← Airlines Confidential Podcast
Airlines Confidential Podcast
344 - Guest Co-Host Dave Hilfman. Guest: Joerg Eberhart, CEO, ITA Airways
01:14:26
Guest Co-Host Dave Hilfman. Guest: Joerg Eberhart…
Loading summary
Transcript97 lines
- [00:04]
A
Airlines confidential with Scott McCartney is made possible with support from RTX, Collins Aerospace, Pratt and Whitney and Raytheon. Connecting and protecting our world. RTX.com infinity Flight the leader in Cadet Academy flight training programs infinityflight.com Ontario International Airport in Southern California state SoCal so Easy flyontario.com the Executive MBA in Aviation at the University of Colorado, Denver business ucdenver.edu and by Cirium, the world's most trusted source of Aviation Analytics. Cirium.com we also welcome your business support.
- [00:51]
B
Contact us at airlinesconfidential.com welcome to Airlines Confidential. I'm Scott McCartney wishing everyone a happy and safe 4th of July. The 250th birthday of the United States is an important milestone. And just to put the airline industry in a little historical perspective for the holiday, I'm reminded that commercial air service has only existed for about half of those 250 years. The first commercial airline flight by Tony Janis across Tampa Bay was January 1, 1914. The first seat was auctioned off for $400, but standard tickets after that were $5, which in today's dollars would be about $168, which seems remarkably correct except that the first airline route only covered about 20 miles. Still, it was a time saver compared to going by land between Tampa and St. Pete in your Model T Ford without any bridges. So the long way around, Dave Hilfman, I suspect you would have been lining up for one of those seats on the St. Petersburg Tampa Airboat line. Welcome back. Dave, I'm curious, do you have World cup fever? Do you have Independence Day fever? Or do you just have the usual golf fever?
- [02:20]
C
Dave well hello Scott, happy 4th of July to all the listeners, all your great podcast fans out there. I've got both, baby. I've got both world and Independence Day fever. You can be assured I'd be lined up for that. That first ticket on the St. Pete Tampa airboat line. You already know I love the Tampa St. Pete area, home of my alma mater, the Harvard of the South, University of South Florida. So a very love love that whole region and used to go to those Tony Janis Awards. I know you still go over to those from time to time and you should be honorable. In fact, you may have already been honored and I just don't know it yet.
- [03:03]
B
But no, no no, no.
- [03:05]
C
If you're not, if you're not, we're going to get you on there, pal. I think it's only appropriate with what you've done for the industry. And I will say, you know, I'm so blessed live here in the San Diego area on Coronado island which as you know has got north island, the naval base. So this is like ground 0 for the Fourth of July festivities with all the great military here, headquarters of the Navy seals. I mean we've got fireworks, we've got parades, there's concerts, there may be a few adult beverages possibly since you really don't have to drive around on the island. You just walk some. So that's good and it's going to be spectacular. In fact, you know there was just the nascar, the big NASCAR race was on north island here in Coronado. It was like the first one ever done on a military installation but hugely popular. All these great NASCAR fans were in town and so it was great. And listen, I've got the whole family and I got my both boys. My 23 year old Marshall just got back from Colorado where he finished up his degree at Colorado State and had to do his MBA at San Diego State. And my munchkin, my six year old and my wife are in from Australia so and then a bunch of cousins. So it's going to be action packed Scott. And I, I know you got a lot of action packed activities as well.
- [04:27]
B
Yes, yes. And the Aussies are still in the World cup, right?
- [04:31]
C
They are at least I that the last time I know at least as of recording.
- [04:35]
B
Right?
- [04:36]
C
Yes. And I will say the I mean it's been great to see all this amazing energy and excitement around the World Cup. Great for the usa, great for all these people coming in and seeing all our wonderful country has to offer besides what they often hear in the media. It just, I know it's been great for everybody such sport makes such a difference especially that World cup soccer and you know bunch of folks been up to LA for in that SOFI stadium for a bunch of the games and a lot forthcoming. So very exciting. And you know, even though it's America's birthday this week, I know you're going to take us to Italy, Scott, for an interview with the CEO of ITA Airways. Frankly I didn't even know ITA was pronounced that I thought it was IDA Airways, but I know that's the successor to Alitalia and I'm sure it's going to be fascinating. While sadly I know you won't be talking about the World cup soccer with with the CEO there as Italy is not in the tournament. But hey, maybe we'll get an update on the busy summer travel season in Europe.
- [05:41]
B
Yes, we, we will. And, and yes they very much want Want everyone to know it's ITA Airways. They a bit, a bit disappointed that everybody in the US seems to call it ita. So I was corrected and now we are all corrected. Yes, it's EDE Airways. It really is an interesting story and I think listeners will appreciate hearing from Jorg Eberhard, who's a German who's trying to turn around Italy's major airline. It's really kind of fascinating. Okay, Dave, as you kind of hinted at, I will be one of the 18.7 million people TSA expects to screen over this holiday period. That's a seven day period, Tuesday to Monday. And it's interesting, the numbers are about the same as the number of people TSA screened last year in the same Tuesday to Monday holiday week. TSA expects tomorrow, Thursday, July 2nd to be the busiest day going into the busy holiday weekend. We had two go arounds at Boston Logan Airport that pointed again to controllers and situational awareness. And there was a Senate hearing highlighting safety incidents in our somewhat fragile air travel system that's desperately in need of staffing help and technology help. The most serious incident last weekend was Saturday morning when an American Airlines 737 was cleared for takeoff on Runway 27 at Boston Logan while a Delta Airlines A319 was on short final on 33 left. If people know the airport well, they know 27 and 33 intersect. Not good. The Delta crew had excellent situational awareness and executed a go around, citing the American jet about to cross its path on the intersecting Runway. The seemingly confused Controller asked American3161 where it was going and the pilot responded that they had been cleared to takeoff. The audio showed indeed they had been cleared. The same controller had cleared 3161 for takeoff. While this was brewing, the controller was potentially distracted giving instructions to several other aircraft. This just shouldn't happen and I'll be very interested to hear what an investigation finds. NTSB is investigating. Boston Logan has an ASDE X system. It's airport surface detection equipment Model X that's at least 10 years old. It can track landing aircraft as well as surface traffic. So in theory the system should have figured out that a landing plane on 33 left meant a takeoff on 27 had to wait until the landing plane had passed the intersection. So was the system insufficient for the situation? Did it not pick up the landing aircraft? Did it fail to alarm as it should have? Were the alarms ignored? The American flight should have been warned about landing traffic and frankly should have questioned the takeoff clearance. They probably could have seen the Delta jet on short final. The controller should have been warned about the conflicting instructions he gave. Thank goodness the Delta crew figured out the situation and took the appropriate action.
