Loading summary
Transcript56 lines
- [00:02]
A
I'm Jon Ostrower, editor in chief of the Air Current.
- [00:04]
B
And I'm Brian Summers. I write the Airline Observer. You're listening to the Air show, the podcast where we talk about what goes on in the business of the sky. Brett is off today, which means no dad jokes. And John and I, we're gonna use this opportunity to go abroad. We have interviewed the CEO of a very German airline.
- [00:27]
A
Wait, we got Karsten.
- [00:28]
B
Wouldn't that have been great, John? Someday. But this time we were joined by Peter Gerber, CEO of Condor Airlines. Now, John, I know we reach a lot of knowledgeable insiders here, but if you're not exactly sure what Condor is, I cannot blame you because it's one of those very few independent long haul airlines in Europe. And while that's a pretty noble experience experiment, I think that we all know it's very tough for any airline that lacks the legal ability to collude with a competitor.
- [01:09]
A
Condor is a really interesting carrier. They underwent a major transformation just before COVID and then moved right into a full fleet turnover during the pandemic. Gerber's been at the airline for almost two years and more than 30 at Lufthansa before that. And as you'll learn, Condor's relationship with that gigantic German global carrier has changed considerably with the need for the airline to actually build a short haul network in Europe from scratch.
- [01:33]
B
Yeah, we tried to ask him some tough questions about the airline's model, and we tried to push him about whether there's really a place for an airline like this in today's very consolidated business. I'm not sure there is, John, but he actually teased something very interesting for us. It's possible this is not going to be an independent airline for that much longer. I think I heard something about a possible investment by maybe a Middle east airline or maybe an airline somewhere else. So that's going to be very interesting to watch. And yes, for those so inclined, we did ask him about Condor's paint job. It's a very much love it or hate it approach to airline branding, but I think that we know this for sure. John Gerber's predecessor, he must not have liked Euro White.
- [02:26]
A
Indeed. A lot of ground to cover. Let's dive into the interview.
- [02:31]
B
Peter Gerber, welcome to the Air Show. Thanks for joining us today. You told us before we started that you have never listened to the show, but that's okay. You said that you wanted to reach a U.S. audience here. And you know that we primarily speak to people in the US Although we are all over the world. I wanted to ask you a very simple question to start. What is condor? I think many of us remember Condor years ago, European Leisure Airline. I think you still are to an extent, but we've seen a lot of new nonstops from you within Europe. Paris, Rome, Milan, Berlin, Munich, Hamburg. What's Condor today? How has it evolved?
- [03:10]
C
Thank you very much for having me having Condor on your show and I promise after this at least, if it's going well, I will listen to this every week. Of course, that's clear. And so to answering the question, what is Condor nowadays? Condor is maybe what we call this nice English word we don't really know about in Germany, but we call it a pleasure carrier. So meaning a mixture between leisure, what already everybody knows about Condor and business, what some people still don't know about Condor. So meaning we are still a leisure carrier, especially in the summertime around the Mediterranean Sea, but also in the winter when it comes to the Caribbean, to the the cruisers business or to East India traffic. But on the other side, we increasingly often take business travelers with us, especially in the summertime on the North Atlantic, but also with our quite new business rounds around in Europe.
- [04:13]
A
Going into the pandemic, there was quite a bit of upheaval at the airline. Not pre pandemic, right? Obviously with the demise of Thomas Cook, a new stakeholder coming in. Can you walk us through that transformation and how the airline sort of entered Covid and came out the other side? Because you had a transformation plan going even before the world fell apart, John.
