Interview Transcript

How do you think consumer behavior will change for travel, in the next five years?

It all depends on whether or not there is a solution. Is there a vaccine or not? If there’s no vaccine, you’re only going to get the bravest people or those with the greatest need to travel and everybody else is going to be very conservative. We can already see, in society, that there are people who are willing to take a lot more risks than others, but the great bulk of the population is following the government’s restriction. So if there’s no vaccine and we don’t get a breakthrough on what happens when you get sick, you’ve got to think that people are going to go a lot more local. You’re probably going to start to get a lot more travel around the UK, if you’re a resident there, or the US, if you’re a resident there.

But I tend to think a lot of the more exotic destinations, like going to Africa, Far East, long-haul travel, even going to Australia, even though it’s safe, people will always be afraid, in case something happens and they can’t get back quickly.

Can you elaborate on that strategic decision. You’re at Etihad; you’re managing the network, you see travel and demand change, in routes and across the network, how do you think about managing that hub and spoke network, during that tough time?

When you’re looking at that issue, you can see that certain travel did hold up. Some of the business travel sectors, on the big blue-ribbon routes, were still okay. When you got to routes that you were trying to stimulate business traffic to and it was leisure travel buying up, that tended to fall away, because people really wanted to go for price. Everyone became extremely cost conscious.

So what happened in that situation is, to get the traffic, you had to drop your price. We were in a position that we could, in that with a big hub and spoke network, you can look for wherever the traffic is willing to come from and to and go to that market, but we did discount a lot. It really was terrifically bad, from a profitability point of view. The impact rolled on for about two years. From Lehman Brothers, a bit less than a year. It was pretty bad. But once you got through that, it did come out a lot more quickly than I thought, after about nine months, actually.

With the hub and spoke model, if you do lose a slot or a route, does that multiply the impact on your network, because you’ve reduced the number of connections?


How do you look at managing that challenge, in a down market, where you’re actually reducing capacity, overall?

It’s a good question. In a situation like that, let’s say you operated a flight from Abu Dhabi to a point in Europe and that flight was losing a lot of money, the question becomes, is it still covering the variable costs? The basic costs that an airline has got to cover is the independent cost of actually making that operation. That’s going to come down to things as simple as the fuel, the cost of the crew’s salaries, air navigation charges. Are you better off grounding the flight? So the issue that you are always looking at is, if you can cover that, the next decision point you’ve got is, can I find somewhere that I’ll get a greater revenue, at a greater delta? In a situation like that, it’s very hard to do it, because normally, when an airline puts on a long-haul flight, it takes up to three years to get it from losing money, to profitability.

On the whole, you’re better off sticking with what you’ve got or giving it up and grounding an aircraft when you’re in very bad times. But that’s a tough decision, because then it starts to trigger employee numbers and furloughs and lay-offs.

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