Benjamin Smith

Chief Executive Officer, Air France-KLM Group (parent), Air France (Société Air France S.A.)

Air France KLM CEO Ben Smith Talks to Us as Paris Prepares to Host the Olympics – Video Interview

🎥 Jul 19, 2024 📺 Skift ⏱ 37m 👁 788 views

In the first installment of our series celebrating the upcoming Paris Olympics, Seth and Sarah speak with Ben Smith, the CEO of Air France KLM—an official partner of these games and one of the largest airlines in the world. Connect with Skift LinkedIn: / skift X: / skift Facebook: / skiftnews Instagram: / skiftnews WhatsApp: https://whatsapp.com/channel/0029VaAL... Subscribe to @SkiftNews and never miss an update from the travel industry.

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Transcript (54 segments)

Sarah Kopit0:08

Hello and welcome back to the Skift Travel Podcast. I'm Skift's editor-in-chief, Sarah Kopit, joined as always by Skift's head of research, Seth Borko. Hey Seth.

Seth Borko0:19

Hey Sarah. Hey everybody.

Sarah Kopit0:20

So with the 33rd Olympiad, aka the Olympics, set to kick off in Paris in just about a week, we're going to be doing a bit of a miniseries for the next few episodes focused on the games. This week we're starting off in style, interviewing Ben Smith, CEO of Air France-KLM, an official partner with the Paris Olympics. And Ben has some serious aviation bona fides. If you don't already know who he is, it's a really sterling resume. He started his career in Canada in the early 1990s, eventually rising to become president and chief operating officer of Air Canada in 2014, before being named the first non-French CEO of Air France-KLM in 2018. And that is a very big deal indeed. He's really thrived as Air France-KLM CEO, helping to navigate everything from labor disputes to COVID-19. Air France-KLM reported record profits in 2023 under his watch. And just as an aside, I can confirm that Ben is a dyed-in-the-wool aviation nerd. In the spirit of living the Skift brand, I was actually waiting to board a flight almost immediately after we recorded this podcast at LaGuardia Airport. And Ben actually asked me, he put on his glasses and he was looking at the renovated terminal at LaGuardia Airport. So this man is genuinely interested in all things aviation. It was really amazing to speak with him. I know you enjoyed it. I loved it. There's so much going on with Air France to get ready for what will be a really awesome event. He let us in on some of the preparations for the games, why Air France-KLM found it so important to be the official partner of the Olympics, even though there's going to be some opportunity costs associated with the games coming to Paris, maybe a little less revenue than initially forecast. It's still going to be a very big deal and a very successful event. So in a nutshell, Air France and Ben Smith is very big on the games and the exposure that will come from being such a prominent sponsor. We also got the opportunity to talk about a bunch of other stuff, not just the Olympics, but what it's like to be the CEO of a major airline in 2024. And there's a lot going on and a lot to talk about. One of my other favorite topics besides the Olympics was about sustainability, which is a huge, huge growing topic in aviation. He talked about the need for there to really be a level playing field so that all airlines can implement sustainable aviation in a level and fair way. And talked about the difficulties with connecting from planes onto trains, that great keyword for aviation nerds or transit nerds: intermodal. That's a tough one, but it means getting your bags checked from an airplane to a train. Lots of really fun stuff to talk about with the really interesting CEO. Talk about first class era, right? That was a fun one. So here's our interview with Ben Smith. I hope you guys enjoy.

So is Paris home for you?

Benjamin Smith3:19

It is now, for about six years now, yeah.

Sarah Kopit3:22

Are you looking forward to the Olympics?

Benjamin Smith3:24

Yes. My third Olympics I've been involved in in some way, shape, or form. But this will be very unique and special because we are a partner, an official partner, and we've been preparing for this for a long time. And there's a lot of unique things that the city has planned for these games. So hopefully if the weather holds up, all the plans should be able to come into motion and it should be great.

Sarah Kopit3:55

Are you going to any of the events?

Benjamin Smith3:58

Yes. Well, I'm definitely going to the opening ceremonies, which are going to be held on the river Seine. And each one of each country that's participating will have their own float, I believe, and they'll float down the Seine.

