaos. Executives are warning it will be a difficult summer ahead.
On tonight's program, you'll also hear from Scott Kirby, the CEO of United.
(BEGIN VIDEO CLIP)
SCOTT KIRBY, UNITED AIRLINES, CEO: I am frustrated that the customer experience is backsliding for things that are a lot of times outside of our
control.
(END VIDEO CLIP)
QUEST: Live from Doha and IATA, it is Monday, it's June the 20th. I'm Richard Quest, and of course, I mean business.
A very good evening to you from the lobby of the Sheraton here in Doha, the very grand lobby, if you will. And the reason we're here is because this is
where the meetings have been taking place of all the world's top airline CEOs.
In fact, actually this hotel has a bit of history, it was, if you will, the signature building. The first one in Doha that looks like a pyramid, but
anyway, more of that anon.
The aviation industry is back and back with a force. It could be said it is a case of success is its biggest problem. That is the message from IATA,
which is in jubilant mood as industry leaders have been gathering here.
They are emerging from the worst crisis pretty much since its history, since Wright first flew. The industry simply can't keep up with demand.
There was another weekend of travel chaos in Europe and the United States. On tonight's program, these are some of the voices you're going to be
hearing. The IATA Chief, Willie Walsh, the CEOs of United, Air-France KLM, Malaysian Airlines, and South African Airways.
IATA says profitability is on the cards having lost hundreds of billions of dollars and will forecast to lose this year as well. Next year, 2023, they
say it could be break even and the industry could make a profit, but there are headwinds that will get in the way, we know them.
The rising fuel costs as a result of Ukraine, supply demand et cetera, staff shortages leading to mass cancellations and delays, the war in
Ukraine. And companies are seeing tailwinds as well with travel demand.
So there you have it, you can really put it down to opposite forces in a sense, huge amount of demand, awful pressures coming down from pricing,
staff shortages and the like.
Willie Walsh, former head of IAG, Director General of IATA, he says that when it comes to the chaos they've been seeing, it is not widespread, and
it's not as bad as we say.
(BEGIN VIDEOTAPE)
WILLIE WALSH, DIRECTOR GENERAL, IATA: There's been problems at some airports. It's isolated. It's not every day of the week. It's not every
week of the summer.
You know, you have to expect as the recovery took -- gathered pace, it actually was moving much faster than people had expected. I'm going to
actually express some sympathy for airports, which is the one and only time you will ever hear me say this, but I think it has caught them by surprise.
These issues will be addressed.
QUEST: Hang on. You've had Amsterdam asking KLM to reduce flights. Gatwick is now asking people to reduce flight. Heathrow -- I mean, maybe --
WALSH: There are three airports. Come on. There's thousands of airports around the world, so we pick on three airports who I love picking on by the
way, and you can add Dublin into the mix of those problems, but I've gone through all of these airports.
I've flown through Gatwick I've flown through Amsterdam, Heathrow, Dublin. You know, yes it is busier, but it's not like it's portrayed that it is
chaos there every day of the week.
[16:05:16]
WALSH: There are problems, the problems will be addressed.
QUEST: Are the problems with the airlines who furloughed and laid off and now can't get back or the airports who did similar or are both guilty?
WALSH: No, I think to be fair, there are airlines with problems as well, but I have a lot of sympathy for airlines who furloughed and laid off
people, particularly in the UK.
Because if you look at it, in September of last year, when the UK government ended their support for the airlines, if you look at who was
being supported, 38 percent of airlines were still availing of the -- 38 percent of airline employees were still availing of the support scheme and
it was cut off overnight.
You know, the UK was actually very slow to recover in the fourth quarter of last year and the first quarter of this year. It's only in the second
quarter that things have really started picking up.
QUEST: There are hard economic times coming. Interest rates five times in the UK. We've got the ECB starting. US is really ratcheting up.
So there will be a slowdown, massively. Whether recession is actually read, it doesn't really matter, do you see that affecting the outlook?
WALSH: Well, the outlook this year, we've improved and that's principally because the recovery is stronger than we had expected. Looking into next
year, yes, there are headwinds. We're not going from a business as usual environment to a recession. We're in a recovery, which likely will go into
a downturn.
We're still going to grow through that because we've not recovered all of the lost business that we had. And if we look at premium travel, now, I
differentiate between premium and business. So premium, people traveling in the premium cabins, that's actually growing at a faster pace than economy
travel and that's in an environment where we know a lot of business travelers have not yet returned.
QUEST: What's the number one issue for IATA?
WALSH: I would say the number one challenge that airlines will face will be the price of oil. You know, we have seen that significantly spike this
year. We estimate that the price of a barrel of jet is at $125.00 a barrel. It's as high as we've seen it for a long, long time.
Now, good news, airlines are somewhat cushioned from that because they do have some hedging in place, which clearly will soften the blow in 2022, and
to some degree in 2023. But ultimately, that price is going to impact on airlines and it is going to impact on consumers.