- [04:34]
C
It was kind of an impossible story. Condor was in and still is in because first there was the bankruptcy of Thomas Cook, Condor being the only part surviving at this bankruptcy. And then after barely surviving this afterwards, pandemic hit. So it was two near death experiences within three years. And this was quite astonishing to really come out of this alive. And this is of course due to the management team around my predecessor, Ralph Techendo, who did a terrific job. So being able to do this working day and night, I think that's really exceptional. And of course it did not end in this phase because after the pandemic experience, Condor needed to urgently get fresh money in, as every airline did. And so there was the new investor Artester, who came in of course, also with the help of the State Federal Republic of Germany and State of Fesse. And then this was only the start of this terrific traffic, terrific journey we are still in. So then there was a decision taken to to get new planes in in the mid of the pandemic. Development when nobody was able or willing to buy planes. But Condor was. And these negotiations decision was taken to take in 330, 900. So the brand new Airbus planes on the long haul side and additionally to get a rollover on the short haul side with 320, 321. And what we then were able to achieve was we transformed our long haul business from all Boeing to all Airbus within 18 months. I do not believe any airline has done this so far. But with the new planes, of course there also came a change, a gradual change of the business model. Because with the bigger planes we also need to fly business routes in order to make sure that we could make money on this. And this has been of course, the journey so far. There is one more step when we also joined now city flying and feeding on ourselves because Lufthansa was not willing to do this any longer. So this was the last step in transformation, keeping our leisure business on one side and the other hand stepping in to the business business if you want to. Especially on account of our new fleet.
- [07:12]
B
Peter, I know you spent a long time at Lufthansa Group. They're not known for being particularly docil competitors. I know that they don't enjoy a competitor in their backyard. That's something that we saw when they took away the short haul feed from you. How challenging is it to try to compete with them? Do they really make things very, very tough for you?
- [07:36]
C
They make things tough, but not too tough, I believe. So for the moment, it's perfectly possible to compete with Lufthansa due to two reasons, or maybe three. So one reason being now the new fleet, because we were the first to have this new fleet. We maybe the newest long haul fleet in whole Europe with this brand new A330 with a really terrific business class. I can only invite everybody, but you have flown it. You do know that it's better than Lufthansa. So it's the best offer from Germany when it comes to a business class.
- [08:07]
B
I don't know. They say that Allegris is the best in the world. It's on like six planes now, right?
- [08:12]
C
Yeah, six planes is great. So up to 120 long haul planes they have? I think. So It's a little bit. It will take a bit of time. And the rest of the business class is from 2015. It was of course built in when I was on the board of the Lufthansa passenger side. So I think in this respect, product wise and from the plane, we can compete. The second thing is Condor is An organization which is quite a bit smaller than Lufthansa. Of course on one side it's a drawback because size matters, at least in the airline business. But on the other hand, we are much faster than Lufthansa is so we can pick up trends quite quickly. We have an organization which really stands together, United. And of course Condor has a spirit, knowing that we always have to solve problems other companies can't solve. And with this mixture, I think we are well off. And to this moment, looking at the numbers and the development, Condor is growing. Maybe Lufthansa is not in this market. I think for the moment we are on top of things.
- [09:19]
A
Peter, you talked about this fleet transition and the arrival of the A330neos. Your previous all Boeing fleet was older 767s. You had some A330s in there as well. You just retired your 757, 300. I'm fascinated by the transition for carriers that have legacy equipment. And I say legacy just from a fully depreciated perspective. I mean these are well worn assets that, you know, those 767s were some of the oldest flying passengers in the world. And that transition of your model over to brand new metal and how your, your business model has adapted to a significant change in capital cost spending. And how do you evaluate that transition at this point? Not only moving away from Boeing to Airbus, but really also the introduction of new technology at a time when engines are not as reliable as, as airlines want them to be.
- [10:16]
C
Yeah, that's true. But for the moment we evaluate this as a big success. When you look at the business plan we made before taking this decision, I can only say that we fully meet at the moment what the assumptions of the business plans were. And as you know, this is rarely seen because normally you never meet them. But we do on the long haul side. So what we see is of course the operating costs for the 330 are way lower, are way lower than the costs on the 767. So it turns out to be very good. And I think on the narrow body side, everybody knows in the meanwhile that 320 321neo are fantastic planes in this respect, especially when it comes to fuel consumption, but also to noise and other things. And we were so lucky that we did not experience the problems at the beginning, this powder issue problem at the Pratt and Whitney engines, because in this respect we were simply later. So we were lucky.