Sarah Kopit4:12

Is that how they're going to come in?

Benjamin Smith4:14

Yes. You'll have seating all along the Seine and in different areas over the bridges as well. So all the bridges will be closed, so traffic will be horrific, but at least you have the opportunity to actually sit and see it. It gives a huge... I don't know how many miles, but I think quite a few people will have the opportunity to watch this. And from what I understand, it's going to be amazing on TV as well because you're not static in one spot. The cameras can go up and down. I love the Olympics. Really excited.

Sarah Kopit5:01

I'm so excited to watch from the comfort of my Brooklyn living room. So one of the coolest things that I have read about the Olympics and how France is hosting is that the surfing competition is actually going to be in French Polynesia. So I'm curious if you're anticipating a run on seats to Tahiti, and is that actually a profitable route for you guys?

Benjamin Smith5:26

Well, it's a profitable route in normal times. It's a one-stop we fly over Los Angeles and has been flying to Tahiti for decades, so it's not a new route. During normal times it's okay. Whenever you host an Olympic Games, there's a lot of directionality. So for the home carrier, it's not necessarily a good thing from a revenue perspective, for quality of revenue. So we're not expecting this to be a banner summer from a revenue perspective because of the Olympics. I think volumes are okay, but business people are avoiding Paris, as you can imagine. Also, hotels have really increased their pricing, so the city's expensive, so people were avoiding it a bit at the beginning of the booking season. But Tahiti, I think that's really cool. If somebody has the opportunity to go all the way down there, I've never been to Tahiti, but it's on my list.

Seth Borko6:24

You gotta fly it, Ben. If you operate an airline with a route there, next time you're in LA, you know, it's an easy one-stop.

Benjamin Smith6:34

Well, we fly to a lot of unique places, a lot of places I'd like to visit. That's one of them, but it's not number one. There's a few that I'd like to go to first, and I won't share the name, but there's one in particular I'd like to go to first.

Seth Borko6:50

We need this scoop, Ben.

Benjamin Smith6:52

No, because it's a city I can't even pronounce in Africa. So if I can't pronounce the city, I've got to go.

Seth Borko7:05

That honestly is part of what I love about the Olympics and the Olympics parade. I love seeing all the flags. And Sarah is true to the form of this interview in an airport right now. That's one of my favorite things in an airport, seeing the departure boards and all the planes and thinking about all the different places you can go. Sarah, where are you? That airport looks awesome with those windows.

Sarah Kopit7:22

I am at LaGuardia Airport, the new LaGuardia Airport. LaGuardia was an absolute embarrassment before, and they rebuilt it. From the ashes, I'm in the Delta terminal C at LaGuardia Airport. It's amazing.

Benjamin Smith7:43

That is amazing. That used to be the Eastern Airlines shuttle terminal. And then it evolved over time. Then there was Northwest, and Delta built a terminal next door, and US Air was there, and then it all connected, and Delta took it over. Now they've renovated it. It looks beautiful. Eight billion dollars at work.

Seth Borko8:12

Well, back on the topic of the Olympics, we were talking about how you said it's not going to be a great summer because of the Olympics. I think you put out an official statement that you're going to lose something like 175, maybe 200 million dollars this summer because of that one-way traffic and the deterrent effect of the Olympics. But you're an official partner. Why sponsor an event that's going to hurt your business?

Benjamin Smith8:39

Well, what we announced was that revenues will be lower than expected. So we're not anticipating a loss. Sorry, summer opportunity cost of revenue is what I meant to say. Yields, as I said, business traffic is avoiding Paris, not just during the Olympics but prior to and after. And we didn't expect that to be the phenomenon. But we were an official sponsor because the exposure is billions of people looking at these games. We're based here, we have France in our brand, we fly all over the world. It's a unique way to get our brand known. So we're very happy to be sponsors. It's a once-in-a-lifetime opportunity because the games haven't taken place in France in, I think, a hundred years.