QUEST: Right. So the one thing we know about the price of oil, there's only two things you can do about it. You can either eat the cost on your
margin, or you pass it on with a surcharge.
WALSH: And to be honest, you can't eat it now because airlines don't have the financial strength to be able to do that. You know, they're recovering
from massive losses. So airlines will have no choice, but to reflect the higher oil price in ticket prices.
You know, the fuel is the single biggest element of an airline's cost base. If you look at the 10-year period between 2010 and 2019, the best 10 years
in the history, it was 27 percent of the costs at an average, Brent price at $80.00. You know, Brent is over $100.00 a barrel now, so it's
inevitable.
QUEST: And to a consumer who says, you're going to take it out my wallet, you're going to raise prices?
WALSH: Oh no, no, no. There is still going to be great competition. There's plenty of choice out there. But yes, it is inevitable that prices
which will be dictated by supply and demand, but also by the input cost.
Airlines cannot avoid, no different to anybody else, energy prices go up. It's going to have to be reflected in costs.
(END VIDEOTAPE)
QUEST: Willie Walsh talking to me earlier. The scenario that the airline industry has faced, the mere fact that so many people are back flying again
is a real achievement, but to understand where we are now, you have to see where we have been and how we got here.
(BEGIN VIDEOTAPE)
QUEST (voice over): 2022 was the year the world was ready for takeoff. Tickets booked, bags packed and COVID-weary travelers were eager to get
into the skies.
QUEST (on camera): The pent up demand is huge. We are waiting and ready to travel.
QUEST (voice over): In the past year scene after scene reminded us, aviation plays a unique role in bringing people together.
In Australia, tears of joy as families embraced.
ALAN JOYCE, CEO, QANTAS AIRWAYS: There were people that haven't seen validly in two years nearly, grandkids they had never seen people, ill
relatives that they were going to visit.
[15:10:02]
QUEST (voice over): Celebrations in the US as visitors from Europe were allowed in and welcomed back in style.
SEAN DOYLE, CEO, BRITISH AIRWAYS: The buzz on the plane was fantastic, stories of people reunited with loved ones they haven't seen for over 600
days. It's very touching.
QUEST (voice over): There was the promise of business travel reemerging.
CARSTEN SPOHR, CEO, LUFTHANSA: There is just no replacement of personal interaction. We all have gotten used to videoconferencing, but we all have
learned the limits of videoconferencing. I am quite positive now that corporate travel comes back just in time.
QUEST (voice over): The year hasn't been without problems, and many remain. The omicron variant, labor shortages, travel mandates and the
continued lockdowns in China.
As long as China's aviation industry isn't flying full throttle, then globally, the industry can't ever be said to have fully recovered.
Having been so vital during 2020, cargo continue to play an important industry role, helping countries reopen and helping to rebuild economies.
AKBAR AL BAKER, CEO, QATAR AIRWAYS: We carry pharmaceuticals, we carry spare parts, we carry livestock, we carry foodstuff -- everything that you
have in your mind, we carry.
QUEST (voice over): And there's so much more to come with some of the strictest countries set to reopen, and some of the world's favorite
destinations awaiting visitors.
Today's airlines are better positioned than ever before to provide a connection in helping the world grow.
(END VIDEOTAPE)
QUEST: And that's the scenario upon which we are going to be looking at the problems that they are facing in this return to profitability.
So coming up next --
(BEGIN VIDEO CLIP)
BEN SMITH, AIR FRANCE-KLM, CEO: We're going to have a good summer, but you know customers will have an experience that, you know, really isn't up to
the level that we would have expected.
(END VIDEO CLIP)
QUEST: That's Ben Smith. He is Air France-KLM CEO, and he says the airports have much to blame for the chaos.
(COMMERCIAL BREAK)
QUEST: So last weekend was another weekend of chaos in many airports and for many travelers going around Europe. There were flight cancellations,
and by the way there will be more flight cancellations and delays and I think it's tomorrow or maybe -- the solstice, summer begins tomorrow.
[15:15:10]
QUEST: So of course it's going to get nasty. Flight cancellations delay as summer begins.
Today, EasyJet slashed its schedule for July to September by seven percent. Heathrow Airport tasking airlines to cut flights because of a baggage
problem and backlog. Gatwick and Schiphol in Amsterdam, is limiting passenger numbers and says the industry is struggling with a demand surge.
The Chief Executive of the Air France-KLM Group, that Amsterdam and Paris blames Europe's airports. Now KLM, of course is based at Schiphol and
Schiphol is one of those airports that has been, A, first of all back in Easter, asking KLM to cancel flights and B, continuing to do so because it
says it hasn't got enough staff.
Ben Smith, the CEO of the airline says the airline was ready, the airport was not.