- [11:19]
B
Peter, I want to go back to something you said earlier about your primary shareholder. You spoke about how they were prescient in learning what was going to come next, ordering the aircraft early. More recently we've seen reports, and I think you've even confirmed them, that a testor wants out or at least wants a strategic relationship with somebody else. You are the CEO. How much do they tell you about this? And what do you think is next for Condor? How's the testor going to get its money back?
- [11:47]
C
Yeah, so I'm fully involved in this process. I think otherwise it's maybe also difficult making it work. And I think it's a perfectly sensible decision Artesto took because you may know that by next year we will have paid back all the loans to the KfW, that's a German state bank where they organized the loan from the state. So this will be paid back by the middle of next year and afterwards Artesto is free to take somebody in or to think how to further work with the shares. And so I do believe it's a perfectly sensible decision in this moment of time to look for potential partners on the minority share side, especially when you want to get in a strategic partner. They have to of course, make up their mind. They have to look into Condor's numbers, also into the operation, is it sustainable, is it reliable? And then I do believe we find exactly the partner we need to develop Condor further. So I believe perfect decision.
- [12:52]
B
All right. I have to ask the logical follow up. What kind of partner could it be? Could it be another European airline group or a private investor? What do you think?
- [13:01]
C
Yeah, I think, of course I'm more familiar with the aviation side, as you can assume. And I think there are a lot of potential partners. It's at least the three big airline alliances as there are not so many carriers around being free. So maybe the last one beside of Condor is TAP in Portugal. And I think everybody's making up his mind whether to invest there or not. And of course also other big carriers who maybe want to globalize their business. When you look at carriers located at the Gulf, they may also be quite interested in. And additionally, of course, other financial investors who look more on the strategic side. But with them I may be not so familiar. And there may be also. This comes with a surprise, but talking about the airlines, it's maybe that what.
- [13:55]
A
I described, Condor undertook a very significant brand transformation. The vertical stripes on your aircraft, safe to say, they are very polarizing. How has that been received?
- [14:09]
C
Yeah, I think all in all this was a great decision taken by my predecessor. And on account of the ideas of Remo Masala and I think it's not a question of taste, it's all a question of recognition and of awareness. And I think there, it's really simply great because everybody does recognize these planes after having seen it only one time. It's especially children pointing at the sky and saying, mom, dad, see the plane? It's a Condor plane. And that's really great. And this also helped us greatly in the Americas because you do know European airlines are not so much known in the US Even such a big brand as Lufthansa is rarely known there. But what we recognized, especially in 2024 when we already had nearly 50% of our passengers on the North Atlantic coming from the US That a lot of people recognize these planes with the stripes and, oh, we don't know the name of this company, but it's the planes with the stripes. And so this worked from this point of view really perfectly.
- [15:16]
A
Yeah, my children know the stripy plane. So there you go.
- [15:21]
B
Peter. Talking about the US Market, it seems like any airline that isn't United, Delta or American, you are happy to work with, you have a deal with JetBlue, you have a deal with Alaska, and big deal in this country right now, you now have a deal with Southwest, one of their early interline partners. What's the thinking behind that? All three, and especially about Southwest, which of course doesn't have a business class cabin. Why do you want to work with all these U.S. airlines?
- [15:50]
C
I think for us, it's a great opportunity to expand our footprint. And as we are not part of an alliance yet, I think we can fully use the advantage of this, meaning we can work together with every airline, which is, of course, a great one, and where we have commercial advantages on both sides. I think that's the basis. And if this works out and everybody makes up its mind on this, then it really works. And we have this long standing partnership with Alaska, which really works great, but also in Canada with WestJet at the same, talking about JetBlue and now Southwest, I think it's all great opportunities for our customers to seamlessly travel beyond our network. But on the other side, giving our partners the opportunity to bring Condor now in the Condor network via the North Atlantic and now with a newly built city network to give them the opportunity also to fly around to the beautiful cities of Europe.