Seth Borko9:41

We've heard a lot from tourism ministers and other spokesmen for the games that there will be a bit of a deterrent effect on Parisian tourism during the games, and that France and Paris are playing the long game here. We've heard that they're going to play beach volleyball right in front of the Eiffel Tower, so there'll be shots of the Eiffel Tower while beach volleyball is going on, which sounds absolutely incredible. But the fact that tourism and the hotels don't seem to be booked as quickly as they have been, I'm wondering if you're feeling like it's been disappointing to see how the numbers are shaping up as we get into the final weeks.

Benjamin Smith10:42

No. I think maybe to put it in perspective, last year was just unbelievable. Paris, France is the number one inbound tourism market in the world, so starting from a very high bar, and last year just blew it out of the water. Hotels, restaurants, we were able to see yields that we've never seen. So this year is not a bad year, it's just coming a little bit lower than we expected. This is going to be an amazing event. The Olympics are absolutely fantastic. It's an amazing city. I hope you could say we're an amazing airline. So we're super... yes, we're a little disappointed over some of the forecasts that we made, but I put it into total perspective. We're really, really excited. I think anybody who has the chance to participate is going to have an amazing time. The atmosphere in the cities that are lucky enough to host the Olympics is magical. You have the entire world watching because they have their own team there. Team USA is going to be here, they're going to be flown by our partner Delta, the official USA partner. So we've got them as well. And everyone's got their own sport. It's amazing. So a bit of long-term gain, and we won't even say short-term pain, we'll say short-term lesser than initial forecast is the keyword. Not quite the slogan, but still strong. From what this is going to do for France, for Paris, for ourselves, it's going to be all positive.

Seth Borko12:31

Can I ask a little about that? Paris is already the number one tourist destination in the world, an incredibly busy city. You run Air France and KLM. Amsterdam has long been a very busy city. We're seeing a bit of pushback against overtourism and mass tourism. We saw protests in Barcelona, we saw governments limiting slots at Amsterdam's airport, Schiphol. Is overtourism an existential threat to your business? Can you continue to grow at Charles de Gaulle and at Schiphol as hubs, or are those guys coming into capacity?

Benjamin Smith13:35

Well, CDG, Charles de Gaulle, still has a lot of excess capacity. It's the only major airport in Europe that still has capacity. There are four parallel runways here. We've got just under 500,000 movements, and this is unconstrained. To give you an example, the busiest airport in the European area, London Heathrow, they're just under 500,000 movements with two runways. So you can imagine how much room there is to grow at CDG if demand continues. Amsterdam, there is a cap on movements of 500,000, which is being contested, and there's an effort to reduce noise around Schiphol. But when you look at the challenges we see at quite a few airports, Schiphol in particular has big pressure to reduce noise impact. So we're re-fleeting as quickly as we can. That has the biggest quickest impact. We don't want to get caught in a political game where you say 'less flying' to bring less noise. I think quieter airplanes should be able to do that. The government has an aspiration to bring down noise levels by 20-25% in the short to medium term, and all the new technologies like the A320neos, 787s, A350s, the noise levels are about 50% below. So we think we can handle that in the Netherlands. We're not seeing a big pushback from overtourism in France. It's the same thing. There are some lobby groups that are not pushing for more tourism, but it's more on the environmental front that we see the challenges taking place here. Putting taxes or charges onto our industry that we may not have seen in the past, and putting restrictions around the way we operate, like curfews for noise.

Sarah Kopit15:37

Stick around, we will be back for more of our interview with Ben Smith after this break.

I wanted to switch gears a little bit and talk about sustainability and SAF specifically. It's wildly expensive, it's hard to find, it's hard to produce. I'm just curious, can you possibly rely on this for your sustainability initiatives and still make money? I think that's the million-dollar question.

Benjamin Smith16:08

Yes. I think it's going to be a huge challenge to decarbonize our industry. It's going to cost a lot of money. I think everyone's been able to identify what it will take to get to net zero, but it's how quickly and at what price. The way we look at it is, the price will be what the price is, via new technology or via new fuels and what percentage that will be between the various methods for us to decarbonize. But what's most important to us as a European-based carrier is that we're on a level playing field. We already have a lot of disadvantages over Gulf carriers or some other jurisdictions. So we need confirmation and comfort that our decarbonization efforts are going to be done on a level playing field. The market across the world will have to absorb that. Will it impact demand? If it gets more costly, yes. But Global Aviation and the global industry is there to stay. You'll have to maintain links. So for us, it's just how fast we can get there. Level playing field is important for us, and to instead of taxes, to incentivize us to decarbonize, incentivize us to be able to buy new airplanes that are quieter and less polluting.