- [09:20]
C
Yeah, couldn't agree more, Scott. And you know, it's something we've talked about many times and so many of your other co hosts have talked about this subject. We have a very safe air traffic system here in the United States. But it could be better yet. You know, we're lucky that we have such great people who do have situational awareness at top of mind. Always they're trained in that generally the equipment works, but we just have to do better. And I know everybody's got to stay vigilant and that's what our great crews from all the airlines are trained and we know that the air traffic controllers get great training and are being taught and get experience out there. But still too many of these incidents, in fact, beyond the one you mentioned at Boston, Logan, you know, there was just a issue about American Airlines having to abort takeoff in Miami because of a business jet on the Runway. And you know, still some issues here there yet to be probably figured out. Although it seems like maybe the biz jet was at fault this time. In the end, of course it doesn't matter whose fault. We just can't have this stuff happening. We need to, you know, just get, get the equipment and the staffing, you know, up to the, what we know are much better levels in technology and, and, and ultimately to be able to avoid any of this happening.
- [10:39]
B
Right, right, right. No, and in the Miami one, you know, look, people are going to make mistakes and, and that's why you have a safety system that is multifaceted, multilayered. And the American crew did the absolute right thing in rejecting the takeoff when they saw business jet cross the Runway when it shouldn't have. But still, I just think part of that multilayered system is technology and there's better technology out there. Part of that multi layer system is not only pilot situational awareness, but controller situational awareness. I think in Miami it seemed like the controller was on top of it. So you know, we'll have to see as all this gets investigated. Look, there have always been, you know, Runway incursions. There have always been go arounds and rejected takeoffs. And that stuff happens. We probably hear about it more than we used to. But at the same time the system is full, the system is busy for the capabilities that it has and I think stretched quite a bit. So we need to be vigilant on this Stuff we do.
- [11:59]
C
And you know, not to, you know, to be on that soapbox, but why not? Because you've talked about it so many times and I know we have got great listeners who are influential people in Washington, D.C. involved with policy and budgets. And we just need to continue the acceleration of funding for, you know, all this equipment and training just to give everybody the best chance to ensure to get to zero, which is almost impossible on some kind of incidents or situations. But that should always be the goal, right? Perfection in that.
- [12:31]
B
Amen. Absolutely, yes. And amen to more funding. And that was what came out of the Senate hearing was, yeah, this stuff is happening and we need a new air traffic control system and we need it fast. And Congress has only made a down payment so far. We need more funding.
- [12:51]
C
Yes. And again, thanks to those in Congress that did see the light and voted yes. And we're, you know, that you got to go in incremental steps, but it needs to be accelerated. And everybody knows this. This is just almost, it's just crazy sometimes. You think, I mean, this should be an impartial scenario. This is a bipartisan and it's for the betterment of the country and every American, regardless of parties and all that. So again, I know we've talked about it a lot, but for those that are listening, have influence, we could use some more help. And let's keep speeding up the process and of course, making even a good system even better. And that's what everybody deserves in the country. Speaking of government investigations, Scott, the Government Accountability Office, the gao, they came out with a report full of findings we already know, but it's interesting confirmation and an important reminder, and that is that the report showed that even with industry consolidation and big problems for the discount airline sector, airfares haven't gone way up after adjusting for inflation. Of course, the research was done before the Iran war drove fuel prices and ticket prices way up recently. But over the past two decades, while eight airlines became the big Four and competition was reduced on some routes. But at the same time, the study found that inflation adjusted domestic airfares were generally lower in 2024 than two decades ago, even when including ancillary fees. And so I've always made the argument flying is an incredible value versus so many other products and services that have seen extraordinary increases in price, even if they seemed reasonable. I mean, if you looked at like tickets to Disney, which are awesome and it's a great experience, but if you looked at that compared to 20, 30, 40 years ago, college education is again, very important. And, but if you look at it relative to the increase in flying, obviously the, the airfares get such notoriety, right? There's such media coverage and so they always, it's just a very personal issue and seems to get unfair kind of coverage in my, in my personal opinion, not surprising come from the airline industry. But it's incredible how much value that public gets from these airfares even in the midst of a lot of increased costs, whether it's, you know, aircraft and obviously paying our crews more over the decades and all the other things that go with it. So this study is important. You know, Congress ordered the GAO to review competition and consolidation in the FAA Reauthorization act of 2024. So the bottom line is what we've been saying. Yes, the discount sector is struggling to figure out how to compete. Yes, big airlines have taken away a lot of the advantages that discount airlines traded on, mainly price, since the big guys have found ways to match it and do it in a decent economic fashion. Yes, consolidation has made it tougher for discounters to compete. Obviously. Frequent flyer programs, for example, have become much more powerful money making operations and those are largely dominated or the domain of the big airlines. Yes, consolidation has concentrated market share in many markets. But what is also true is that despite all of those changes, this is still a brutally competitive low margin business and air travel is still a bargain for most consumers. Really fascinating, really important for people to know. They may not realize just what a great bargain it is out there, but if you look at the numbers, the data and the statistics and this, this report bears it out, you're getting a smoking deal when you're flying if you're willing to, you know, be flexible and, you know, look around. Right. Scott, it's pretty, pretty amazing really, what a bargain air travel is today.
- [16:47]
B
Yeah, no, I think this is, you know, this, this was an important study and you know, there have been studies, sort of short term studies that had found airfares went up after consolidation. Yeah, okay. But this study took the long broad view and basically what it, I think what it shows us is you had a whole lot of competition when you had eight major airlines or eight big network competitors. But by the way, they weren't making money and bankruptcies were common and all that. And now you're down to four. And it turns out there's still a lot of competition with four. And that competition has really, as you say, resulted in the bargain, the air travel even bigger bargain today. So I just think it's really interesting there are people still bemoaning the lack of competition from consolidation. And I think this study and a lot of other evidence would say, you know what, that's wrong. We do have a very competitive industry across the country. You know, you could point to this market or that market, and you could point to, hey, we lost Spirit Airlines. So it's not as competitive. Well, that's not. I don't think that's the case anymore. It is competitive, not only the four, but you have Frontier and JetBlue and Alaska and other airlines adding a lot of competition into the marketplace. It is really very much a competitive industry, certainly compared to other network businesses. I mean, look at the cellular phone industry or banking or whatever, where industries where size matters still, you know, they've seen a whole lot more price increase, I think, than the airline industry.