- [16:52]
B
Yeah, I think if we talk more about the inner line in the United States, there's some concern among certain people in the United States right now. Me and John. John, I think I speak for you here. We're trying to get a Read on. How much of apprehensiveness of Europeans to visit the US Is just kind of anecdotes and people talking about how they don't want to go to the US and how much of it is actual data. Are you seeing people in Europe saying, you know what, I'm going to go somewhere else next summer, I don't want to go to the U.S. do you see it in your bookings?
- [17:26]
C
Yeah, we do. I think in the end in Europe, it's a typically mixed picture. So in Europe, you know, never a thing is united. It's always a lot of differences here and there. And when we look at the numbers of last year, at least of part of last year where we already this now ending year, when we look at maybe the first half of the year, we can safely say that in Germany we had quite a bit of less travelers than in the years before. So some people talk about 10%, something like that, maybe even a little bit more here and there. But when you look at travels from Italy, it's unchanged. It's the same amount of travelers than the year before. So I think it depends on the markets. It depended also on how the media transported the so seen problems which haven't in fact been problems because people could go as easy to the US Than the last years. But as you know, media made up quite a story and I think this was especially a thing in Germany and so people were a bit reluctant to travel to the U.S. i'm optimistic that in the upcoming year it will be different again because people love to travel to the US they have a lot of reasons to travel to the US and so I think it will maybe more come back to normal. Especially we also have the football World cup, which is a big European thing next year in the US and in Canada. But I think also one point we should realize is that the prices in the U.S. especially for accommodation, other things are that high that some travelers coming from Europe can't afford it any longer.
- [19:12]
A
I couldn't help but notice you use the word yet when talking about alliances. You spent a huge part of your career at Lufthansa, obviously as a founding member of Star Alliance. How do you see alliances in the current context? Is there a benefit as you see it right now to being non aligned and what are the benefits as you see to potentially joining an alliance?
- [19:38]
C
Yeah, I think of course there were times when alliances of course gave the utmost advantages because you couldn't do what we do now with other partners. Now in the age of digitization, a lot of Things, especially when it comes to to seamless travel, you can also do with interlining or some co chairs. So I think this advantages to a certain extent vanished a little bit. So there we have the full advantages we could have also without being part of an alliance. But there are other things, of course you can't share. You can't talk about prices. This is only done when you have the antitrust immunity. So there it would be useful to be part of an alliance. Alliance and also some other things when it comes to buy the important things like engines and airplanes there of course it's important to maybe get a bigger size you could have and also pressure in your network with your partners could also be very beneficial. So there at least are three big parts where you could have advantages with an alliance. But again, the drawback is you can only choose one alliance.
- [20:51]
B
PETER I generally cover European airlines by listening to the earnings calls of the four major groups. And I can barely go through an earnings call season with at least two of the group CEOs and maybe up to four whining about how there's just too many airlines in Europe and wouldn't it be great if some of them could go away and we need more consolidation. And I can't help but think that they're thinking about airlines like yours and why does Europe really need an independent Condor? Aren't there just too many airlines as it is?
- [21:22]
C
I think it's pretty easy when you ask the customers because what you should do is then look at the prices and look at the opportunities. Looking at this from a customer's point of view, I think everybody likes Condor pretty much because in the market we are in and we step in, we help customers to get a broader choice and maybe get the same a product for a lower price. So I think people love this, people appreciate this, and all in all, I think we need some competition here and there. Of course, we also need consolidation here and there because the costs are very high and sometimes you need to put things together to make it affordable. But I think for the customers still a decent amount of competition is very, very important.
- [22:13]
B
And you're really on the North Atlantic. You're competing with three legalized cartels, right? All these airlines basically fixing prices and essentially price matching each other. It's a weird way to run a business against them, isn't it?
- [22:27]
C
Yeah, it's not so easy. But on the other hand, when you are small and when you are competitive, when it comes to your product and your costs, I think you can safely play in this league because you are so small, small. And when you can be able to be a little bit price wise, a little bit cheaper, you can make a little bit a better offer, then I think you can sail around because matching this would be a big problem for all the big ones. So we try to be this tiny one, giving here and there a little alternative.