Sarah Kopit17:34

I know a big piece of the decarbonization is also, to an extent, substituting flights on short-haul routes. I know you've changed your short-haul network in France quite a bit to rely on trains. Could you talk to us a little about that? I know you have a partnership with SNCF. But would you ever buy a train company and build out a train part of Air France?

Benjamin Smith18:00

Well, first of all, France is a pioneer in high-speed rail. It's a big company and it's a government-owned company, so I don't think that's in the cards. But there is an SNCF station at CDG airport already, with the tracks, and we already have high-speed trains going through the airport. So the infrastructure in France is way ahead of many other countries. You can get to Marseille in three hours, you can get to Lyon in less than two, to Le Bourget, and eventually to Toulouse. These are the major metropolitan areas in France. Our ability to connect the majority of France into CDG via train is going to happen. Already we can do quite a few of these routes. We have Brussels to CDG as well. We canceled all of our flights from Brussels to CDG. So when you look at European airports and airlines that are using intermodality with trains as a way to connect the hub, I think we're ahead of many airlines. Yes, I think we will deepen our partnership with SNCF. Where we need to do a better job is connecting baggage to make sure customers don't have cumbersome security processes or immigration. When you're getting on a flight or a train in Marseille, you could connect as if you're on a flight. That would be ideal. If you could clear security in Marseille, check your bag in, and not have to see it, that would be ideal. I think we can get there.

Seth Borko19:57

Sounds pretty complicated, actually.

Benjamin Smith20:02

Well, if there's a will, there's a way.

Seth Borko20:09

Let's talk a little bit about consolidation. It's been a big topic. I'm just curious, between friends, who are you going to buy next?

Benjamin Smith20:18

We have to make more money. That's the question. Can't find anything without more money. Well, look, the US, as you know, 90% of the market is in the hands of four players. In Europe, that's not the case. There are three big groups that have multiple brands. We have three brands, IAG has five, and Lufthansa has five, coming on six with ITA, former Alitalia. We've bought a stake in SAS, which gives us the exclusive right to buy the majority share in two years. So that would be a fourth brand for us. There are four or five independent carriers that are not big carriers left in Europe. They could be of interest under the right circumstances. As far as the medium-haul, these are low-cost carriers that are doing quite well. Would those models work inside a group like ours? To be seen. As far as consolidation goes in Europe, I think there are some small carriers that could join up with one of the three groups. But there are no British Airways that are independent, or Lufthansa, or other Air Frances. And we have the biggest inbound market and we have the best transfer hub in Amsterdam. So we're already in a good spot. When you look at the size of Air France-KLM, our international ASMs, we're already one of the biggest groups. We have more long-haul airplanes than, let's say, American Airlines. Air France alone with 175 long-haul airplanes is a big fleet.

Seth Borko21:59

You obviously can't tell us who you're going to buy right here right now, but if we were going to play a dating game, swipe left, swipe right, what do you look for in a partner? You've said you have a lot of long-haul, so you're probably looking more medium-haul, more short-haul. Would you be looking to fill a transatlantic hole? Would you be looking for low-cost, full service, brand recognition? How would you think about what kind of airline you'd want to buy?

Benjamin Smith22:38

Look, I think we don't want to merge or buy any airline just for the sake of scale. For us, it's got to help us improve our margins. That means by having enough synergies that could be created through a merger or a buy, that's what drives the decision. And then strategically, how do we make sure we stay relevant and we don't get marginalized? Maybe in the short term it may not be accretive, but you say, okay, in three, five, six years, if your major competitors are much bigger and they're able to buy airplanes at lower rates because they buy more airplanes, when they go to try to sign corporate deals because their networks are more diverse, will that put us in a more difficult position? You have all that to consider. So if there's an airline that you want, another network carrier, let's say as an example, do they have a concentration in a geography that you're not number one? And if you secured that geography as part of your portfolio of routes, that could be very interesting. At what price, and how hard would it be to integrate? Would their customers fit into the marketing programs you have? Your loyalty plan, does that align? And does it have to be in Europe? You can look at some of our competitors; they bought interest or they bought airlines outside of their home continent. So it's not just in Europe.