(BEGIN VIDEOTAPE)
SMITH: So look, from an airline perspective, we've been -- we took the bet, in the fall of last year, we were quite confident that the summer
would be good. So from a pilot, cabin crew, maintenance, we were ready both at KLM and Air France.
A lot of US carriers, some other carriers in Europe did not have enough pilots, it takes a while to train them up. But on that front, we were okay.
But we've seen in some airports that there are shortages at security, shortages at Customs and Immigration. So the impact that it has on us is --
it's quite large.
QUEST: So when the British Transport Minister says, as he did that, airlines need to get their act together, I'm not inviting you to criticize
him, but you would say no, airports, infrastructure, you need to get your act together.
SMITH: I think well, we're not based in the UK, but this is what we're saying in the Netherlands and in France because we put an enormous amount
of effort to be ready for this summer. We sold a lot of tickets. We were off to a very good start. We still think we'll have a good summer.
But you know, customers will have an experience that really isn't up to the level that we would have expected,
QUEST: The sort of issues we're talking about will be very difficult to solve, if you're now in August.
SMITH: Well, we've done a few things. One, we've tried to spread out our departures. So for instance, in Paris, we have two big hub structures, one
at 10 in the morning, one at 1:00 PM and we've moved as many flights as we can to the afternoon, which costs us money and then the minimum connection
times at both of our hubs, we've expanded them, which here again, it costs us money as well.
But at least it takes pressure off people connecting, it takes stress away. It takes the stress off our employees as well. We don't have the same
number of flights all going at the same time.
QUEST: How are you handling the higher fuel price? I mean, traditionally it is what -- 30 percent of cost. Now what is it? Forty five percent?
SMITH: Well, what is good with the higher fuel is the booking curve, since the beginning of pandemic is really shortened. So historically, when
there's been a spike in fuel prices, there hasn't been that much opportunity to recapture through fare increases and balance that that with
which you've already sold. This time with the shrinking of the fuel curve or the purchase curve of the tickets, it's been not bad.
And the market because it's so strong has been absorbing the increase.
What's really challenging for us is the fact that we can't overfly Russia. So adding all of these extra hours from say for instance, South Korea to
Paris, three extra hours with fuel costs at that level, that's tough.
QUEST: Let's take the Lufthansa Group here. They have tight control over the operating, and then you have IAG which is more of a federation type of
thing, but they work closely together. How would you describe the relationship of Air France-KLM?
SMITH: Well, I think it's two models that are trying to optimize as best they can because KLM had the first transatlantic joint venture with
Northwest, so they pioneered it and Amsterdam Schiphol and KLM were the first international transit fortress and Singapore at Changi copied it;
Emirates at Dubai copied it.
And meanwhile Paris with France being the largest inbound tourism market in the world, you've got two different markets, two different ways of serving
them. And this is how do you the best out of both, you know, to be able to produce the best results? And that's really the challenge and the potential
magic if we can get it to work.
So as you say, the two other big competitors we have in Europe, different environments, but this is really something I think in the past there wasn't
a true understanding of what it could be. I think we have a team now in place that really gets it.
QUEST: Is this a priority in terms of your vision?
SMITH: Yes, so vision is we've got two very strong brands, fantastic connection hub in Schiphol and we have a whole market in France that we
have not exploited as best we can.
[16:20:10]
SMITH: We only have 48 percent of the French market. We had a very, very complex fleet. We did not have consistent product, the Air France product
is going to be much more consistent. And I think, you know, in a commoditized market, I think the Air France brand can be positioned higher
than most of the transatlantic European and North American carriers.
QUEST: This is very interesting, because I knew you're also investing in the product.
SMITH: Yes.
QUEST: Everybody wants to invest, but it's very difficult post pandemic, but you're putting money into a new business class seat, into the first
class. How difficult was it to justify that to the Board?
SMITH: Well, we were lucky timing wise on the Air France side that a lot of our airplanes were at that age where they had to be replaced. So they
were in the capital plan to begin with.
So when you replace an airplane, you get new product. And then I would say that's three quarters of the airplanes that are affected that are coming in
because they're new, and the rest, these are paid off airplanes, where instead of getting new airplanes, we can justify updating the interiors,
and we can put out a decent product.
So it is not just the product on the inside, the new airplanes are also really environmentally friendly. And this, of course, is another big
priority not only of ours, of our own group, but also the whole industry.
(END VIDEOTAPE)
QUEST: That's Ben Smith who is the CEO Air France-KLM.
Now, if you look at the range of problems that the industry has faced, besides the existential one, of course, some two years ago, now there's the
war in Ukraine, there's rising fuel prices. There are the staff shortages that are causing so many delays. And then there's aviation fuel itself,
which has gone up by 80 to 90 percent of jet price increases outpaced that of crude.
