AUA CEO Annette Mann: "What Ryanair is doing is blackmail."

Good morning.

Yes, it operates seven weekly long-haul flights and that is our future model for the next few years, yes, decades.

Yes, Johannes Teison actually visited us a few weeks ago and has just been traveling throughout the group to get an overview. And during his visit here in Vienna, I think he was quite impressed by the quality of Austrian. He flew in with Austrian. His first comment to me was that the food was far too good for airplane food. And I think he also felt that what he likes, namely that we are quite pragmatic and that we focus a lot on the customer. He liked that a lot. But we have to say clearly: what he doesn't like is that after 20 years in the group portfolio, the financial results have on average not been impressive so far, and that is something we have to work on very intensely.

It's not that simple. It's a relatively small hub, and many airlines have become very, very large, and size is relevant simply because of efficiency. It really is about individual euros. We earn about 5 euros per passenger. You can imagine how tough the business is, how narrow the margins are. The larger a hub, the more you can focus on efficiency and productivity. The smaller it is, the more difficult it is. And here in Vienna, we also have relatively few business travelers, relatively few large global headquarters, as in Switzerland, for example. That means we have a very high proportion of tourists, who pay less than business travelers. And if you think, well, Vienna is actually quite conveniently located towards the East, or is super connected from Eastern Europe to the West. That's true. We have a lot of business from Eastern Europe, but purchasing power in Eastern Europe is still significantly lower, even if growth rates are high. That means the ticket prices we can achieve there are lower than in Central Europe, and we still have to compete with our locations in the West. So it's not an easy or very profitable business. If you say, great, then take people from Central and Western Europe eastwards. Theoretically a good idea. But then you have very strong competition from Turkish Airlines and especially from the Gulf carriers, which have grown massively in the last 20 years and unfortunately operate under completely different competitive conditions. So it's really not an easy location. As I said, many tourists, a lot of low-cost, little purchasing power in Eastern Europe, a lot of competition towards the East if you want to go to Asia. So the mix is tough, that's true.

That's true, but I consider that a very short-term phenomenon. I believe the Gulf states have every interest in stabilizing the security situation again, and we rather assume that as soon as that happens, there will be a big price war towards Asia, because in the last 20 years the Gulf carriers have invested a lot to build up market share. Currently, about 50% of all travel between Europe and Asia goes through the Gulf states and Istanbul, and they will fight to get back every percentage point of market share. We firmly assume that, and they will do that especially through a very tough price war.

Austria has unfortunately developed over the last 5 to 10 years into the second most expensive aviation location in Europe. And you mentioned it, what does a location actually need to be attractive? There is not one single issue, one condition, but everything has to come together. That includes the political framework – how much taxes and fees are set by laws. How expensive is the airport? But also – and we are very good at that at this location – how well does the airport function? That is of course also part of it. But air traffic control and so on, many little things that come together. We are a very personnel-cost-intensive business, and of course with personnel that cannot be replaced by automation – pilots, flight attendants, technicians, that will all remain. And insofar, the labor costs as they have developed in Austria are not advantageous compared to the European average, with disproportionate inflation in the last 5 years. So for us it's really a toxic mixture of very high aviation-specific location costs, where we really have to reverse the trend, plus of course the general conditions that have become more difficult for all businesses here in the last 5 years. And we are talking to politicians and especially to the airport about the aviation-specific topics. But I am also on the federal board of the IV, so I naturally see what the industry as a whole needs, keyword ancillary wage costs, which indirectly also help us. But we definitely need to reverse the trend on location costs, because otherwise it will become really difficult in the long term for Vienna.

And if we reverse the trend in costs, then I still see great potential for Vienna. Why? We have managed very well, especially after Corona with Austrian, to put ourselves in a very good position with internal factors that we can directly influence. We are operationally extremely stable. In March we were the most punctual airline in Europe. On average over the entire last year, we were the third most punctual airline in Europe. That should be one of the best values in the Lufthansa Group. Yes, it is. And without having large reserves – at the same time we have the best value in terms of how many hours per day our aircraft are in the air. Because you can always be punctual if you have a lot of reserves, but we don't. So we are operationally top. We have very high customer satisfaction scores. Our brand strength in Austria is very, very high again. We are very successful in finding employees at this location. So actually all factors where from a group perspective you would say, great, this is a location worth investing in, especially because there is still room for growth at the airport. And that is also the reason why, based on these factors, we have started to renew the fleet over the last few years, because fundamentally we still believe in the Vienna location. I believe in the Vienna location, because one of its great strengths, as seen after Corona, is that when it matters, everyone helps together. During Corona and after, the fact that Austrian and the airport got back to very good levels so quickly had to do with politicians providing short-time work and support, but also after Corona, all parties involved helped each other very quickly. There are much closer relationships than I know from other countries. That is a huge strength. And what we need to achieve is to transfer this strength that we had after Corona in ramping up air traffic, from operational aspects to strategic direction. We need a common picture of what kind of air traffic and how much air traffic we want and need in Austria in the years 2035 and 2040, and we need to work together to make it possible. That is how successful locations elsewhere in the world work. Air traffic is important for the economic strength of a location. I think everyone here has understood that by now. So that is a good foundation. And now to reverse the trend in costs can also lead to disproportionate growth, and we as Austrian and the group will be ready if it goes in the right direction. Otherwise we will stagnate first.

