Bloomberg Audio Studios. Podcasts, radio, news. Well, this morning the World Airport Transportation Summit is underway in Rio de Janeiro. Let's go live to our colleague Guy Johnson. He is co-anchor of the opening trade and standing by with the CEO of Air France-KLM.
I said I am. Good morning, guys. Thank you very much indeed. Yeah, I'm here with group CEO of Air France-KLM, Ben Smith.
Nice to see you. So, the news overnight is that you have just announced you're flying back into Riyadh. You're flying back into the Gulf. Is this the first of many steps, or is this the first step you are taking and then you're going to assess the situation and then you're going to look at what the rest of the Gulf is going to be looking like? What is the situation in the Gulf for an airline like you?
Yeah, well, today we're very cautious in returning to cities which we've pulled out of. So, we've gone back into Riyadh, closer cooperation with the French state from a security perspective with our cabin staff, with our pilots. We have not reopened Dubai as of yet. Tel Aviv, Beirut are still closed. Dammam is still closed for us.
So, what would get you back into those routes? What do you need to see in terms of the situation on the ground? What did you see in Riyadh? What do you need to see elsewhere?
Well, I think we need, as I just said, we need to have all of our stakeholders aligned to put us in a comfort position to go. And right now we're not there on the destinations that we have in mind.
Does it need a peace deal? Does it need a full cessation of hostilities? What kind of boxes do you need to tick?
Yeah. I mean, peace deal, no peace deal. As long as we're confident that it's not going to have an impact on safety at the particular airport, it doesn't necessarily need to be a peace deal, but we need to have confidence that we're not going to see any danger around those airports.
So, Riyadh, there never was and there doesn't seem to be any today. So, we went out there as a precaution. We pulled out when the fighting started, but now we're comfortable to go back in.
Let's talk about the situation when it comes to fuel.
I think you updated the market a couple of days ago. You talked about the idea you've definitely got enough fuel for the summer. What happens after the summer? You get the summer and then what?
So we've secured fuel through the end of August. We've got our full capacity in place. We have not pulled any of our capacity. It's a little unfortunate that a lot of customers are still not confident that there'll be enough fuel, so we're seeing a late booking environment. People are booking a little closer than we've seen in the past. As far as the fall goes or the winter goes, it's a bit too early for us to make a decision on how much capacity we keep in the market.
Okay. Just in terms of that messaging you've had to deliver. At the beginning of the war there was this fear that there wouldn't be enough jet fuel. And the industry came out very quickly and said we've got enough fuel. The summer's going to be fine. If fuel went up significantly from here, say in July or August, you see a big spike in fuel.
Are you effectively guaranteeing that all the routes that you're committing to now you are going to fly? I'm going to get there and I'm going to get home.
Well, first off, if the fuel significantly spikes, we're going to have to raise ticket prices to compensate for that. And when you raise ticket prices, there'll be less demand. So the need for the full capacity that we had planned is probably not going to be the case. So how we balance that out with the availability of fuel, the price of fuel, the willingness of customers to pay, we'll see how that works.
Consolidate some routes. Would that be? Is there a plan if fuel went up further to change maybe some of the current routes, the frequencies, kind of where you fly, maybe the overlap between Air France and KLM changes? What is there a plan in place if fuel goes sharply higher from here to kind of consolidate within the group?
Sure. I mean, our companies are old, our global brands, and we have a lot of experience in adapting. Last minute, medium term, long term. COVID was probably the most challenging for us to manage capacity and frequencies. So, yes, depending on how the availability and prices of fuel evolve over the next few months, we'll adapt. If it means removing frequencies, consolidating frequencies, we'll make do with whatever comes at us.
But that's not a plan you've got ready to go. That's something you will do effectively on the fly.
You know, when I mean, the supply of fuel, price of fuel could be different in different parts of the world. So, to guess what's going to happen, it's pretty difficult to do that. But, you know, airplanes can move around relatively easy and quickly.
You know, we've managed to do that over the last few weeks where we've taken some capacity from other parts of the region in our network and started to use it on routes overflying the Gulf where there has been a lack of capacity. So, to Southeast Asia as an example, where a big part of the European traffic was going via the Gulf, now we've been able to offer something that is important in the.
Let's just talk about that for a minute. How sticky do you think that demand is to go over the Gulf? Do you think people will want to fly through the Gulf after this? Once there is a peace deal, do you think you may retain some of that traffic going out to Asia?
I think it's another example of how dependent Europe is and European customers are on flying over the Gulf to destinations that I think could support more nonstop service. You know, with an unlevel playing field, you've got companies that are based in the Gulf that have been able to attract a big portion of the European demand via the Gulf. So, when full capacity comes back in the Gulf, I would expect some, you know, what is it? 5% to 10% of customers that in the past would have flown over the Gulf to prefer to fly non-stop. But the Gulf carriers are going to be, our expectation is they're going to want to get their full capacity in place.