One of the largest costs for the airlines is, of course, obviously fuel and it is up 50 percent since February, twice it's 2019 price rise. The costs
are being passed on to consumers, flyers, the average ticket price in the US is now up 66 percent from October.
The panel is here in IATA, I spoke to the CEO, the Group CEO of Qatar Airways, and Virgin -- and Australia's Virgin Airlines CEO.
(BEGIN VIDEO CLIP)
AL BAKER: We will be getting very close to 40 percent of our cost structure that will be only from fuel. Fortunately, we were hedged. The
last financial year we are again, hedged to a lesser percent. This financial year would help, but it won't help too much. At the end of the
day, we will have to put up prices to cover for the increasing cost of fuel.
JAYNE HRDLICKA, CEO, VIRGIN AUSTRALIAN AIRLINES: The notion that your cost can inflate by 50 to 75 percent in one of your biggest cost levers, and you
can't raise price, you can't recover it. I mean, that just doesn't work.
And we've got an obligation as an industry to ensure that we get the world traveling again, we get global connectivity back again, but we have to do
that in a way that's sustainable. And we've had two years where most of us had pretty extreme losses.
So I don't think there's any choice but for price to go up and for capacity disciplines to remain in order to ensure that that's possible.
(END VIDEO CLIP)
QUEST: Anna is with me. Anna Stewart has been at the conference as well.
As we look at these price rises, as we look at the way they've handled the industry. What is their number one concern? Well, first of all, what did
you think the mood is?
ANNA STEWART, CNN REPORTER: The mood is really interesting, and I think he put it really well in one of your panels actually, Richard, because you
said we're morphing from one crisis into another and that's certainly the sense that we're getting in terms of costs, whether it is inflation
relating to Ukraine, whether it's coming out of the pandemic and all the disruption that's still there. The fact that staffing is quite hard in many
airports and airlines.
So I think the mood here is one of nervous excitement getting back to business.
QUEST: You have a lovely way of putting it, nervous excitement.
STEWART: But a lot of issues to deal with.
QUEST: And its practicalities, for example fuel, so-called SAF, which you are you have a distressingly detailed knowledge about.
STEWART: I've a great love and a great hate of SAF.
QUEST: Which stands for? Sustainable Aviation Fuel, which is made from waste feed stocks, agricultural waste, and this Richard is the solution to
getting to net zero by 2050. This is going to result in 65 percent of the carbon reductions. So without SAF, they are not going to get there.
Now the first flight took off with SAF well over a decade ago. Great. Fantastic. It exists. It is a drop in fuel. You don't need to change
anything with the plane. How much SAF is on the market right now? Zero point one percent of jet fuel.
QUEST: And it's not going to increase much. I mean, I've seen numerous announcements of SAF of this and somebody is buying SAF out of Narita for
the next 10 years, but the reality is -- so where's the blockage? Is it the oil companies who won't make it? Is it the airlines who won't buy it? Is it
the governments who won't subsidize it?
[16:25:10]
STEWART: I am going to annoy you with this. It's the chicken and the egg scenario. It costs -- its cost, it is too expensive to make, but it is too
expensive to make because he can't scale it up because not enough people are buying it and this is the big issue.
QUEST: Because it's too expensive compared to oil because governments haven't made it advantageous to buy it.
STEWART At least it was. So, it was three to five times more expensive than traditional jet fuel. But as a result of the war in Ukraine, seeing
jet fuel prices shooting up, it is actually, actually to Shell Aviation around parity now.
QUEST: So Anna, I mean, you obviously cover all of these stories, aviation and the like, as sort of an outsider coming to an IATA conference, which is
basically not only full of CEOs, but full of #AvGeeks. What do you make of this industry? It makes no sense.
STEWART: It makes no sense. The problems are absolutely ginormous because you're talking about multiple jurisdictions that every problem agreeing on
something, which seems completely mad, but what I love about being here, IATA, is it's not just a talking shop, this is a place where solutions are
being found and it's great to be in those panels because you kind of get to be a part of the solution.
QUEST: Absolutely. You get to hear what they are thinking and the other great thing, I think, which I always love about the IATA is the CEOs of the
industry. They're all here and they're all sort of pretty much locked up in one building with everybody else.
STEWART: But they can't get away from Richard Quest.
QUEST: Well, I'll not go that far. However, they are all here and they all do -- it's been lovely having you here.
I think --
STEWART: Thoroughly enjoyed it.
QUEST: Would you like a quick --
STEWART: Oh, I wouldn't --
QUEST: There we go. Anna Stewart, having a quick ring of the bell.
Coming up in just a moment, US government must fix or at least help fix the travel woes, so says the United Airlines Chief Executive, Scott Kirby.
You'll hear him after the break.
QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
[16:30:00]
RICHARD QUEST, CNN HOST: Good evening from Doha, the IATA conference in the lobby of the Sheraton Hotel in Doha, which is the conference hotel, if you
will.