I consider the way Michael O'Leary represents things at this location absolutely unacceptable. And what I just said, that a hub can only function and develop further if all parties work together, that for me is essential: it requires trusting, long-term relationships. And what Michael O'Leary is doing here is blackmail. Yes, and we will never question that. We have been at this location for almost 70 years, we are committed to the country and the location, and we want to stay. We see this location responsibility. We cannot simply leave. In that respect, I think relationships must be shaped and lived completely differently, because I truly believe that is the only thing that makes you successful. So again, there is no silver bullet. We are naturally in agreement with politicians and the airport that costs are too high and must come down. I don't need to tell you that in the context of the double budget and EU deficit procedure, it's a difficult matter. But I very much hope that we will achieve something now, because that is precisely the basis we need to even think about further development of Austrian. Everyone knows that. And in that context, let's see what we can achieve in the next few weeks.

Not every year is equally crazy, but I've been doing this for 23 years, and somehow every year has something different. A global kerosene shortage is indeed something new. That it happens at one airport or another, we already know, but that it takes on such dimensions is new. That means it was also new for us that we suddenly set up a global kerosene monitoring system as a group and are in very close exchange with all suppliers about how things look. Yes, so you face your challenges, what can you do?

What I am about to say is very specific to Austrian and not to the global kerosene situation. For Austrian, it is indeed the case that more than half the battle is already won when you have enough kerosene at your own hub, because every second flight is fueled at the hub. And I am quite optimistic that we are well supplied. And yes, on short-haul flights it is at least theoretically possible to take more fuel. Why do I say theoretically? Because at the same time there is currently a so-called 'tankering ban' in Europe. That means we are actually prohibited from taking more than 10%, I think, more kerosene with us, also due to various environmental regulations. That is in principle correct, also because of the SAF blending quota. But if there really is a kerosene shortage somewhere, then it is actually a topic that we have to address politically at the European level. Otherwise, there may be kerosene, but I am not allowed to take it. At some point it becomes difficult.

It's a bit different for every airline, because of course each has a different network. If I look at long-haul flights, then towards Asia, where Asia and Africa is always, it's probably tightest. And we don't fly to Africa, so let's look at Asia. Tokyo has given a bit of relief. There was a big question mark at the beginning, but they seem to be well supplied now, at least for the summer schedule. And I think China is known to be very well set up with its strategic reserves. Then Bangkok remains. We'll have to see, but that would be our only destination in Asia where we might have to find workarounds, maybe using a refueling stop. Because of course, out and back won't be enough. Then let's look westward. At the moment, it is not expected that kerosene will become scarce in North America in the short term, and the majority of our long-haul flights go to North America, the USA and Canada. So specifically for Austrian's situation, I cannot rule out that we might also be affected, but I think in terms of scale, other airlines with different networks or at other locations are probably more affected.

The flights you mentioned were not canceled due to kerosene shortage, but due to the acceleration of a decision made some time ago, namely that Lufthansa Cityline would be closed. And what affects all of us is not only the kerosene shortage, but even more so the kerosene price. That is the context. I can only answer for Austrian here today because I don't know every specific situation at every other hub or airports we don't fly to. I assume that there will be cancellations from time to time. I think one has to distinguish clearly whether it is really a kerosene shortage or because the kerosene price has shot up so much. It has more than doubled, and not every airline is hedged against kerosene prices. Then it hits them directly, and if at some point you burn more money when the flight takes off than if you just keep it on the ground and cancel, that can certainly be a reason for an airline to keep flights on the ground.

