Hi good morning, nice to see you. Hello, hi. Well, there's a lot to get through again. We got about 15 minutes to do so. Um, talk to me first of all, and I'm asking everyone the same thing: of where are we now? Where do you see the market right now? Because there are so many things going on. Each airline clearly has its own challenges and its own specific issues. Where are you? How are things?
I think as far as the consumer is concerned, I think the market is fine. That is consumer demand. I know that there is this ongoing looming worry of all the stakeholders whether the market is changing, consumer demand is changing, coming to summer, coming to winter, etc. I think consumer is fine. The consumer wants to travel. The consumer recognizes the value of travel to satisfy their needs, so I don't think there is any fundamental change to that. I think what has changed is the supply chain. I think the supply chain is a lot more challenging than ever before. And the supply chain, I mean, from OEMs to ATC, operating through the European skies, so that is pushing us to make changes to make our operating model more resilient. But the consumer is fine, so let's talk about those two.
So the consumer is back, they want to travel. Talk to me first, ATC, huge problems across Europe. What does that mean for what you do?
So first, the problem of ATC: I see the problem of ATC is that this system has completely failed to integrate on a European scale. It is seen as an expression of national sovereignty or whatever, but it has nothing to do with economic efficiency, operational effectiveness. As a result, the industry is paying a high price for that. The geopolitical events are not helpful to the ATC operation. Let me just give you an example: look at Hungary. Because of the airspace closure in Ukraine and Russia, a lot of the overflying traffic got re-channeled through Hungary, and traffic went up 42% this summer, and their capacity, human capacity, is still down versus pre-COVID period. So only one thing can happen: you get slaughtered as an airline, and they cause long delays. So I think it is an issue of staffing, it is an issue of systems, and I think it is an issue of strategy, and it has become very political. And I'm just not seeing how anyone on Earth would correct this.
That is a challenge. What is the answer to all of this? And we'll come on to maybe what one of the solutions might be in a second, but for you, operationally, that causes huge problems because there's not a lot of flexibility in your network and your fleet. It means you're taking flights off, having to cancel because of issues outside of your control. How do you build in resilience, short of getting more aircraft? How do you build in resilience?
Yeah, I mean, clearly if there is one learning over the last few years, it is that the USC model is great and the USC model used to be very efficient in the past, but given the changing set of circumstances, we need to adopt for resilience. So it requires us to adopt some scheduling principles, how we roster, how we create slack in the system, on aircraft on cruise, etc. So we have been really kind of, if not putting the model upside down, but significantly adjusting to make sure that we are maintaining the core discipline. So fleet utilization is critical. We are driven by fleet utilization as a business. We fly brand-new aircraft, expensive assets, a lot of capital investments. You have to spread the fixed cost, and this is called utilization. But at the same time, implementation needs to be such that it is adequate to the changing environment, and it's a lot more stressful than ever before.
So your orders are locked in. You've got a pretty strong order book of stuff that's coming through. Am I right in saying 30 or 40 aircraft a year coming? Yeah.
So we have 30-30 aircraft to be delivered in the next six or seven years, but we shall see whether Airbus is going to be able to deliver it, but this is the order we have, and roughly 40 to 50 aircraft a year we get delivered in the next few years.
But at the same time, the Pratt and Whitney issue means you've got planes on the ground, so any new planes are sort of canceling out the ones that are grounded. So operationally, that means you sort of find it difficult to move on while you've got those planes still on the ground.
Yeah, so basically we are dealing with this dichotomy of growing the fleet actually quite substantially. Our fleet has grown tremendously. I mean, we are nearly twice the size of the fleet versus pre-COVID capacity, but we are only like 60% more production in the system because a significant portion of the fleet is grounded due to the engine inspections. But I think this Pratt and Whitney issue is a cycle we have to go through. Probably it has already bottomed out. It will gradually improve, and probably another two to two and a half years it will continue to drag the industry. It will continue to drag us, being one of the largest operators. But we are very focused on kind of overlooking this issue and making sure that we put the fundamentals in place in terms of markets, in terms of staffing, infrastructure needed to be able to grow the business in the future.
You sound quite pragmatic about it, but I wonder, does it make you angry that you're spending all of this money, this time, and this energy on ordering new aircraft, making the business efficient and fluid, and yet you face these challenges like ATC that, as you said, until you can train up enough people to work in that, until we can break down borders between sovereignty on ATC, there are very few solutions. And yet you've got to run a business amid all of this. Does it make you angry?