News to bring you, Israeli Prime Minister and Foreign Minister are to dissolve the coalition government. The Prime Minister Naftali Bennett is to
step aside. And the Foreign Minister, Yair Lapid will take over. Elections will follow. It's the fifth vote in less than four years.
Hadas is with us in Jerusalem. Hadas, there was going to be a power sharing that we knew, but why the election? Where does that come into? Why is that
come into play?
HADAS GOLD, CNN CORRESPONDENT: Richard, this coalition government had been teetering for weeks, essentially because two members of Naftali Bennett's
own party defected. And so essentially, this government was now a minority government. There was already efforts to try to bring forward a bill that
would dissolve parliament, but this was a surprise. What happened today was the Prime Minister Naftali Bennett and Foreign Minister Yair Lapid
essentially announcing that they wanted to dissolve themselves, something that normally the opposition would do, essentially, they were taking away
the pleasure of this opportunity from former Prime Minister Benjamin Netanyahu, who's now the opposition leader.
Now, they will bring forward their own bill to dissolve parliament. And when that pass is likely next week, Foreign Minister, Yair Lapid will then
become the caretaker Prime Minister and as you know, the likely sending Israelis to their fifth elections in less than four years. This is also
notable Richard, because next month, the U.S. President Joe Biden is still expected to come visit Israel as part of a regional trip also to the West
Bank and Saudi Arabia. And so now we'll be Yair Lapid, who will welcome Biden on the red carpet and not Naftali Bennett.
QUEST: OK, so the election will take place now, will Lapid and Bennett fight the election, obviously, against each other, but with some
understanding that, you know, there could be a coalition afterwards, assuming the result was and where does this leave Netanyahu as he goes into
this election? In other words, who's going to win?
GOLD: Everybody would love to know who is going to win because that has been the problem in Israel for this kind of endless cycle of elections that
no Glock was able to get at really solid, at least 61 seat majority to really have a solid government for and as we've seen more than a year,
nobody is quite sure exactly what Naftali Bennett's political future will hold because it's unlikely that his immediate party will even still be in
existence for the next election.
As far as Benjamin Netanyahu and comments he's made to the press today, he seems quite pleased. He says this is the opportunity for Israel to come
back to itself. And yet, even for Netanyahu in the latest polling, it is still not clear that he will have more than 60 seats in order to have this
majority. So we'll have to see, of course, what the elections will hold. I'm sure that Foreign Minister Yair Lapid will be quite happy to take the
position of Prime Minister to be shaking hands with Joe Biden to show the Israeli public that he could be Prime Minister hoping that could boost his
chances in the polls. But it seems as though the Israeli public is kind of bracing themselves for another sort of endless cycle of political unknown.
QUEST: Right. Before you go, just give me -- let me know, do we have a rough idea of the date of the next election?
GOLD: Right now there is estimates, it will be in the fall. I've heard dates around late October potentially even early November. However, there
could be other machinations in the Israeli part that would put it even earlier, but the fall, for sure the fall.
QUEST: Plenty of time. Plenty of time for you and me to chew this one over. And it's various machinations. Hadas Gold in Jerusalem for us tonight.
As though more misery in the United States over the holiday weekend for air travelers, many cancellations. There are 3000 cancellations in the U.S.
Over the weekend, just today alone, by the way, 360 flights were canceled. Friday was the busiest air travel day of the year, nearly two and a half
million people were screened by the TSA.
Now, amongst the airports that are very badly hit is Newark. It's Newark, New Jersey, is the third airport, second airport, whatever want to call it,
that also serves just across the Hudson River that also serves Newark. Over 100 flights were canceled from Newark today. This is particularly bad news
for United Airlines, which is Newark's -- which Newark is the main Eastern hub. I asked Scott Kirby, Chief Exec of United. When we look at Newark and
its problems and therefore other airports in the U.S. with problems, what's needed to fix it?
SCOTT KIRBY, CEO, UNITED AIRLINES: Well, there are parts of the world that are going to be really challenging to operate. You know, a united what
we've done is we were flying a smaller schedule than we did in 2019 to try to create some relief and for the most part the operation is running well,
the one area where we really have challenges is the New York Airspace, Newark in particular. And from an industry perspective in the United
States, New York, Newark and Florida, really our air traffic control challenges, there are different issues at some other airlines, but those
two places are really struggling.
[16:35:23]
QUEST: Does not realistically, there's not much that can be done to improve the situation between now and the summer. It's just it's hold your nose and
--
KIRBY: I disagree, although it requires, you know -- the truth is, I think it requires government help. Because the biggest issue is, there's more
flights scheduled in Newark, for example, than there is capacity at the airport, even in a perfect blue sky day. And air traffic control is
understaffed. And because of that, there's just more flights in the airport can handle.
QUEST: What do you want from government?