- [18:53]
C
No question. It's. So it's still, it's just a very robust competitive marketplace. And like I said, yes, there's isolated areas where a carrier may have more concentration, but you can still find great deals. And I know we've chatted about this, I've mentioned it a previous show or two. There may be less names of airlines and paint jobs, but there's still a very similar, if not more, seats out in the marketplace. And you can get great deals. And so, you know, it's a tough business. People have found ways to operate, still offer great value, great deals. People are obviously, you know, they've separated out now services that you want or don't want to pay for. And I think it's been good for the consumer in the long haul. And this study that, just as you talked about it, bears it out.
- [19:44]
B
Yeah. And by the way, shout out to GAO somebody. One of the GAO folks highlighted the study to me, sent it to me, and I thanked them for that. I had heard about it previously, but thank them for that. And I heard back that GAO is a big fan of airlines confidential. So there we go. Love it.
- [20:07]
C
Love the GAO folks. Good job, guys.
- [20:09]
B
Yeah, thanks for listening. And by the way, on fares, since we're talking about fares, I thought Delta CEO Ed Bastian had a really interesting observation last week. Asked when fares would come down, Bastian said, when supply constraints ease and airlines get more planes flying, the constraints are many. Right. We've talked about air traffic control capacity limitations that are in place at a couple of our major cities now, but that affects the whole system. There are airport gate limitations at key airports. There's slow deliveries from Airbus and Boeing because of supply chain issues like getting enough new engines or enough new seats for airplanes, or in Boeing's case, getting new airplane certified. And of course the engine reliability problems that we've talked about, all that has really reduce the number of airplanes available to airlines. And fares are all about supply and demand. So what Bastian was saying was until the supply of seats gets bigger, fares will stay high unless there is some big drop in demand. Speaking of the supply of seats in the skies, Aviation Week had separate interviews with the CEOs of Boeing and and Airbus ahead of the Farnborough Air show, and it was striking to me how different the two sounded. Two completely different views of the future. First, Boeing CEO Kelly Ortberg, who by the way has done an amazing job I think getting Boeing back on track even though he's been in the job less than two years. Still, Ortberg talked about ramping up 737 production on a new airplane. He said what he hears over and over for customers is get the existing product to be more reliable before you worry about the next new airplane. That's mostly an engine issue, but you can certainly see the logic in prioritizing better durability for existing engines before billions of dollars gets pumped into developing the next new generation of engines, ortberg said. Quote there's no reason to launch an airplane until the market is ready, he added. There's no question that the time frame is moving to the right. In other words, getting extended out further moving to the right in terms of when the airplane is going to be available. Okay, makes sense. But the message is a lot different from Airbus CEO Guillaume Fury. He said Airbus is pressing forward with an A320 replacement aircraft at a brisk pace, hoping to launch the program in 2030. That's four years away with deliveries in the back half of the next decade. So think 12 years or so from today. Airbus has firmed up its timeline and is deep into research on different options for wings, fuselage, propulsion system, engines and industrial systems. Discussions are happening with suppliers on issues like new engines. We are very focused, very committed, he said. And he could hardly contain his glee. This is what I love. He could hardly contain his glee upon hearing Boeing's slow go outlook for the future. Told that Kelly Ortberg suggested Boeing's timeline on a 737 replacement was likely to move further out in time. Furry responded, simply perfect. Even though the A320 is outselling the 737, Airbus thinks the way to hold on to market leadership is with a new airplane. An interesting quote, we want to be mastering the time. You don't want to do this, reacting to something else if they move much later. Well, their problem, I think that when we move, they will have to take that into account. And that's fascinating because that's how we got the Max right. Boeing was working on a 737 replacement. Airbus came out with the Neo. Boeing kind of panicked and in order to not lose orders with the existing airplane, came up with the more fuel efficient Max. And we know about the problems with that as they, as they rush to do it. All very fascinating. And you could see a scenario where Airbus does come out with a replacement and Boeing panics with that and steps up its time frame. I don't know, I think it's a, it's a fascinating time to launch a new airplane. The order book is full. The A320 is, you know, if you want a new A320, you got to go way out to get into the order book. And so this would seem like the right time to start really getting serious about a new airplane because you have all those orders. Aviation Week told Ortberg that because the 737 Max was selling so well, Ortberg didn't feel pressure for a new plane. Furry's response? I like this thinking. Airbus thinks it will continue to build the A320 even as it builds a new airplane because of that full order book. Some airlines will want the existing, some will be interested in the new airplane. Same market. Two views. Pretty darn fascinating, Dave.
- [25:54]
C
It is, Scott, and I gotta say, first off for Kelly Ortberg, I think he has done a magnificent job with Boeing and getting refocused, getting through all the challenges and issues. I mean, it's a great company, obviously have gone through the issues that are well documented, but to see them come back so strong, become more efficient, the quality of their products, the reliability things that the airlines that he obviously is talking about is critical. Get everything right right now and then worry about the future. Although it does harken back. I was even thinking when they kept talking about the 757 replacement, which they had never quite come out with. Never, never. You know, here comes the A321XLR. And you know, we know the history and the story now on that, but I would be shocked Even after the CEO, Mr. Ortberg says that they're just focused on today's aircraft and doing it all right. I have to believe Boeing's got some kind of skunk works group that is absolutely looking at new options and alternatives. And a company that big, with that many brilliant engineers and all that they've got going. Yeah, maybe they're not investing massive dollars now, which would then require them to maybe very, very publicly disclose as a publicly traded company. But I don't for one minute think that Mr. Ortberg isn't got a group there that they're not evaluating, even if he's not talking about it right now. And they can always make the case. Hey, you know, we have some guys in the back room down there. We're, you know, looking at a lot of new things, which a lot of these great companies often do. So anyway, I, I know what's public have been stated. I don't have any insight. I've, sadly, I've not had the chance to talk to Kelly Ortberg. But, yeah, knowing the creativity of Boeing, they know what a tough and good competitor Airbus is. I just, I don't buy it. I just don't buy it, Scott, because I know they, they have to learn from lessons in the past. They're always got to be looking out toward the future. And, you know, they've got so much great, great stuff at Boeing today. Obviously the 787 has done remarkably well and sold out the Max past all its problems. Like you said, the order books sold out. And Airbus has all these great airplanes and they're sold out. I just, I see great things for the future.