- [22:58]
A
I touched on engines a little bit earlier and you mentioned Pratt Whitney and the powder metal issue with your 321neos. But I want to really understand how the airline is doing with its 330neos and the Trent 7000. One thing our listeners may not realize is that in the summer of 2022, Rolls Royce received certification for an updated durability package that Condor was actually one of the earliest customers to benefit from. And so I want to really hear your perspectives on wide body engine economics right now and whether or not that durability package is actually hold up to the expectations that Rolls Royce had promised.
- [23:41]
C
So I can safely say of course at the very beginning there were always some issues. As you know, at the beginning there are always some here and there small issues we had, we experienced. But I think we could really work this out in a short period of time. And at the moment I have to say the engines are doing very well. And when you look at the utilization of our planes, you see that it really works out. So I think in this respect, when I talk as a CEO, it could always be better, of course, and there could always be a little bit more. But so in a broader sense of things, I think it's really. They are really doing well, they're doing great. And so in this respect we are really satisfied because the engines and the whole plane is really matching our expectations.
- [24:30]
A
And I would say globally, you know, it's hard to find an airline that isn't having some issue with getting seats and galleys and other items for their planes on time. What Condor's experience been, I mean do you feel the supply chain for your aircraft is humming along? Is there a future where you take airplanes without seats and you just install them yourself later on?
- [24:54]
C
Yeah, maybe one day this may happen. I don't hope for this but. But it could happen one day.
- [25:00]
A
Now.
- [25:00]
C
Seriously, seriously spoken. Of course we are experiencing the same issues than the competitors experience. So meaning the planes come late. There's always problems with the seats and other things. We had this as we were launching customer also of the seats and looking at this part, small parts here and there, also there we needed quite some time to work the as you need then Alternatives, they have, as you know, a long process to be proven before they can get on the plane. So we took our time there. And again, so now also the narrow body planes being late, being delayed, like for everybody else. So of course we are all facing these issues, all airlines do. And I do understand about the problem the OEMs have. But on the other hand, given the prices we have to pay, I think it's a situation you can only have in such a kind of a duopoly or oligopoly, otherwise this would never work out.
- [26:07]
A
And when you are handed an explanation for why interiors are not available, what do they tell you? What is that in terms of understanding the root causes of this problem?
- [26:18]
C
Yeah, I think they simply said a lot of problems because sometimes it's a lack of material, sometimes it's a problem with one of their suppliers 1, 2, 3 rows back. Sometimes it's a thing when political issues in this country where the suppliers are located occur and all those. So it's a variety, a big bunch of problems. And sometimes it may also be that this amount of production which is normally needed now by the market and the demand being so high, it's simply difficult to meet. Of course, this amount of production. I think also essentially, sometimes here and there, also some guys in the whole chain not knowing who it was, maybe have oversold his capacity.
- [27:08]
B
Peter, you talked about the narrow body airplanes which are using within Europe. I think the rule of thumb in this industry is that it tends to take a while for a route to spool up to make money. Maybe a year, maybe longer. Because of the Lufthansa court decision, you've had to build a short haul network from scratch. And I say this in the kindest possible way, but right now, how much money is that short haul operation losing for you guys? It has to be tough, right? Every route is pretty much new.
- [27:40]
C
Yeah, that's true. Every route is pretty much new. But I think paramount is that these routes are filling up our long haul planes. And I can safely say looking at our numbers, when we had to replace the Lufthansa feed on really short notice, we were able the full year to fill up our long haul planes. And I think this is the biggest achievement. And this worked out. And this is also the biggest issue we can talk about commercially. The other question is, is there already enough point to point demand on these planes? Could it be better? And there, it depends. I have to say, from city to city, their city is working really great. For instance, Vienna was nearly full at the very first day. Also Prague is working very well in the summer, Milano. But we have other cities which are maybe not as much filled as we want them to be. For instance, Munich could improve a little bit. So it's a mixed picture. And of course, as it is only six months old, I think we need to be a little bit more patient. But looking at the curve as we also fly now since the winter schedule, we fly three waves and also there we see we can sell all the capacity, meaning it's important for the market and we find enough customers. But all in all, half a year is maybe not enough time to fill every route like we wanted it to be. But again, on the feeding side, it's already a complete success.