That's not quite right, because we are of course not 100% hedged, but only 80%, and it's a rolling system. And now with the very high prices, hedging was initially suspended. That means it varies every month how much is actually hedged. And the group figure is, I think, publicly known. Despite all hedging, the group will have an additional 1.7 billion in kerosene costs this year. If you consider that we have about 10% of the group's flight movements, you can calculate what that means for Austrian. And if you then consider that last year we had 80 million profit, and we have additional kerosene costs in the three-digit millions, it certainly affects us, even though we are hedged. Conversely, you can imagine the drama for another airline that is not hedged. So we are glad, but it does not pass us by without a trace. And that is also why I have said several times, we will have to see, and given these dimensions, it will also have an impact on ticket prices.

Yes, in normal times kerosene is about 25-30% of total costs. The second largest block, which alternates, is either taxes and fees and overflight rights – everything you have to pay not only in Austria but worldwide when you fly over or land and use state fees – and personnel costs, which also account for between 20 and 25% each. And the rest is everything else you add up.

Well, you mention the strikes, but that is always a very specific topic. Much more interesting is that we are getting better and better at coordinating our networks and supporting each other in case of short-term, different kinds of disruptions. An example: about two years ago we had a major damage to an A320. The repair took several months. That meant we were missing one aircraft for a summer. At the same time, the engines – it was an A320neo – the engines were very scarce at that time. So we simply gave our engines to another Lufthansa subsidiary. At the same time, we borrowed an aircraft from somewhere else. So that is something we do almost weekly now, because there is always something somewhere where you can help each other, and we are getting better at it. And that is also important in global competition. We must learn to coordinate better so that we have a chance in global competition out there, because although the Lufthansa Group is the fourth largest airline group in the world, we have a global market share of 3%. So if we don't succeed in pooling our strengths properly and coordinating among our various flight operations, and exchanging aircraft, it will be tough out there.

From my perspective, it can only develop further if we have the right regulation behind it. SAF is a very, very important future technology. Why? Of course, a lot of money is being invested in developing new aircraft technologies, like the famous hydrogen aircraft or even electric aircraft. But these are all technologies that will not be suitable in the coming decades to replace the aircraft we know today in terms of range or size. To give an example, the hydrogen aircraft Airbus is currently developing, which will probably not come in 2035 but rather towards 2040, is supposed to be a 100-seater that can fly 2,000 km. That is a good first step. That is a technology we need, but it will not replace the air traffic that is moving around the world today for a long time. SAF is interesting because you can use current aircraft. There are between 30 and 40,000 commercial aircraft worldwide, and you can blend SAF in any ratio. Scaling that is the right way, because only in that way can we move towards greener flying over the coming decades. Actually, Lufthansa was the first airline to fly with SAF in 2011 and helped certify it. They did 2,000 flights between Frankfurt and Hamburg, and then nothing really happened for 15 years. That also has a lot to do with regulation and how it's done. When you look at how fast SAF production is progressing in Europe, it's very slow, because many investors who were initially interested are pulling out because it is so complicated with the different rules. What can you make SAF from? How exactly must it be produced? And always with the question: if I invest all this and do everything, will the EU really recognize it? I think we are cutting off our nose to spite our face in Europe. We make it so complicated for a technology that is only just emerging that it gets strangled at birth. We need to look at other regions, like the USA or Asia, where the focus is on getting into production quickly and then possibly tightening the rules later. In Europe, we are at 2% blending quota, target 6% by 2030, and that will be difficult because at the moment, at least in Europe, investment projects for 6% SAF are not underway, because as I said, it's not attractive for investors. And that is something we need to think about.

Yes.

Yes, Linz is indeed a very short flight. That we no longer fly to Salzburg is honestly nothing that pains us in our portfolio. I said it recently too. The headlines made it 'Austrian CEO defends ultra-short-haul flights'. I sat there reading the paper and thought, no, we rather just tolerate them than defend them. My point is: who defends them? The state governors? Well, I 'defend' them in the sense that one says we absolutely need them. I think as long as there are no good alternatives, yes, it is really painful for, say, Innsbruck if there is no flight connection to a hub anymore, because that cuts off Tyrol. It takes about 5 hours by train, currently via Germany, I learned, it's even more complicated. By car, it's also four and a half hours. What are you telling me as a person from Vorarlberg? But I also see across Lake Constance, there is an airport in Memmingen, for example, that Lufthansa hasn't served for a while or stopped during Corona. Friedrichshafen, I mean. Exactly. So, as I said, if it were up to me or us and our controllers, we would have stopped all these flights long ago. So I don't defend them. But I can well understand the desire and necessity of a region like Tyrol for connection to a hub. Because the alternatives are very limited. And I think we need to find good ways for the future, either better train connections or ways to make such flights economically viable if a region needs them for its economic strength and quality of location. I think those are two separate discussions. I can discuss ultra-short-haul flights from a sustainability perspective or from an airline's profitability perspective. From both, one could say they are not needed or should not exist. But I think one must not neglect what it means for an economic region. I believe we need more honesty in that discussion, but also future-proof solutions, because if we only add more burdens and make these flights more expensive, we as Austrian will not be able to sustain them for long in their current form. They are loss-making, and in a tighter year, it really hurts.