- [28:15]
B
I do think they'll have options. A new airplane is really going to largely depend on a new engine. And hey, if one of the engine makers, if all three of the engine makers develop the next generation, it's available for Airbus. It's also going to be available for Boeing, right? Yes. So once you have the new engine, I think things can move pretty quickly. I do think there is a manpower issue with the Boeing skunk works type. Question of, hey, they got a lot on their plate and the aerospace engineers they have are really focused on that. So I don't know how much is going into that. I do think another wild card in all of this is I'm fascinated with Jet Zero and this company that is developing a blended wing concept. And from reading what, what Airbus said, it was looking at all kinds of fuselage issues, you know, it might be that, that Airbus comes out with a blended wing airplane and Boeing says, you know what, the fastest way, fastest thing for us to do is to buy Jet Zero and maybe say, you know, something like that happens. Jet Zero just broke ground on its factory in Greensboro, North Carolina, and there are several top former Airbus people involved in that. A lot of good people involved in Jet Zero. And I think a really interesting project that's got money and orders and everything else behind it. So I think that Boeing will have options and maybe they are willing to either play catch up or sort of leapfrog. Okay, Airbus, you go with your new airplane. But we're going to be, you know, 10 years later, but it's going to be better or who knows?
- [30:11]
C
Well, point. Yeah, no points well made. And I guess we'll just have to stay tuned. But it's exciting, it's great when two, two tough competitors, right, are trying to improve things and look into the future, obviously not only for the benefit of consumers and their airline clients, but for their shareholders too. So I, I, yeah, I mean, you
- [30:31]
B
know, the, the, the only other thing I'd Add is a 737 replacement can't come soon enough for me. The 737 is 1960s design. We need a new airplane.
- [30:44]
C
I think there's a lot of folks that agree with that. Even though the current stuff is really good.
- [30:49]
B
Right.
- [30:50]
C
You're always looking for improvements. Hey, one other interesting news note. The Federal Aviation Administration just awarded an $875 million, 12 year contract to Airspace Intelligence to overhaul US flight scheduling to improve how flights are managed. I know you got to see this system in the lab.
- [31:11]
B
Yeah.
- [31:12]
C
Headquarters. Right. When you were visiting with FAA administrator Brian Bedford.
- [31:17]
B
Yeah.
- [31:17]
C
They say, right, the FAA will use the new system to ensure adequate capacity for air traffic demand and provide data for the management of flights. Say that the system will use data to prevent significant congestion and delays by strategically coordinating schedules and trajectories before aircraft depart. Any other insight on that, Scott?
- [31:39]
B
Yeah, a couple things. First of all, they had three really good companies competing to develop this system. The first one they showed me was the Airspace Intelligence System. It clearly was more advanced, it seems, than the others. It looked fantastic. It had all kinds of capabilities. And what really impressed me was I knew some of the people in the room who were working on this from previous stories about air traffic control technology. They were the right people to have. I mean, that was exciting to me. You walk in and you say, oh, okay, you know what you're doing? I'm really glad to see you here. And so that was exciting. I think this is a system that can really help. You know, the other thing about it, when, when Brian and I were talking about, and this was, it was not part of the recording, but we were talking about it. Brian said, shown it to airline CEOs. Bob Jordan of Southwest said, wait a minute, you want to take over our scheduling. You know, the FAA is going to start scheduling. Scheduling flights? Well, no, that's, it's a great question, but that, that's not exactly. But the FAA is going to be more active in managing airline schedules. And I think, you know, this has to happen because you can't have airlines, you know, dumping 82 flights at 8am on a Runway that can handle 26 or, you know, that kind of situation.
- [33:18]
C
Yes.
- [33:19]
B
So the FAA is going to get smarter about how airlines can schedule, and I think that will make the system more reliable. But this system will also give them, I mean, it can look at airlines now, have cameras on the gates so you can see where the catering truck is and if the aircraft's been fueled and all that kind of stuff from an operations center. Well, the FAA will have access to that, too. There will be, you know, they'll, they'll know when gate 26 is going to push back at C26 at DFW or that kind of thing. And there are a lot of ways the FAA command center can tap into, you know, air traffic control communications. When there's an emergency, they can monitor it. There's lots of stuff that they can do with this system that'll be, I think, really beneficial. And the price tag seemed really pretty reasonable for what they're getting.
- [34:26]
C
Yeah, I mean, well, it's pretty shocking when you say, you know, 875 million, kind of a drop in the market, but compared to what we've spent in government across so many other things out there, it really is a wonderful return on investment. And like, said that technologies, including all that the AI is bringing, you know, and I'm not an expert in that at all, but you just can see what it's doing, the computing power and so much that brings to bear. You gotta imagine this could help out immensely as long as it's not restraining the airlines from being creative in their scheduling. But like you talked about, and I know that's what the schedulers will be concerned about, each of the airlines. But you gotta work within a system, Right. That is reliable and safe. And, you know, like you said, you can't schedule 82 flights if only 25 flights are reasonably can be accommodated.
- [35:17]
B
Right.
- [35:17]
C
So better get ahead of that and plan.
- [35:19]
B
Right. And Southwest can't control American schedule, United schedule and anybody else. Right. That's the job of the faa and they need to get smarter about it. You know, air traffic control modernization really is about computing power and, and how far the system can see what's going to happen in advance and how the system can see what the impact of that thunderstorm as it moves across an area is going to be. And all of that and the more capabilities of a system, I think that's only going to help the human controllers do their job better.
- [35:56]
C
Couldn't agree more.
