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List 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 Kalm Hie said M.
Good morning guys, thank you very much. Indeed, yet I'm here with a group. CEO of Air France KLM. Ben Smith good morning. Okay, nice see. So the news overnight is that you have just announced that you're flying back in to Read. 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 golf is going to be
looking like. What is the situation in the Gulf for an airline like you.
Well, today we're very cautious in returning the cities which we've pulled out of. So we've gone back into read closer cooperation with the French state from a security perspective, with our cabin staff, with our pilots. We have not reopened to BAI as of yet. Tell them the Bay route are still closed, Gamma is still closed for us.
So any what would get you back into those into those routes. What do you need to see in terms of the situation on the ground, What did you see and read? What do you need to see elsewhere?
Well? I think we need as as 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. We're not there on the destinations that we have.
But does it need a peace deal?
Does it need does it need a full cessation of hostilities?
Does it need?
Like?
What kind of boxes do you need to tick here?
I mean peace steel, 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. Okay, so read there never was and there doesn't seem to be any today, So we don't have as a precaution. And 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 kind of you get the summer and then.
What So, we've we've secured fuel through the end of August. We've got our full capacity in place. We've not we have not pulled any of our capacity. It's a little unfortunate that a lot of customers are still not confident the probably enough fuel. So we're seeing a late booking environment a little. You know, people are booking a little closer than we've seen in the past as far as
the fall goes or the winter goes. A bit too early for us to have made 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 to sgnificantly from here, So 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, you'll be less demand. So the need for the full capacity that we had planned is probably not going to be going to be the case. So how we balance that out with the available the fuel, the price of fuel that you know, the willingness for customers to pay. We'll see how thats.
So you might consolidate some routes with that.
Is there a plan if you went up further to you would change maybe some of the current routes, the frequencies kind of where you fly, maybe the overlap between France and KLM changes. Is there a plan in place if fuel goes sharply high from here to kind of consolidate within the group.
Sure, I mean, we've our our companies are old, are our global, our global brands and you know a lot of experience in adapting or last minute, medium term, long term. COVID was probably the most challenging for us to manage capacity and frequencies. So yes, depending on you know, how the availability and price of fuel does evolve over the next few months. Will adaptive it means or removing frequencies, consolidating frequencies, and we'll we'll we'll make do whatever comes with us.
But that's not a plan you've got ready to go. That's something that you will do effectively kind of on the fly.
Correct, you know, we're not 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 it's pretty pretty difficult to do that. But you know,
airplanes can move around relatively easy and quickly. You know, we've we've managed to do that over the last the last few weeks where we've taken some capacity other parts of the region in our network and started use it on roots overflying the Gulf where there was there's been a lack of capacity, so to Southeast Asia as an example, where a big part of the European traffic what's going via the Gulf, and now we've been able to offer something that you know, it's important.
Let's just talk about that for a minute, how sticky do you think that demand is to go over the Gulf?
I e.
Do you think people want to 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.
Well, I think it's a 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 unleveled 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, as if five of customers that you know in the past would have flown over the Gulf to prefer to fly NonStop. But the golf carriers are going to be Our expectation is is they're going to want to get their full capacity in plays.
Either talk is possible, the talk is it's going to be a massive price wall once they come back.
Tim Clark's gonna want his capacity.
Back at Everard's for sure, for sure.
So you ready for that. What does that look like.
Look, they're the three golf carriers plus Turkish. They're extremely aggressive. That's not new for us. As I said, without a without a level playing field, we're not flying NonStop to many of the routes that under a normal scenario where there would be a level playing field that would be able to support. So this is not it's not going to be a surprise to us. Okay, just back into the issue of pricing and demand. Well, the consumer take much more.
The storry post post pandemic has been that I'm going anywhere, I don't care what the price is. I'm going. I'm going to apply up the front of the plane. Demand has been very strong. If prices get pushed much higher from here, does that still apply? Are you confident that the pricing way to defect demand? What are you what are you expecting to have?
Well, we're pleasantly surprised that demand is holding. Paris are still a very attractive destination, Amsterdam is still a very attractive hub to flow over. So what we're seeing on the bulk of our network is a strong, strong demand, predominantly in the premium cabins, and we're not seeing customers avoid the trip sometimes. As I said, they're booking a little closer in. Yeah, but demand is very strong. That's all about M and A. Okay, that's the way easy Jet.
So easy Jet those that know is a is a low cost carrier based in Europe. Castle Lake, we understand has made an approach. The details of it remain sort of failure opake. At this point in time, you have some experience in working with them. We've obviously seen what the SAS deal did and how you and how you manage that process. Air France was the first name that came to mind when I heard that they were involved.
Came to mind any conversations with Castle Lake. Any interest you in any way involved in this process?
What's happening?
No, so we're not involved. Is there any interest? It's not something we've been given much thought. I mean easy Jed is a you know, it's a it's a very impressive airline. They've had a fantastic i would say history in how they've developed. They've got some great positions you know in Geneva, London, Gatwick, et cetera. So it's very attractive. In their market cap is low, so it's not surprised to us that there's there's a party or there's a group that's looking at you know and buying them or
buying aforshrom them. Not as surprise to us. Your Castle Lake is an excellent private equity firm as well. We've had, we had and still have a great experience with them in sas as you've just said, So it's not surprising to us. But we're not involved in this transaction.
But your sense would be that the market is undervaluing that business right now, undervaluing the slots in Geneva and places like that, undervaluing the slots that they have for airbus aircraft and to lose Your sense is that that is being undervalued at the moment.
Hence why I was saying the interest.
Well, the slot portfolio is quite impressive. Yeah, the number of slots they have at gat Work. I mean they've got some new slots at le Nate that they gained through you know, the remedy slots that Lufthansa had to give up the coaches of it t A and you know even what they have at Orley in Paris is we're all uncomfortable with the position they have in Orally. So it is impressive.
So so if cultle A came to you your you're sounding like you would be.
Do you think this is this?
This could be an interesting opportunity if they came and wanted to talk to you, you pick up the phone.
Oh yeah, for sure. Yeah, and I would expect OLI our competitors to do the same.
Okay, but but yeah, I don't think i G would work very well.
But I could see from sweat be working. Do you expect the call? Do you think they're going to come to you?
I pick, I don't know. I mean, have to get that led to that question to because.
Of a fairly early stage in the process.
I think so okay, so but it's great to catch up.
Yeah, thanks guy, really appreciate it. Thanks you very much and deep spending some time with us today.
Ben Smith, the group CEO at Air France KLM, thank you very much