Seth Borko24:19

You talk about looking for markets that you like. Not to get too network or marketing, but SAS, like are you saying Northern Europe would be an interesting geography for you? Clearly that's where you've got that ownership.

Benjamin Smith24:34

Well, Northern Europe is interesting because we already have a very strong position there through KLM. KLM in many cases is the best link to the world via Amsterdam for a lot of secondary cities in the Nordics. Same thing within the UK. Many UK small cities, their only way to link to long-haul is via Amsterdam. They don't have a flight to Heathrow. So we've been able at KLM to penetrate a lot of these secondary cities throughout Europe, and that's what drives the KLM model. What was nice about SAS is they've got point-of-sale strengths in a massive way in some of these bigger markets, secondary markets where there may be choice. And the airline was underperforming for many reasons. One of them is because they were not part of a transatlantic joint venture. And we really like them to join our joint venture with Delta, which we think can add a lot of synergies for both KLM, Air France, and for SAS. So different reasons. The Nordics, of course, we had a big opportunity there for revenue, taking revenue away from our competitors, and for improving our hubs.

Seth Borko25:56

I'm curious about the Nordics. We've seen a lot in the press and heard a lot of coverage this summer especially about how climate change is making it so much harder to visit some destinations. The European heatwave, the tragedy in Mecca. But the Nordics, on the other hand, we've seen a lot of talk about how that might be the next big destination, especially in the summer, because it's cooler up there. Do you buy that? Do you think that's actually a legitimate trend, that passengers will actually open their wallets and fly to cooler climates in the summer? And are you planning around that or strategizing for a possible Scandinavian boom in the summer months?

Benjamin Smith26:50

Look, I don't think we're going to have a boom per se based on what you just said. But we do see growth, and we do see people that are more interested. Obviously it's a fact that there is slow global warming. But here, I'm not going to say this is perfect science, but here it's been an awful summer, freezing. You're certainly going to need air conditioning here this summer. But no, I think for many reasons, Scandinavia is becoming more interesting for inbound tourism. And I think you're right. You see what's happening in Greece. Certain areas that have historically been very popular tourist destinations, with global warming, it may not be as attractive for some as it would have been in the past.

Seth Borko27:49

I for one am very excited about my Delta flight from LaGuardia to Charles de Gaulle, then on to Trondheim, Norway. Why did you choose to do it? I want to do it. It just looks beautiful. It looks gorgeous, and in the summers it looks amazing. I want to get up to the Arctic Circle.

Benjamin Smith28:12

Well, in the summer, it's daytime all day and all night. That was a surprise.

Seth Borko28:18

It's going to go a bit crazy. What is it, gonna get dark?

Benjamin Smith28:22

Yeah, exactly. You don't get that in New York.

Seth Borko28:30

One of the things I was talking with Sarah about when we were prepping, neither of us have ever flown first class. We've flown business when we're lucky, but never first class. But you've got this new La Premiere cabin that you're redesigning, right? That's going to be basically a first class product.