Yes and no. Because the discussion we are having about ultra-short-haul routes, I think every country has it. It's the same in Germany. Just yesterday it was announced that the Bremen-Frankfurt flight is being discontinued. Bremen is still connected via three other hubs, and yet social media is full of outraged posts and newspaper articles about how terrible it is. In France, there was also the discussion about banning short-haul flights, but then it was watered down through the back door because those short-haul flights still exist, but you are only allowed to connect afterwards. So I know this from many countries, and I think it's something every airline has to deal with. You are an economic factor. You are not just a company with 6,000 employees that produces packaging or screws; you are a company that is relevant for the economic performance of a location. And in that context, you have to find a balance. What does that mean exactly? Where does the region need such an airline? And it's a give and take between what you can still economically justify and how you can work together so that such short-haul flights, which we might not operate economically but which a country needs, can be sustained. But you also have to be globally competitive. That is always a balance.

Yes, that's right. Thank God we still have other profitable routes, but Tel Aviv really hurts because normally we fly to Tel Aviv three times daily, and we take a lot of connecting passengers from Tel Aviv for our North American flights. Those are currently missing.

This year has been difficult with high costs and lost revenues. Normally there would be a profit warning. For Austrian Airlines it's particularly tough because we fly a lot to the East; we currently cannot serve five destinations. We redistributed to more European flights, which helped in summer, but the beginning of the year hurt. Kerosene costs also hurt. For the group, it's more differentiated; each airline has a different network. We have fewer Asia flights, others more. We are part of a system, so you can't generalize from AUA to the rest. For holiday travelers this summer, where there are crises, there are also opportunities. I hear there is capacity to North America, so cheap flights to America could be a goal. We have good kerosene supply in Vienna, so no flight cancellations due to fuel shortage. Plus, we have fewer transfer passengers from Tel Aviv, so more space and attractive prices, until Trump changes his mind. Regarding entry stories, we keep detailed statistics and see no significant change in entry denials to the US. So I'd be relaxed about traveling to New York or California.

We do see a trend of fewer Central Europeans wanting to go to America, but there are big differences within Europe. For example, Poland has a slight increase, while France, England, Spain are not as affected. German-speaking countries and Denmark show declines, likely due to the Greenland issue. However, for us, 70% of our summer flights are full with Americans coming to Europe. Stock prices are still good, so American demand to Europe remains strong.

It's always interesting how people try to put airlines into categories. The categories of premium and low-cost have existed for a long time. A strength of Austrian Airlines is that we only need one brand. We cover a wide range of passengers. We are not an elitist brand; people don't think we are too expensive. At the same time, business travelers and those willing to spend more also fly with us. It's a classless brand. We can compete on price and also offer premium services like long-haul, premium economy, business class on short-haul. We see ourselves as a full-service carrier under one brand.

To clarify, there were headlines that Austrian is removing hand luggage. That's not true. We had three tariffs on short-haul, and they still include the rollaboard. We added a fourth tariff below them without hand luggage. Why? Because 75% of our tickets are sold outside Austria, where the brand is less known. Many customers book through online portals like Google Flights, which sort by price. If we don't have a product at a comparable price, we don't appear. This tariff is primarily for those online channels. It's not just a low-cost issue; even Eurowings has a tariff without hand luggage. We need to compete in these comparison portals.

I stick with what I said. We need to appear in the top 3-5 positions in online portals. Not every time, but regularly enough. Our prices are not based on costs but on competition. When we want to sell more tickets to Palma or Barcelona, we look at competitors' entry prices and decide if we want to play in that league. The lowest price point would be in Basic, as it's directly comparable to others without hand luggage. But due to kerosene price changes, it's hard to compare. The decision to introduce the tariff was made long before, as IT systems need to be adjusted.

It varies greatly. We have an app for employees at the airport to predict based on route, day, and time. For example, on the Frankfurt route, there is a lot of hand luggage because of business travelers. On holiday flights, people often check in their suitcase and only have a small bag. We manage at the gates with hand luggage checks to ensure enough space.