- [35:58]
B
All right, time now to thank our sponsors. Thank you. Thanks to Cirium for making this podcast possible. Cirium offers the most accurate and precise data and analytics. Yes, we need data and analytics to enable airlines to optimize planning, operations and passenger services. The right intelligence drives operational efficiencies, enables you to predict market shifts, and helps airlines respond quickly to maximize revenue, manage costs and and seize commercial opportunity. Visit cirium.com for more. And we know that the FAA is also a user of Cirium data. So very, very important and deep, deep appreciation for Cirium's support of the podcast. We also want to thank Ontario International Airport, which just launched the ONT BOLD program proposed vision to transform the airport's facilities to streamline the passenger journey while also creating jobs, growing the regional economy and building on ont's legacy as a global gateway. The program includes plans for a new terminal, a multi story parking garage, upgrades to existing terminals, enhanced roadways and new utilities. The ONT BOLD program is early in the planning phase. Visit flyontario.com bold to learn more and join the journey to Ont's boldest chapter yet.
- [37:26]
C
Also thanks to the Executive MBA in Aviation at the University of Colorado Denver for its sponsorship. I know you're very involved in that, Scott. The Executive MBA in Aviation at CU Denver is the first degree of its kind in the world. Taught by industry experts and designed for ambitious leaders from across the aviation ecosystem. With classes located at Denver International Airport and week long residencies in Washington, D.C. and at airports around the world, students experience a hybrid flexible course structure that balances in person and online classes without career interruption. Go to business ucdenver.edu to learn more. What a great program, Scott.
- [38:10]
B
It really is. Really is. Okay, let's turn to my interview with IDA Airways CEO Joerg Eberhard. Joerg Eberhard is Chief Executive Officer and General Manager of ITA Airways, the flag carrier of Italy and successor airline to Alitalia. Ita is now 90% owned by Lufthansa and 10% owned by the Italian government. As another European carrier in the Lufthansa Group, ITA joins siblings Swiss, Austrian and Brussels in the Star alliance. Having departed SkyTeam IDA launched in 2021 after buying the assets of Alitalia last year, the airline posted a profit of 209 million euros. After four years of losses, it recorded 3.2 billion euros of revenue and load factor of 83%. Jurgis, a Lufthansa Group veteran who held senior roles including head of strategy for the group and CEO of Erdol Miti. He is fluent in Italian, flew as an A320 captain for Lufthansa, and has a degree from the University of Tubingen in Germany. Welcome to Erwan's Confidential, Joerg.
- [39:21]
A
Thanks very much for having me, Scott. It's nice to meet you here.
- [39:25]
B
Good to be with you. All right. We always start with a simple but often interesting question. I think particularly interesting in your case. How did you get into this crazy business?
- [39:37]
A
It was my case. I read an ad in a magazine that Lufthansa was looking for pilots. And at the beginning I thought, you'll never be selected as a pilot. But then I wrote the requirements and at the end I decided to apply. And that's what that was the start. And as you said rightly, it's a crazy industry. 1, 1, 1 will not enter, let's say with full, full consciousness.
- [40:06]
B
And you also worked as a flight attendant?
- [40:08]
A
Yes, right. That's. That's how I started. Six months as a flight attendant and then I became a student at Lufthansa Pilot school in Bremen, in Phoenix, Arizona.
- [40:20]
B
Ah, very good, Very good. So I'm curious about the current situation for European airlines in this busy summer season. Are you still feeling impact from the war in Iran? Has the fuel situation improved greatly? How's this summer going for you?
- [40:40]
A
Of course, as the crisis started in the Middle east, we then, first thing we did is canceling the routes we had to Dubai, we had to Riyadh. And then of course, we all were impacted by higher fuel prices and some uncertainty if there might be availability of fuel in the future. Fortunately, this has been overcome or we're heading towards, hopefully towards freedom, in the words stable situation in the region. And we already also have seen that fuel prices have come nicely down. Not yet where they have been before the crisis, but this allows us at least to restart hatching operations for next year. For this year we were covered quite well with 80% on Jet A1. So so far we think we can compensate also partly by higher prices, as everybody did. But as the situation, as the tension will not be the same anymore, it will be easier in the next month and until the end of the year to recover.
- [41:58]
B
And what's your thinking on being so heavily hedged? Obviously that that worked out well, this year it doesn't always work out well. But what, what do you think about hedging now?
- [42:10]
A
Look, looking back, we, we were right, but this is not, this is not always the case. And it's, it's also like hedging is, costs, costs some money. It's, it's not for free. And we, we also seen the American, big, American carriers not doing hedging.
- [42:26]
B
Right.
- [42:28]
A
They, they might have to keep more liquidity in order to bridge situations where you have rapid increases of, of fuel prices. We, we could do so as well, but the difficulty in Europe is that everybody's doing hedging, so we cannot talk to each other about this. But if we were all the same opinion to not to do hedging anymore, the US Model could be interesting as well. And then there's always a question, how are the levels you're hatching? Depending on the overall situation. But of course, it's not a very easy topic to be decided.
- [43:06]
B
Yeah, yeah. So you joined IDA less than two years ago. I'm curious what you found when you got there and more specifically maybe how much of Alitalia remains at the, at the airline? Alitalia was often viewed as a kind of, as a jobs program. The Italian government kept it going because it didn't want tens of thousands of people out of work. Is that still part of the legacy, the challenge that, that you inherited?
- [43:37]
A
No, I don't, I don't think so. Despite the fact that two thirds of the ITA employees are ex Alitalia, mostly in the operations part. But ITA profited in the beginning to have the head start with all these qualified people, say flight attendants, pilots, technicians, and also in some, let's say, management positions where they needed the experience. We are small industry compared to other industries. If you're looking for revenue management specialists, you have to find the person in another airline. There's no market for these kind of specialized jobs. And so of course there is always the risk of what you call administrative or let's say less agile, part of the Alitalia legacy. But it's our job as a management to change that. That's our job to let's define a new culture and to implement the new culture. The definition is much easier than to implement it. But we, of course, adding towards a more lean, very entrepreneurial culture where initiatives are also coming bottom up and less administrative and formal.
- [44:59]
B
And do you find people receptive to that culture change?
- [45:03]
A
So far we defined where we want to go. So far we defined certain, that's it behaviors and that's, that's the key to it. You need to change behavior in the company. And in order to change behavior you have to enter into. It's a typical business situations, let's say a meeting, a horizontal vertical meeting, meeting within one department, meeting with more departments, meeting with external participation and so on, different scopes of meeting, problem solving, decision preparation, brainstorming, whatever that might be. And we try to enter there by certain technique in order to have always a kind of a referee on the table, somebody who is taking the whistle and tell everybody, are we now behaving the way we want to behave? Was this the right way we did the meeting? Was everybody necessary in the meeting? Have we been efficient? Was there a result? What's the follow up? Is there a plan, who is doing what, when and so on. That's the next step. But we have, we are right in front of that step. And yeah, cultural work is always the most difficult part in a company.