KIRBY: Well, we really want at Newark Airport in particular, is to enforce the rules that limit the amount of flights to the number of operations that
the airport can theoretically handle. But the other thing we need -- and they're not the only ones left for airlines to do. But the other thing we
need is to get the air traffic control towers back to full staffing.
QUEST: Are you frustrated because you've managed to keep from facing an existential crisis, and being ready to build up and rebuilding up and
crewing up again. Does this frustrate you?
KIRBY: You know, I don't think frustration is the right word. Because I understand it's happening all across the economy. What I don't like is at
United we prepared for this two years ago, we started preparing to build that plan, knowing it would be difficult, and trying to -- for the most
part covering all the things that were within our control. And you know, we got deals done with our pilots, we don't have staffing issues, you know, we
prepared for those things. And so some of these other things, you know -- and we made such a difference on what was happening to customers and had
the experience for customers and improvement. And so I'm frustrated that the customer experience is backsliding for things that are a lot of times
outside of our control.
The pandemic set up what I think is going to be some seismic shifts in the U.S. airline industry. And people haven't quite figured it out yet. But
when you look back -- when I talk to you two years from now at the AGM, I think you're going to look back and say, wow, things really the order. The
things that we took for granted in the airline industry are totally different than they were before the pandemic.
QUEST: All right, you can't use words like seismic shift, or not given --
KIRBY: Tell me what they are. I'll tell you, it's often you would ask.
QUEST: Yeah, what other seismic shifts?
KIRBY: So first, I think United Airlines is going to be the biggest and the best airline in the world. We're just positioned uniquely. Our team is
doing a great job. The second thing I think is, from an industry perspective, maybe the biggest is there is a real pilot shortage. And
regional airlines and low cost airlines are going to very much struggle to hire enough pilots. And so going through that process and other airlines
are at earlier stages of the seven stages of the acceptance process going through the grief. But you know, that is going to be a seismic shift in the
industry, because people aren't going to be able to realize their growth aspirations, not everyone is going to be able to realize their growth
aspirations.
QUEST: And what's the one thing that could screw it all up? What's the one thing that you worry about now? All your planning and you think, well, if
that happens?
KIRBY: You know, I'm not the worrying type.
QUEST: You really know?
KIRBY: Not well, but the problem -- the reason I'm not the worrying type is because if there's something that you know about, then go deal with it, and
then you don't have to worry about it. And if you can't change it, then there's no point in worrying about it. But the most likely things I think
to tip the industry off the current recovery track, or some exogenous shock, it could be I used to say war. That's now happened, you know,
pandemic, ironically, in 2019, at our board meeting, they asked, you know, what are the two things that, you know, the same kind of question, and I
said, a pandemic or a war. And now both of those things happened. But you can't plan for those kinds of events.
So some kind of exogenous shock is the biggest. We, as the whole industry need to do, however, and we need the help of our government, is get the
system back to running normally. Because, you know, this is really frustrating for customers and unfairly frustrating for customers. And so
our focus in the next few years, needs in months, and years is to build a resilient system that can handle these increases in demand that has some
margin of error. Airlines can't do that alone. In fact, we almost need the government's more than we need ourselves to help but we need the help to
rebuild a resilient system to support this industry.
QUEST: The CEO of United Airlines, Scott Kirby.
[16:40:05]
We've tried to cover as many airlines -- I mean, recognizing the difficulty of time in geographical areas. So South African airlines next was coming up
next, emerged from bankruptcy protection, the CEO is John Lamola. And what's he going to do with his airline, in a moment.
(COMMERCIAL BREAK)
QUEST: Relax, I'm going to show some magnificent sort of architecture, arguably of a different era. But there's an incredible job of bringing it
up to date. It is the signature building in a sense for the -- it was the first one of its kind in Doha.
It has been a rough couple of years for South Africa, the heavy travel restrictions COVID, it's all really taken its toll. Now, the airlines that
have suffered South African Airways filed for bankruptcy during the pandemic, was closed for years and then started resumed flying in
September. But other issues in there Comair, for example, in South Africa, is going out of business. So the industry is still exceptionally fragile.
John Lamola is the CEO, the new CEO, the new CEO of the new South African Airways is with me now.
John, I have said in the past that if you can't make money in South Africa, and if the only way South African Airways can survive is on government
money, then you should be allowed to go and let somebody come in who can do it privately?
JOHN LAMOLA, CEO, SOUTH AFRICAN AIRWAYS: But Richard, from where the industry is emerging now, South African Airways is not unique. You will
have read the latest, they ask you a report that showed that during the COVID period, governments throughout the world have put about $200 billion
helping airlines to perform their strategic role of creating connectivity and travel among people and bail.
QUEST: You're restructuring, have you restructured sufficiently that you can be profitable?