You'd have to ask the airport. Those are not our employees. We don't have incentives for taking rollaboards.

Seven days responsibility, five days work.

After.

I meddle.

Design ambition.

Yes, I think so.

Resilience.

The smaller, the better.

Office.

Will to shape.

I have defined it as work-life blending. That works for me because work is an essential part of my life. I do what I love, so it doesn't always feel like work, and it blends.

One that finds a good balance between customer, employee, and economic perspectives. Especially as a service provider, but it must also be economically viable. It's a daily struggle to find that balance.

I like the Obama interview: 'Learn how to get things done.' I think that's the most important thing to learn.

I was very lucky early in my career. I was a referent in cabin management for the A380 project. A colleague left unexpectedly, and the project lead for the first class cabin became free. My boss at the time called me and said, 'Annette, I've decided you'll do it.' I was completely surprised; I would never have raised my hand. The key moment was that someone who knows you well believes in you. I did it very well, and that built confidence. Later, when I was appointed to Vienna, it was similar. The company knew me for over 20 years and trusted me. I didn't hesitate. It's a dream job.

I always say the first 10 years I didn't feel disadvantaged, and the second 10 years I felt very well supported. I think it's more a generational issue. Most of my sponsors were men. I tell young women that the difference is not male vs. female, but when a woman becomes a mother, it becomes difficult depending on the partnership. Personally, I have always felt very comfortable as a woman.

By putting women in responsibility. We haven't set up big programs since I've been at Austrian. But I checked for International Women's Day: since I started, we have 39% more women in leadership, and almost 50% more at the level below the board. It's about making it normal so that people don't think, 'Oh, I'm a woman, can I do this?' That's nonsense.

Cross and cross. I don't have one source. I look for design ambition and curiosity. I want to see if someone has the drive to shape things, to look at something and say, 'What would I make of it if it were mine?' That intrinsic motivation is important. I have a list of colleagues who have stood out in that aspect.

I would start earlier. Today, I would not study business administration as a first degree. I did because in the mid-90s, with no internet and limited exposure, I thought it was the most flexible. But today, I would study something technical or scientific, and then add an MBA. You can easily add business on top of a science degree, but not the other way around.

Yes. My reason for the MBA was different. After about 7-8 years at Lufthansa, my husband was also international, and I asked myself if I wanted to stay in Germany or go international, and if I wanted to stay in aviation. I needed to stretch my head out, meet other people before being absorbed. It was a great 1.5 years. But today, I wouldn't recommend doing an MBA on top of a BWL degree without a specific reason. If you studied something else and want to go into business, then it's a good idea.

I don't know. I hope long, because I still have plans. The first 1.5 years were about rebuilding after COVID, repaying state aid. The next two years focused on internal efficiency, investments in new aircraft (50% new fleet by 2030), product improvements, and lounge expansion. Now I'm working on location issues with politics and stakeholders. I have more to do, especially for the 70th anniversary next year. I feel I'm not finished. It takes time to build relationships in Austria. After four years, I feel I can now shape things together with politics and stakeholders. So I see value in staying.

It starts much earlier when I walk through the airport. Many think I get driven to the plane, but I take the normal passenger routes. It's important to experience the check-in, security, boarding. I observe not just the processes but the human interaction. For example, hand luggage checks: we have to do it, but how you are addressed matters. It's about the interpersonal aspect. Processes must work, but that's not enough. It's a service, and that has a lot to do with human interaction.

Yes, some airlines are more processual and stringent. But when you look closely, that often comes with standardization and less personal warmth. I think that's the trade-off. When I compare within our group, Austrian is a bit more rolled-up-sleeves than Swiss in some processes. But we get feedback that our service is warmer and more approachable because we leave more room for the human touch. It's about finding the right balance. You can't have it all at the same time. I'm quite satisfied with how it's going.

I was fascinated by how consistently customer centricity is lived at Sacher. I attended a daily meeting where they focused entirely on guests, learning about them to delight them. The intensity and passion were impressive. In aviation, we face a similar challenge: how to standardize processes to enable personal moments for guests, like celebrating a birthday. There's a system behind it that makes it feel individual and spontaneous. That's very similar between hotels and airlines.

Maybe come to your editorial conference. That would interest me, as your industry is also changing a lot.

Yes, maybe we'll do that. Then we have something planned again, and as a Munich saying goes, there's always a little something going on.

Yes, we'll manage that.