- [46:25]
B
Yeah. So interesting. So interesting. So what's your goal for the airline? What do you hope to turn it into?
- [46:32]
A
We have a strategic plan. There's basically only three KPIs. I like to have it simple. If it's too complex, you never get there and at the end everybody is lost. 3 KPI. 1 is customer oriented because that's the base of everything. So we try to achieve an NPS of 66. 0 within the next four years. The next is economic result because revenue is not enough. You need to have the cost under control. And we need at least 8% EBIT margin. What we defined also to be reached in four years from now. And then the last one is the market share we have in Fiumicino on the long range part where ITER is quite, let's say low compared to other hub carriers. We are currently at 13%. 1,3 other hub carriers also in the Lufthansa group. Take Swiss, take Austrian Airlines. Take Lufthansa in Frankfurt, Munich. They are above 20% as average. So that's what we want to achieve as well. We want to achieve 25% at least. But this is more long term strategy which goes beyond 2032. And of course it depends on how. How can we improve our concept? Can we convince Lufthansa as our shareholder in order to invest into iter, in order to give us more long range aircraft? The market at least is there. Italy is a very dynamic market. Fiumicino is growing by 5% as an average. This growth rate we, we see in Asia in, in our industry we usually don't see In Europe.
- [48:16]
B
Yeah.
- [48:17]
A
And so we, we want to really take the, the opportunity to, to grow faster as the market in order to gain market share in Fiumicino. That's the strategic plan. I always tell my, my flight attendants, you don't have to take care about KPI. Just treat our passengers as if they would be guests at your home. This is enough. I don't ask more from you. But of course the challenge is having 450, let's say guests a day at home, some of them bringing their trolleys with them. But that's the basic concept. So one is to have a strategy, the other is to translate to all employees what does it mean? And then you need, and then start from the beginning. You need the right culture in order to execute the strategy
- [49:11]
B
and to increase that long haul market share. I'm curious if North America is a big part of that. You recently added Houston Rome and that route makes sense obviously because given your Star alliance connection to United Airlines with a hub in Houston and you've applied to join the United Lufthansa transatlantic joint venture. So how is North America going? Is that the key to future expansion? Expansion for you? The US market?
- [49:41]
A
Yeah, the US Market is crucial for us. It's our biggest market when it comes to long range flights to, to widebody aircraft. And as, as you said, we added Houston from 1st of May. We're quite satisfied with the first month we even made a profit. Okay, this is not in, in, in May you should also make a profit. But if it's really the first month of operation, it's not a given thing. And we see even more potential in the US when we can join the joint venture Lufthansa Group has with United and Canada. But the first step in order to do that is to apply for merger control. As you mentioned, Lufthansa now executed the option to come to 90%. And in order to have this, let's say active, we have to as the merger control authorities not not only in the US but also in 19 other US chickens of the world. US is of course the most important. But we also have to ask Japan about when it comes down to Egypt because they have a merger control law. And so this all has to be done before we can join the joint venture with United Air Canada. And once we joined, of course we expect much more sales from the, from the US to Italy. And this should give us the position to connect our network much better to the United network. Example is Newark. So far we only flying to jfk, but United is strong at Newark. And so of course we will try to connect our network with theirs.
- [51:25]
B
Uh huh. Uh huh. Interesting. I'm curious if it's been a challenge to get US travelers, North American travelers, or even European travelers to understand what ITA Airways is. The name sounds a bit like a discount or charter carrier. It's kind of nondescript. Do people see you as the Rome based Italian national airline that you are?
- [51:54]
A
I think in, in Europe, yes. ITA is well known not only in Italy, but also in other countries due to also the storyline. Alitalia, as you mentioned, was always a problem for the Italian government. They put money in, the service was poor, it was sustained, old company. So all Europe knew about. And now as they set up it as a new company, of course there was a lot of communication done. What helped ETA to establish its name in Europe. When it comes to the US or other parts of the world, ITA is much less known, also much less known than Alitalia, the former Alitalia. And in the US people don't even say ita, they say ita.
- [52:37]
B
Yes.
- [52:38]
A
So this is really bad for us. We know that we have to do some communication or much more communication in the US in order to convince our clients that Italy or the dreaming of Italy already starts when somebody enters our aircraft. So if you want to start Italy, and that's the reason why most people come to Italy because they're so fascinating, so attractive in many different respects. And this should already begin when they enter an ITA aircraft. So we have to take care about typical Italian good food, we have take about care about hospitality, we have to take care about what, what people like of Italy. And there are a lot of things like fashion, like music, like the way people are, the way people solve problems, the, the let's say positive mood people are in. And this is, this is a big strength of ITER that we have to communicate in a much better way. And then second, second point is there are certain elements of Alitalia that we'd like to revive, we'd like to integrate into our ITER brand concept. Like we are talking about a heritage aircraft and very nice design, design of the 60s. We talking about some, let's say, brand ambassadors that really can communicate the Italian way of life in much better way. So there, there's a, there are a lot of thoughts into this direction. But your, your observation is quite right. Yeah.
- [54:26]
B
And with that I, I noticed in the company logo it says inspired by Alitalia. So it's not like you're abandoning that Alitalia Heritage necessarily, yes.
- [54:38]
A
That's the link. We'd like to tell the story. The story of ITA is connected to Alitalia. So there's a lot of collective memory in Italy about Alitalia. Many people telling me, oh my grandfather was in Alitalia, my niece or whoever everybody's somehow connected to. So Alitali is part of Italian culture, his history. And that's also the reason why we have a couple of ideas to. With the, with the old uniforms of, of Alitala. There were always famous designers doing these uniforms. But there's some, some kind of museum we are thinking about but also recalling by, inspired by, by Alitalia. Maybe there are certain elements of the Alitalia brand we, we'd like to integrate into Iter. So trying to reload the ITA brand, which more technical brand with more emotions that come from the positive heritage of Alitalia. Heritage is not, not always a good thing. Yeah, it depends. It's good legacy and heritage. We can do cherry picking of the Alitalia past. That's the idea.
- [55:58]
B
Yeah. Yeah. So turning a bit more towards operations. I'm curious how you view the hubs. You have Rome as well as Milan Linate. Can both hubs work for you? And I notice you pulled out of Milan Malpenza, right?