LAMOLA: Absolutely. A South African Airways is emerging out of the COVID pandemic as well as the structure that it had to go through as a new
totally different operation as a public-private entity, we, for the first time, it will be run by a private entity at private company.
[16:45:07]
QUEST: Has the mentality change? Because there has been a previous view of the government will always bail us out, which to be fair, the government
did always bail you out.
LAMOLA: Yes, but we are not the only airline in the world to be.
QUEST: You have bailed the most?
LAMOLA: Yes. I -- well, the jury's out on that, like, I've just -- as I've just mentioned, but in the case, it's not just the bail out, African
government has been the main shareholder like any other shareholder when the investment is in trouble. And that is a strategic role for South
African Airways with the government has always come into play.
QUEST: Unlike other countries, the South African government has interfered in the running of the airline based on political policies. Let's take this
country, for example, where it's a government airline. But basically, the government has said to get on and run it and run the best airline you've
got in the world?
LAMOLA: South Africa is unique and that it is a strategic and has always been a strategic asset in Africa. Western Africa is a very special role as
the leading aviation industry, so in -- on the continent, and the government has done what it has. But the mentality has changed if the new
SAA that we are leading is totally different.
QUEST: So tell me about the new SAA, what is going to be different?
LAMOLA: What's going to be different is that is majority owned by a non- government entity. And secondly, it's an agile stripped out the entity airline with a focused strategy of unlocking the African market. Currently,
Africa accounts for less than 2% of the global air travel industry. A lot of potential there it is the -- it has the youngest population in the
world, and growing GDP, and South African Airways is poised to exploit that market.
QUEST: We will come down to visit.
LAMOLA: Absolutely. You're welcome like we did last time in 2013 was great.
QUEST: No, I visits, I visits. But we will come back again.
LAMOLA: Please fly to South African Airways.
QUEST: Of course, I will.
LAMOLA: Cheers.
QUEST: Of course, I will. Thank you, sir. Great, great.
LAMOLA: OK.
QUEST: So the CEO of South African Airways is joining me. Now, to our new mission ahead series, on Quest Means Business, it's all week. It's projects
that aim to disrupt the way we traveled. Rachel Crane now reporting on a Swedish Evie revolution that'll change the way we travel.
(BEGIN VIDEO CLIP)
RACHEL CRANE, CNN INNOVATION AND SPACE CORRESPONDENT (voice over): In the island suburbs of Stockholm, one startup is making waves in the boating
industry by making almost no waves at all.
GUSTAV HASSELSKOG, CHIEF EXECUTIVE OFFICER, CANDELA: (voice over): Since we don't make any waves, we can run the boat much faster.
CRANE: The man at the helm is Gustav Hasselskog. The 50-year-old drove gas powered boat for decades, locking up a series carbon footprint in the
process.
HASSELSKOG: I realized that that boat cause seems like 50 times more fuel than our car.
CRANE: It's why in 2014 he decided to build a greener boat and founded his startup Candela.
HASSELSKOG: I didn't have any track record as an entrepreneur. I didn't have any track record as anyone working with boats before.
CRANE: He did have a master's in mechanical engineering though, and had learned about a century old technique, giving boats wings known as hydro
foils. A pair of computer-controlled hydrofoils lift the boat out of the water and make micro adjustments over 100 times a second. This creates a
smooth ride at top speeds of about 55 kilometers per hour Hasselskog says.
The electric engine releases no emissions and no noise. So it's better for marine life too.
CRANE (on camera): Candela has been called the Tesla of the Seas. You know, they sort of revolutionize the industry of electric vehicles. Do you see
Candela as having potentially the same kind of impact in the boating industry?
HASSELSKOG: We have found a lot of inspiration in Tesla. I think when I started Candela the hottest type of electric car you had at the time was
Toyota Prius. And what Tesla did was to also add a lot of style to electric cars.
CRANE: Candela isn't the only sort of looking to emulate Tesla's success on the water. Act sure a Swedish startup. An arc boat created by former SpaceX
employees are both developing high-end battery powered boats. While G.M. that Pure Watercraft is making electric boats as well as outboard motors to
install on existing vessels. However, leisure boats alone won't move the needle on ocean transport emissions experts say.
ELISE GEORGEFF, RESEARCHER, THE INTERNATIONAL COUNCIL OF CLEAN TRANSPORTATION: Ships emit about one billion tons of carbon dioxide each
year. When we talk about global shipping the three largest producers are going to be the container ships, the bulk cargo and then the tankers.
Personal craft is usually the smallest.
[16:50:08]
CRANE: For Hasselskog, recreational boats are only the start. He's now developing city ferries. Stockholm will trial Candela's 30-seat model for
commuter routes in 2023 he says. Because the boat doesn't create a week, it can go faster through city waterways Hasselskog says. He hopes this bonus
will get more people on board with the mission of greener boating and leave a cleaner future for shipping in their wake.
