Interview Transcript

Looking at the airframers and either the A320s or the 737s that you produce, per month, I think Airbus increased their targets in February and those targets are 63. What is your estimate that that could decrease to?

They never reached 63. They just said, our target is 63. I believe that they will be back to their levels of production of today, something in the range of 52/53, by 2024.

So we’re going to see a huge oversupply of aircraft?

Today, what they have decided is, they have revised the 63 target to say it’s 40, for the year. An average of 40, a month, between March and December. It doesn’t mean that they are producing 40 today. Possibly, they will produce 100 A320s in December, and you just average it down and you have this 40 level. I think they will be back to 55 in 2024.

Is there an oversupply of planes? The question is, when do you buy new planes? You buy new planes for two reasons. One, you establish new connections. In my view, this is not going to happen soon. The second case is when you have to replace old planes. This is where the 40 number comes from. This is where my 55 in 2023/2024 comes from.

Given your experience in dealing with the airlines, how would an airline be looking at taking orders and these two decisions? Let’s say they won’t be making new connections right now, but what about shifting from older planes to newer planes?

It was a necessity when you were looking to reduce your operating costs and when the oil price was positive. The oil price is positive. We are talking about WTI and you know it’s the future. It’s very easy to say, oil is worth nothing, because the future is negative, but it doesn’t mean that. This is going to continue, even though it’s not going to continue as acutely as before. People will say, I want to make savings on my running costs, but I’m not going to invest hundreds of millions unless I’m sure that I have a return. So it’s going to reduce.

There is another dimension that was never there before. Assume that there are rules of distancing in the planes. Airlines will have to revisit their cabins.

Do you think this is likely?

I cannot tell. If someone had told me, in January, that we would have a pandemic with the effect, I wouldn’t believe them. One needs to be prepared for anything. Even in a commuter, in a 737, when we are six abreast, we are seated next to each other. The three feet distance is not there.

This would ruin the economics of the airline, if you have to take a seat out.

This is going to be a big issue. It’s not yet on the table, but we should be prepared for it.

What, exactly, would you be doing, if you were running Airbus today?

What the current team is doing is amazing. I’m not surprised, because I have known Guillaume Faury for a long, long time now. I’m not surprised that he has reacted the way he has, together with his team. The consideration time was pretty short. They had three or four days of, we don’t know; we are assessing. Then they went back to work, I would say. They said, okay, here are our rates of production, we have responsibilities towards our supply chain, we have responsibilities towards our customers. The behavior would be the same.

Technically, is there anything I would do differently? Detailed stuff; nothing fundamental. What makes the difference is the way you approach the problems and the mindset you are in. I can compare to other companies, who said, if we do not get 60 billion, we’re dead. Airbus is in the same situation.

What about if you were running an airline today, what would you be doing?

It depends which airline. If I were running a Western airline, I would be applying a principle, an infallible principle of leadership. Never waste the opportunity of a crisis. I would restructure. It’s nothing personal. Western airlines, say Air France or Lufthansa, they are burdened by decades of history and never managed to really restructure. We’re not flying, so let’s restructure.

You can see some of that. Ben Smith is saying, we’re changing the organization, etc. I would be very vocal about that. I would say, no, no, no. We need to reduce our workforce; we need to revisit the terms and conditions of our pilots. We need to review the work organization of the ground staff. All those problems, all those matters that make it impossible, for a company like Air France or Lufthansa, to compete with the newcomers. The Middle East airlines, the Gulf airlines are always pointed at saying, they are cheating. No; the real threat is the Asian dragons, because they are extremely competitive, they have the highest quality on board and if nothing is done, they will control the business. They will take over the business.

The Chinese, the Malaysians, the Thais, the Japanese, who are completely restructuring. It’s about time to restructure.

Do you think there is a risk to the Eastern airlines taking market share, in the West?

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