- [29:14]
A
That's a great segue.
- [29:15]
B
Actually.
- [29:15]
A
Talking about narrow body aircraft, and I mentioned earlier that you had just retired your 757, three hundreds, took delivery of those airplanes back in 1999 as one of the earliest operators of, of the aircraft. You know, it is an aircraft that I think was tailor made for Condor back then. And, and I'm. And obviously a 321 Neo is not as big as a, as a 757 300. Obviously there's a fuel burn benefit, chasm benefit with new generation of technology. But it seems like airlines globally are pretty resistant to the idea of talking about what they want in any kind of new airplane from Boeing or Airbus when they can't get the ones they've ordered already. And technology has been as troublesome as it has when you look at a 757, 300 tailored really for a holiday operator like Condor at the time. What do you want in a future single aisle when you reflect on that experience?
- [30:14]
C
Yeah, of course in this respect, talking about leisure routes, it could be a little bit bigger. So this is really, in this respect, the 757 really was a nice one. On the other hand, I think what we all have to keep in mind is that you need really a decent number of planes and a sizable number. So the biggest problem in the end of the 757300 was there was so less planes operating. And this creates, after only 25 years, or already after 20 years, this creates this problem of being a white elephant, you know. And so this comes with costs and other problems. And so I think what we all have to mitigate is on the one side, the specific idea for a plane for really some part of your routes and your market. On the other hand, being able to get an industrialized size of planes where you don't have problems. In this respect so if I could wish for a little bit bigger would be nice. But knowing that it's maybe not for everybody who is in that market.
- [31:15]
B
Thank you. Peter, I've got one last question for you, and we're going to have a little bit of fun here. The reason that you're on this show is David Carlisle, who's your VP of network, is a big fan of the show and he contacted me and he said that you could help us with a question. John and I are kind of obsessed with what's happening at Lufthansa Group. We've never got an interview with Mr. Karsten Spohr, and we're fascinated by him and what's happening. So David on your team said that we could ask this question, who is going to be the next CEO of Lufthansa Group?
- [31:54]
C
So I think that's very difficult. But what I can safely say to you is that the next years, Carsten, who is really a great guy, will be the CEO and will remain the CEO of Lufthansa. And I think when you look through his ranks in the meanwhile. So who is CEO of Brussels, who is CEO of Austrian, who is CEO of Swiss and in the group, and additionally, who is maybe placed in the supervisory board, I think you may find the answer by yourself. But what I can safely say to you. So that's another side. We are always taking in great people. Condor may be a small airline, but when it comes to our search for people, we try to take in the best people. And you see also international ones. So I'm very glad to have David and Bord as our vp, network and alliances, because we do believe the best thing in an airline is in the end, always the people. And this is also why Condor maybe differentiates a little bit from some other airlines, because on one hand, our people working are passionate about Condor and passionate about the customers. On the other hand, we have maybe a management team which in this respect is as good as the size of Condor is Peter Gerber.
- [33:21]
A
Thank you so much for joining us. This is really fun.
- [33:23]
C
Thank you, guys.
- [33:24]
B
Thank you, Peter.
- [33:24]
C
See you next time. And I promise I will listen to you now every week. Thank you. Bye bye.
- [33:31]
B
Thanks for listening to our conversation with Condor CEO Peter Gerber. If you have questions, comments or feedback for us, go to theairshowpodcast.com to get in touch. You can also find contact information there for Bullpen Strategies. If you're interested in sponsoring the podcast in 2026, remember your company's sponsorship makes this podcast possible. And we have one more episode this year and we'll be back with you next week.
- [34:00]
A
The Air show is produced and edited by Sarah Fay. Our theme music is by Joshua Mosher. Thanks for listening and we'll be back soon.