- [56:19]
A
Yeah, that was time ago. We pulled out of my Penzer and the only real hub we, we are having in in ITA is Rome. It's Fiumicino.
- [56:28]
B
Okay.
- [56:29]
A
The Linata is a special case. We are not doing long range flights from, from Linata. Linata so far is only short range and it's limited. There's coordinated. Say if you want to have a slot in Linard, it's not possible tomorrow. There's, there's, there's a long queue, the movements are limited and so we, we have a. Still a slot portfolio in, in Linate as ita. But we are just doing flights, domestic flights or flights within Europe. We don't, we don't do any intercontinental flight from Lenard at the airport was never designed to do that. Malpenza was designed to do that. Right. There were several attempts in the past of Alitalia in order to make Malpensa second hub besides Rome. But it takes a while to create a critical mass for a hub. It's at least I would say 15 to 20 widebody aircraft and then a nice feeding structure and then you need also strong local catchment. And now we're concentrating as I said before about the strategy on the, on the market share Fiumicino we Couldn't afford in the same time to set up a hub in my Penza. This would simply not possible. Investment would be, would be too big and then having two hubs in an airline with 100 aircraft would be too much.
- [58:02]
B
So Interesting. Okay, and where do things stand with your narrow bodies in terms of Pratt Whitney engine issues?
- [58:10]
A
That's still an issue for us really a sad situation. Still have 20 aircraft and everybody parked in Fiumicino and always pass and see these aircraft reminds me of this, let's say mess. And yeah, we have a lot of damage due to this, not only economically but also image damage when you have to cancel. We had to give up crowds that we had in the past. So there's a lot of political discussions then ongoing in the country. How could you abandon it or reduce priests in Genoa to Rome. And we are facing all this discussions and it was not our fault. It was clearly the, the fault of Bretton Whitney. And so we, we calculated our damage was quite remarkable so far more than 150 million US dollars. And that's, that's what we, we try to get as a compensation so far. There's, there's a quite, quite a big gap of, of what, what they have in mind and, and what, what we think it should be. And that's, that's also the reason why we preparing a, a lawsuit against Patton Whitney in order to, to have these, these damage compensated. And as we as we still dealing with public money in it, not a small thing. Also when it comes to responsibility liability, we of course have to go for full compensation. There is no choice.
- [60:01]
B
Yeah. Okay, so to sum it up, what's ahead for eta? Sounds like you have a full plate of things to do, but what do you expect for the next year or two?
- [60:18]
A
That's right. We like to grow. We are still looking for aircraft in long range aircraft which is not very easy in the current market situation. Boeing, Airbus, both are sold out until 32 33. So we have to look into the used aircraft market and we identified maybe two units for 20, 28. It could be 359 if we, if we are lucky. But at least we're working on it. And then we are discussing within the Lufthansa group if there might be other aircraft available. Lufthansa Group having more than 800 aircraft, there's much more possibility than to shift and to let's say also extend some, some leases so they have possibilities to generate much, much easier capacity on the long range. And so hopefully in the next year we can get maybe another two units. That would bring our long range fleet from 24 to 26 and then 28 units in 20 in 2028. This may be the most important investment, would be an investment of more than more than 1 billion and we still see a lot of potential also not only in the U.S. as I mentioned, but also in South America where we're quite strong. We're looking into destinations currently. Caracas could be an interesting destination and then tomorrow also Lima and maybe Santiago which is a historical destination or was historical destination of Alitalia. There's there are a lot of ties between Italy and South America. There's more than 35 million Brazilians having Italian roots. There's more more than a million Brazilians with Italian passport. There's even more in Argentina also in the other South American countries. So we see a big big potential for ITER to expand into South America as well.
- [62:29]
B
Well your good luck with it all. I look forward to checking back in with you someday down the road and see how it all goes. But wish you great luck with all the challenges ahead.
- [62:42]
A
Thank you so much Scott. Would be nice meeting you one day in person. For the time being, stay well.
- [62:49]
B
Yes, yes. Thanks so much. And we will be right back with more on Erwan Scott Confidential Promotional support
- [62:56]
A
provided by the ultimate Avgeek website.
- [62:58]
B
TheAirchive.net a vast collection of airline memorabilia, timetables, route maps, rare cabin and airport photos, special flights and more all@theairchive.net the
- [63:08]
C
hub of air transport history.
- [63:10]
B
Thanks again to Jurg. Really fascinating conversation and wish them all the best. Before we get to the mailbag, we want to thank RTX for its longtime support of airlines. Confidential RTX rallies more than 180,000 innovators around a powerful vision to create a safer, more connected world. With industry leading tools and technology, the RTX global team works across market leading businesses Collins Aerospace, Pratt and Whitney and Raytheon to drive progress for generations to come together. RTX pushes the boundaries of known science and finds new ways to connect and protect our world. Visit rtx.com to learn more. And thanks to Infinity Flight Academy for its sponsorship. The path to the flight deck starts long before a pilot reaches the airlines and Infinity Flight Academy they're proud to serve as a flight training partner for the American Airlines Cadet Academy helping prepare the next generation of professional airline pilots. Infinity Flight Academy's training is structured, standardized and built around the discipline today's airlines expect from from day one for future pilots pursuing a career at the highest level. Infinity Flight Academy is proud to be part of the journey. Infinity Flight Academy training tomorrow's airline pilots through the American Airlines Cadet Academy.
- [64:36]
C
Beautiful. Love those sponsors. Thanks again to all of them in the mailbag Scott Ed from Sun City, Arizona, One of the most exciting places on the planet with thousands of golf courses. I know. Ed from Sun City responded to your discussion last week both about Marsha Baldonza running in the Falmouth Road Race to raise money for ALS research and care. Obviously, as listeners know, Ben Baldonza, co creator of this podcast and great airline executive, passed away of als. So Ed pointed out this if one flies non stop between Alamosa, Colorado and Sioux Falls, Iowa, the airport codes would tell you how I feel about a disease that took a friend's life and that would be ALS to sux, he said. I look forward to the podcast every week even though I'm not employed in the airline industry.