(END VIDEO CLIP)
QUEST: As we continue tonight, I promise you geographical at least diversity will after the break. Malaysia Airlines, the CEO finally has got
a grip for the whole thing and we'll be talking tonight about the changes and challenges, ahead.
(BEGIN VIDEO CLIP)
IZHAM ISMAIL, MALAYSIA AIRLINES CEO: Lots of gray hair now. And I'm age -- I'm 61 years old, Richard.
(END VIDEO CLIP)
(COMMERCIAL BREAK)
QUEST: The CEO of Malaysia Airlines says the company has, well and truly turned the corner and a bright future lies ahead. Now, of course, Malaysia
lost two planes in 2014 MH17 was shut down, MH370 is still missing somewhere off the coast of Australia. And it's been somewhat unfortunate
with CEOs two, three of them stepped down in fairly short order. So there's a whole set of challenges fleet competitive advantage, COVID, shutdowns but
captain Ismail who now leads the airline and has them for several years. He believes that corner has been turned and actually the new Malaysia Airlines
is ready for success.
ISMAIL: Booking is very sluggish, return very sluggish. But passenger flown today is 30% better than what we forecast internally, 30% forecast. But,
you know, in the ASEAN region, Singapore, inbound traffic, Indonesia is the second, thirdly is China. Chinese are concerned. So we're not going to wait
for China. We've shifted our network. We've shifted our capacity away from China, at least for this year. And our capacity will be back in America
around 76%.
QUEST: What do you think China's going to do? Or no one knows?
[16:55:00]
ISMAIL: I've heard, you know, China reopening and after the Congress I saw one report for the U.S. Ambassador to China things that weren't to be
perhaps until 2023. I mean, I guess you just write it off as part of your route planning and structure and you're both.
QUEST: Yes, I think. Yes.
ISMAIL: So we have right it off for 2022.
QUEST: Right.
ISMAIL: China is not in play for us, right. My prediction, personal prediction, plus out the analyst is done by my team. My best bet is late
this year, optimistically, pessimistically, probably second quarter of 2023.
QUEST: How concerned are you about the global slowdown?
ISMAIL: Higher interest rates.
QUEST: How concerned?
ISMAIL: I am very concentrated, Richard. I'm very concerned. Fuel costs is one example. Typically airlines, Malaysia Airlines and like fuel costs is
about 20%. Now, it's sitting in the range of 45% to 49%.
QUEST: Malaysia, a wonderfully proud airline, with a tremendous history that's had a very difficult, I think, is a polite way of describing recent
past --
ISMAIL: Checker journey.
QUEST: Checker journey, even better. How are things now?
ISMAIL: Richard, we've come a long way, since MH370 and MH17 struggling to reset its balance sheet for the last 20 years. COVID, while it is an impact
to the whole world economy, but it has presented an opportunity for Malaysia Airlines. So we were able to reset the old balance sheet, which is
like 20 years of legacy issues, removing 15 billion ringgit of liability, removing by 10 billion our debt. We are a very lean and agile organization.
QUEST: So you can deal with the balance sheet side of it. But the core problem hasn't gone away, which is your Nutcracker, between the low costs
AirAsia and others. And the Gulf carriers where we are here who sort of eat everybody's lunch?
ISMAIL: 2025 years ago, they were like five, six airlines in the ASEAN region. Today, they were 30 plus airlines. Capacity is an issue. So the
competition in the Asia -- in the ASEAN region is very competitive. Malaysia Airline is very clear of our segment, very clear. So we will do
not want to go back and fight the battle in the local segment. So we know where our customers, our customers, our premium customers. Of course, we
are not luxury airlines, the like of Qatar, Emirates and the likes of those.
QUEST: Finally, do you feel that you now have breathing space? Or are you on borrowed time?
ISMAIL: Yeah, not borrowed time, Richard. We believe very strongly. Malaysia Airline future is very bullish. We at the doorstep, we're making
history, a comeback per se, right? I'm very confident of that. I've been here for 40 years with Malaysia Airline and I've never seen this
trajectory.
QUEST: Are you enjoying it?
ISMAIL: It's been a very steep learning curve for me, Richard, since I knew you in 2014, I personally changed
QUEST: Oh, yeah.
ISMAIL: I personally change lots of gray hair now. And I'm age -- I'm 61 years old, Richard. Yeah, and to be honest, it's a fantastic journey. I
would not -- if you asked me to rewind the clock, go back into history, I'll do it all over again, in a heartbeat.
QUEST: He's only a year older than me. And he's looking better on it. No profitable moment tonight. We wanted to give more opportunity to hear from
our airline guests. And that's Quest Means Business for this Monday night. I'm Richard Quest at the IATA Annual General Meeting in Doha. Whenever
you're up during the hours ahead, I hope it's profitable. I'll see you tomorrow.
(COMMERCIAL BREAK)
END