Benjamin Smith28:58

It's not new. Well, sorry, it's not new, but we are relaunching it. Air France has had a first class, or the French translation for first class is La Premiere. Air France has had a La Premiere cabin for decades. It's absolutely the best. And we put an enormous effort into maintaining its exclusivity and ensuring that the experience from when you make your reservation all the way to when you pick up your bag, or when we deliver your bag to you, is equivalent to a private jet experience. A lot of airlines have not been able to deliver that, or in the minds of consumers, view that the brand can actually meet their expectations. There's no more first class on any of the US carriers. They've not been able to charge what's necessary. Many airlines around the world have not been able to support it for many reasons. Either the product is not good enough, or they can't keep investing in it, or they're located in a jurisdiction or city that can't support it. London Heathrow, obviously it's the biggest European financial market, so there is business there. In Tokyo, in Hong Kong. It's surprising that in New York, the biggest financial capital in the world, none of the carriers are able to support it. It's only the international carriers. And I can tell you, if Skift starts making a lot more money and you guys can insist on flying La Premiere, you can try all the products around the world. Ours is the best. We have the best wines, best champagne, best food. Every single thing that we put into our La Premiere is absolutely fantastic. We have a Michelin-starred chef who runs our lounge in Paris. We have a Sisley spa. You can come and have a massage or a facial before you get on the plane, and you don't see anybody in the terminal. So you asked about a new product. We're bringing out a new product in December. It's going to be much bigger than the one we have today. It's going to be a separate seat and a separate bed. You'll have a lot of space. We have a lot of customers who, for environmental reasons, own a private jet and say, 'I can't justify flying half the way around the world, I'm going to buy a La Premiere ticket.' It's very expensive, but compared to a private jet, it's reasonable. Some people may have to go with a colleague they don't want to talk to for 14 hours. You can create this 100% privatized space from floor to ceiling. You don't have to talk to anybody. We're going to have a big reveal in December, so we'd be happy to invite you to come to that. We'll be showcasing all of our food, everything we have to drink. I won't tell Rafat. You can really enjoy yourself.

Seth Borko32:48

There you go. It's a deal. We're all there, and we'll make sure you have a really good time. And I'll try to pronounce all the products we have. Us non-French people, see if we can destroy the names.

Sarah Kopit33:06

Speaking of that, when we were prepping, last question for you here. I was curious, do you have a different personality when you manage all of these teams? We were thinking of the cultures between France and the KLM side of what you do. We were just very curious about how it is blending all of the different aspects of your job.

Benjamin Smith33:36

The way we're set up here, these are two national carriers. In the US, there were never any national carriers because they were always all private. But the flag carriers, like Pan Am or TWA, they don't exist anymore. But when you have these two national carriers like Air France or KLM, there's a lot of emotion amongst the individual citizens of both countries. So you have that when you've got these flagship carriers that stand for many of the attributes and cultural aspects of a country. So to answer your question, you have that to deal with. It's a bit overwhelming, and sometimes it's good. In France, the bulk of French citizens love Air France. They love the SNCF, though always reliable but maybe on strike. Having that kind of support is really special. So when you have these different brands, Air France and KLM are actually owned by the same company. Sometimes people like to think, 'Oh no, we're still a separate company. We are proud Dutch or proud French.' They are owned by the same holding company or group that lets these brands totally sprout and progress and really shine on their own. So from a consumer perspective, they should come across as independent companies, but from a financial perspective, they are part of one group. In the US, when there's a merger, one of the brands disappears and the two brands are put together. That's not what happened with us, and the same with all the carriers at Lufthansa Group or IAG. As a dumb Canadian who understands America, even though Canada's not the same as the US, at least a lot of similarities. I went to the US 12, 15 times a year. I felt very comfortable. It was easy. We spoke the same language. Coming over here, it was just very different. Very fun, a bit of an adventure. Here in France, the biggest shock was the union environment. Labor laws that are very different to North America. You have ideologies all the way from communist anarchists all the way over to right-wing supremacists, and everything in between. So you have to sort of go back to school and try to understand each ideology to manage the business. But it's an adventure. You guys come for our reveal, maybe we can introduce you to some of the characters I work with.

Sarah Kopit36:34

We would love that. Well, Ben, thank you so much for joining us today. This was fantastic. Have a great Olympics.

Benjamin Smith36:41

Okay, thanks a lot. Have a great day. Thank you. Bye.

Sarah Kopit36:47

That's a wrap on our interview with Ben Smith. Thank you so much for joining us. Next week we'll be transitioning from planes to hotels as we talk with a core about what the Olympics means for hotels, STRs in Paris, Europe, and beyond. And don't forget to send us any questions you may have to [email protected]. Seth and I love to hear from you. Thanks everybody for listening, and we will hear from you and see you next week.

Narrator37:10

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