- [65:33]
B
Well said Ed. ALS does suck and we appreciate that very much. Okay Dave, Jason from Utah had an interesting question and I'm curious what you think. Jason says. I'm a weekly listener, absolutely love the show and have commented a few times in the past. This week I'd love to pick your brains about airline strategy. How would you go about competing against American Airlines in Charlotte? Let's say you operate a smaller carrier with a demonstrably better cabin product than they offer. American relies on overwhelming capacity in a fortress hub like Charlotte, which makes direct competition almost impossible. What would your strategy be to carve out market share in and around that area? Would you bypass CLT altogether and fly into alternative regional airports to capture passengers within an hour's drive? Looking at American schedule, it's amazing how much capacity they dump on routes like Miami to Charlotte. I understand those are two of their biggest hubs, but it leaves virtually no elbow room for smaller carriers. Though considering they are losing money right now, that overcapacity might be a good reason why. If you were running a smaller airline in today's market, what would be your exact playbook for stealing market share from a giant like American? I'd love to hear your thoughts, and me too your thoughts, Mr. Hilfman.
- [67:06]
C
Well, my first put is if you had a bunch of dough, you'd be better advised for entertainment value just to build a huge bonfire and burn it and have the Fourth of July, put the hot dogs, have the beer, or take all that dough and invest in Nvidia or any of the other hot stocks in the tech sector. That's probably the better return. But I love the question. Listen, we have actually seen examples where smaller carriers compete effectively and profitably against the big guys out there. I mean, you can look at sun country, did it pretty effectively in Minneapolis. Obviously they stuck to their nitty and the Leisure Marcus against what initially was Northwest and then of course, you know, into Delta. I mean, AirTran did pretty well in Atlanta when they stuck to just their unique markets or didn't try to sit there and grow too large in certain areas. You got JSX that seems to have done pretty well in a lot of the markets against some of the big competitors out there. So a few things, of course. A, you gotta watch your costs very carefully. If you really want to start an airline, you need to figure a way, at least initially, you've gotta keep those costs contained so you could charge very competitive, attractive fares and still find a way to make money doing that. Secondly, I think you just, you got to figure out where you want to pick your battles and make sure you've got enough humans that, you know, there's enough for everybody to eat. And finally, yeah, make sure you have a great product, hopefully have some creative advertising. We have seen examples in history where certainly carriers competed against American, Delta, United, Southwest, others, and have done well. It's, it's not a long list, but it's one that, hey, if you're willing, if you got the excitement, you got a little extra cash, hey, go have at it. I, of course, love being in the airline business. I think all the folks that are in that business, it's kind of in that jet fuel's in your blood. So, hey, my put is have at it. You know, go out there and have a good time. Jason?
- [69:18]
B
Yeah, no, I mean, I do. I think in general, I'll talk a little bit about Charlotte specifically, but in general, I think there's opportunity ahead for new startups for existing discount airlines to really revisit the original Southwest strategy of the alternate airport. And for a couple of reasons, because the big airports costs are really going up. You know, all the construction that we've seen, billions and billions of dollars, that's translating into much higher cost per in plane passenger at big hub airports. So that creates the opportunity of, hey, I can get a cost advantage, you know, maybe $10, $20 a passenger cheaper if I go to a small alternate airport. And so I think there's, there's market there that can be had. The other thing about new service is, you know, Southwest and, and others, they really created their own demand, right? They came in with low fares, started with a lot of leisure traffic, but create their Own demand. In the case of Charlotte, So Allegiant flies to Concord, Concord, Padgett Regional Airport, they fly from there to Orlando, Tampa, Fort Lauderdale, Punta Gorda. Right. All leisure destinations. So, you know, that's an example of how you can, how you can do it. I don't. You're not going to go into Charlotte and win business passengers. Americans got that locked up. And that's a lot of the Charlotte market. Right. With all the bank, bank of America, with all the big companies in Charlotte. So you got to do something that's going to create demand and it's going to, it's going to be leisure demand. Look at the alternate airports and I'm not sure, you know, Charlotte be an interesting place to start because America does have such a monopoly there. But I'm not sure there's, you know, the population base there that's going to support a whole lot of alternate service. I don't know.
- [71:38]
C
Yeah, no, I think you'd be right on target there, Scott. It would be fascinating. I'm sure American be thrilled to have somebody start up something.
- [71:49]
B
Yeah.
- [71:49]
C
But Jason has a great question and like you said, it can be done. There's certain places and obviously a number of carriers have done that, done it successfully through the years. I guess we'll, we'll see what the next iteration might be.
- [72:02]
B
Yeah, no, I really think in the next generation of startups or whatever, right. We've seen a lot of cost convergence. Right. Maybe they go back to flying used aircraft. That gives them a cost advantage there. They've got less seniority in their pilot ranks. They may have to pay similar rates, but less seniority gives them for a time, a cost advantage. I think there are ways to do, do it, but as we talked about, there's a shortage of aircraft. There are, you know, a lot of reasons why it's really tough to start an airline these days. But if the supply of airplanes loosens up and you can, you can, you know, get some airplanes, get them, get them cheap, find some airports that give you a cost advantage, you know, maybe you can make a go of it.
- [72:56]
C
Sure. And in fact, you know, we could tell Jason that, I mean, you look at Avello, right, that has gone through different phases of its growth and, you know, accelerated, then pull back a little bit back. I mean, Mr. Levy has done a good job there. Obviously, Breeze has been quite impressive. And you know, I, I don't know how these guys are doing financially at the moment. Bit challenged with fuel prices, of course, elevated. But they, they clearly have people that believe in it. Got customers that are loyal to those carriers and, and, you know, seem to have good product and, and investors are, you know, hanging in there. So, yeah, I, you know, it's, it's possible and we've seen examples of that through time and I'm sure we'll see more. So, Jason, out there from Utah, you ought to go ahead and get, you know, get a pitch deck going, get out there, see if you can generate a little interest. And you might be running your own airline someday. And, and we'll have you on the show.
- [73:51]
B
Right? Awesome. Absolutely. Absolutely. All right. Fun stuff. That's all for another edition of Airlines Confidential. My thanks to Juerg from ITA Airways. And thanks to you, Dave.
- [74:04]
C
Yep. So long, everyone. Thanks so much for listening. Thanks to you, Scott. Have a great vacation with family. Look forward to talking with everybody down the road.
- [74:12]
B
Have a great Fourth of July, everyone. We'll be off next week, but back July 15th with co host Maya Liebman. Have a wonderful holiday.
- [74:22]
A
This podcast is produced by Mass media info@massmedia.net.